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What Does WPP PLC’s Latest Acquisition Mean For Investors?

The shares of WPP (LSE: WPP) (NASDAQ: WPPGY.US) climbed 1% to 1,326p during early London trade this morning after the global PR powerhouse announced its subsidiary — 24/7 Media — had made an interesting acquisition. But does this mean much for WPP shareholders?

With no sum or fee disclosed, WPP revealed 24/7 had purchased Crystal Semantics, a specialist digital advertising agency.

Using proprietary technology, Crystal Semantics matches adverts to the context of the website on which they are being displayed. In other words, it targets ads more appropriately — no more adverts for streaky bacon while you browse for Peppa Pig toys, presumably.

Advertising is a game of hit and miss — a great many people will not be interested in the majority of adverts they see. Contextual marketing, by even slightly improving the percentage of interested parties seeing the ad, tremendously increases the value of that ad-space to marketers. The benefits to hosts are clear too — they want adverts to be as subtle and relevant as possible, in-keeping with their website’s image and readers’ interests.

Attempting to increase the context and effectiveness of adverts online is seen as a huge untapped source of potential value for media companies. It’s something that leaders in the field are still trying to figure out, too — as witnessed in analysts’ bi-polar attitudes toward Twitter and Facebook in recent years.

While cracking the online and mobile advertising puzzle will be crucial for the likes of WPP in coming years, today’s acquisition merely underlines the company’s ambitions in the sector. For a company valued in the tens of billions, a tiny acquisition like today’s simply won’t move the needle at WPP.

Investors do however have the right to be pleased by WPP’s intentions in this division — getting “digital” right could be a huge opportunity to unlock long-term value for investors.

Of course, WPP isn't the only "old school" company making surprising inroads where digital content is concerned. In fact, the Motley Fool's "Top Growth Stock" is a prime example of a traditional household British name fighting toe-to-toe on the world's online media stage.

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> Mark has no direct investment interests in the securities mentioned in this article.