J Walter Thompson is to acquire San Francisco-based online advertising and branding specialist Tonic 360 San Francisco.

The acquisition, expected to be announced today, will expand the interactive marketing capabilities of the WPP Group unit.

The two companies already have close links, and last month formed an alliance to successfully bid for the entire £71m Sun Microsystems account.

JWT will now be in a strong position to extend the services it offers to existing and more traditional clients, such as Unilever, Pfizer and Ford, which are increasing their presence on the internet.

The move comes at a time when the big, traditional Madison Avenue ad agencies are reassessing their future in the digital advertising field as the carnage mounts among dot.coms.

Agencies devoted to online marketing are also suffering as websites report declining ad revenue.

Tonic 360 will operate as a standalone unit of the Thompson North America division, which is separate from Digital@JWT and has offices in several European and North American cities, but not San Francisco.

Tonic 360 has 85 employees and estimates its billings at $150m (£98m), with clients including AvantGo, Go.com, iBeam Broadcasting and TechTV. It opened in December 1999.