Investors and analysts this morning welcomed WPP's push into the internet search marketing business, with the $649 million (£325 million) acquisition of 24/7 Real Media.

Shares in the group gained 10.5p to 772.5p in early deals after Sir Martin Sorrell's group clinched control of the US advertising firm against competition from the likes of Microsoft.

Analysts said the $11.75 a share cash deal would strengthen WPP's presence in the digital advertising market amid increasing competition from online rivals.

The agreement follows Google’s acquisition of Double-Click for $3.1 billion and Yahoo!’s purchase of Right Media, the ad exchange, for $680 million in April.

Sir Martin, WPP's chief executive, said: "Our clients and therefore our industry are becoming more technology driven. 24/7 Real Media significantly enhances our capabilities, technological resources and talent, as well as adding to our geographic coverage and our measurable skills.”

It is understood that Sir Martin switched his attention to 24/7 Real Media after losing out to Google over Double-Click. He later attacked that deal for causing “regulatory issues”.

Deutsche Bank told clients this morning that the 24/7 acquisition would provide WPP with search marketing expertise and technological capabilities that it would not have been able to develop internally. Analysts at the broker raised their target price on the London-based group from 875p to 900p and reiterated their "buy" stance.

WPP should be able to cut costs by integrating 24/7 with other businesses including GroupM, the media investment management group.

The move is expected to be a precursor to further acquisitions by advertising groups of digital marketing specialists, as the industry goes online.

Lorna Tilbian, an analyst at Numis Securities, said: “This deal was inevitable. Advertisers like WPP want to be able to offer clients the full package and digital is an increasingly important part of that.”

WPP said that the deal would dilute 2007 earnings by about 1 per cent, adding that it is still on course to achieve operating margins of 15 per cent for 2007 and expects to achieve a cost saving of £2.5 million. 24/7 Real Media will account for 3 per cent of WPP’s market capitalisation.

The New York-based company was founded in 1995. It is listed on Nasdaq, has about 400 staff and operates in 12 countries. Last week it reported a 34 per cent increase in revenue on last year to $54.4 million in the first quarter and expects to achieve full-year revenue of up to $275 million.

The takeover is expected to be completed by the autumn.

You can track WPP shares by clicking here.

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