Will one company rather than two be strong enough to survive in the turbulent wireless advertising and services market?

That’s the question facing the new Avesair after Avesair completed acquisition and absorption of Morrisville-based WindWire on Tuesday.

The combined company will incorporate many of the senior executives from both companies and create a single-source provider of mobile marketing solutions for operators, marketers and content providers, new management says.

And early evidence seems to support the belief.

Kent Allen, Research Director at The Aberdeen Group, thinks the acquisition is a positive move for both companies, but that the biggest challenge still remains overcoming the United States’ slow adoption of the wireless marketing technology. “It’s more a question of how middle America embraces the mobile marketing segment (as a whole). The United States is playing catch-up with Europe (in this technology).”

Avesair needs to keep focusing on working with carriers and device manufacturers that are in the position to open up new opportunities for the technology and the company, Allen says.

The new Avesair has an impressive customer roster that includes Go2 Systems, Boston.com, The Sporting News, AT&T, and the Carolina Hurricanes NHL team.

Each customer was briefed on the WindWire acquisition, making them aware of “the value of the merger” according to Sean Harrison, former president and chief executive officer of WindWire. He added that customers would see additional services and resources available on a global level.

That’s fine with at least one customer.

“I expect the relationship (between our companies) to be enhanced by the merger,” says Laurie Igel, vice president at Brand Source, a spin-off of Go2 Systems and a WindWire customer. “This makes their presence even greater internationally. It’s a change for the good, and will be very beneficial to the customers.” Brand Source uses the company’s application server technology to manage all of the advertising campaigns for Go2 Systems.

Avesair formally announced its acquisition of WindWire for an undisclosed sum on Tuesday morning. According to Kimo Kong, Avesair’s founder and the new company’s chief operating officer, the legal and financial transactions have been completed, and the executive team is currently in the process of integrating the two companies. WindWire’s staff will be moved into Avesair’s offices within the next two weeks.

The executive team, which is in place, will retain Avesair CEO Ernie Connon and former president Kong as COO, and adds Harrison of WindWire as executive vice president of corporate development. Rather than retaining separate departments and responsibilities, the staff will be blended together and the departments restructured, resulting in layoffs for approximately 10 people. Kong said it is not yet decided which positions will be affected and that they are in the process of deciding where responsibilities are being duplicated.

Avesair, which was formed with $15-million in funding from Nokia Venture Partners and New York venture firm New Things, makes software that allows businesses to send ads to cell phones. WindWire got its initial start with $4 million from Intersouth Partners in Durham.

“Avesair has focused a lot of attention on the international market, while WindWire was very successful at penetrating the U.S. market,” Kong says. “Now we will have good global penetration. The U.S. becomes a critical component to our global strategy now that we have brought these two companies together, particularly because we have [customer] AT&T as a proof statement.”

Kong added that each company’s core business complements the other. “Avesair started as a solution for infrastructure, while WindWire started as a hosted set of solutions for the turnkey environment. Now we can offer customers both,” he said.

Harrison says the blending of these core competencies differentiates Avesair from the dozen or so companies that compete with them in this space. “Our competitive edge now comes from being able to offer what best suits the customers’ needs. We can now offer on-site installation and hosted applications,” he adds.

More hype than action to this point

So far, there’s been a lot more talk about the possibilities of wireless advertising than there has been any execution.

One option, which Avesair customer AT&T uses, delivers messages to customers who have “opted-in” for the content. In AT&T’s case, it allows them to send messages to customers who have used up their allotted minutes, and offer them details on a new service deal AT&T is offering. Down the line, third-party advertisers will buy space and send messages to wireless customers, allowing for promotions such as sending a coupon or promotional message to a PDA or cell phone of a user as they pass buy a storefront.

The acquisition and reorganization are occurring at the beginning of a year that Kong says is, “a year of adoption and validation” for the wireless advertising market. “2003 will be the big year where it goes from a proof statement to an accepted marketing medium,” he adds.

Cahner’s In-Stat Group predicts the wireless data market will grow from 170 million subscribers worldwide in 2000 to greater than 1.3 billion in 2004, while Ovum, another consulting firm, predicts that interactive advertising across all platforms will generate $83 billion by 2005, with mobile markets generating 20 percent of this revenue.

Avesair has been successful in the last two years, despite the downturn in the economy, due to the company’s conservative use of a “significant first round of funding” which allowed for continued financial stability, according to Kong. “We were conservative in spending [the money], realizing the time frame for adoption [for this technology].”

“Things are going good,” Kong adds. “We are going to hit the ground running.”