Radical Communication Winding Down

In a development that raises questions about the future of the rich media email space, Radical Communication, widely considered to be the leader in the field, confirmed on Friday that it’s hunting for a buyer for its technology as it prepares to shut down.

Jay Stevens, Radical’s marketing director, said the Marina Del Rey, Calif.-based firm is working on finishing out current client contracts but has largely given up on seeking new business.

Instead, it’s aiming to turn its delivery platform — which embeds streaming, rich media creatives into email marketing messages — into an enticement for a merger.

“We’ve by and large ceased operations at this point,” Stevens said. But of the company’s twelve remaining employees, the six non-executives are developers, who are “actually continuing to work on the platform … with the idea … that we’ll find a new home for the technology.”

“Our backers will take us for several months at our current burn and the way we are right now,” Stevens said. “While we’re not able to continue at same development and same rate as we were before, we’re very much alive and looking to find a new home. We’ve got several suitors, there’s some real technology that’s built, and there are some solid assets. We’re not desperate.”

Stevens declined to discuss potential buyers. However, the company recently signed a reseller deal with New York-based DoubleClick — which clearly has an appetite for expanding its email marketing practice through acquisitions.

Radical also has partnerships with Akamai — which, like several of its competitors in online content delivery, has recently been focusing its solutions for interactive advertisers — and email marketer NetCreations, which is affiliated with European yellow pages publisher SEAT Pagine Gialle.

Like others in the online marketing space, Radical Communication suffered from a declining valuation and a pull-back from interested venture capitalists, after receiving an initial $15 million in August from investors led by Lehman Bros.’ venture capital group.

“During the last six months, we were a little over 50 people … and we dedicated half the company to building the software applications necessary to make the implementation of rich media really easy and really scalable,” Stevens said.

“But as a result of this fallout, you’ve got a lot of venture capitalists looking to make a quick buck, who have no experience in financing software companies — looking to turn money sooner rather than later. And when you’re developing software, it’s not an overnight process,” he added.

Nevertheless, management at the firm remains confident that that loss will turn out to be some other company’s gain.

Chairman and chief executive officer Bruce Stein declined to discuss the company’s situation in length, pending merger discussions, but said the company is still doing business and would “work through any M&A event.”

“When you have a downturn, people aren’t interested in looking at new and emerging technologies,” Stevens added. “But this industry is certainly a viable industry, no ifs, and or buts … Everyone agrees that five years from now, you’re not going to be typing out your email … video email will be one of the standard forms of communications. How often did you need typing pools to be able to send all your memos to folks after the invention of the telephone? It’s the same kind of principal.”

In the meantime, Stevens said he pegged firms like Dynamics Direct and TMXinteractive — companies with diversified revenue streams from creative and technology practices — to “carry the standard” of rich media advertising.

“The way we operated, we started building for some real technology and real software applications, and unfortunately, we were doing this in anticipation of a market that was still nascent,” Stevens said. “They operate very much like an agency by handling creative piece by piece as it comes in. That’s a revenue center, and those guys will be able go on.”