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Web Ad Growth Falls Off — and So Do the Salaries

Posted by Mort Greenberg on October 26, 2008

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Article Author: Michael Learmonth

Article Date: 28-Oct-08

NEW YORK ( — The $23 billion online ad market is slowing down, and so is the once white-hot market for online-ad talent.

Five years of double-digit growth fueled a scramble for talent unseen since the last boom, as hundreds of ad networks and venture-funded start-ups competed with the portals, agencies and marketers to hire anyone who knew — or agreed to learn — how to sell or buy and online advertising.

Aside from the burst of another asset bubble, there are few similarities between the internet bust of 2000 and the slowdown occurring today. First, most believe we’re looking at a few years of single-digit growth, not negative growth, as occurred between 2000 and 2002. In 2000, online advertising was still experimental for most marketers; today it’s part of the mainstream.



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Yahoo and WPP in Partnership

Posted by Mort Greenberg on May 18, 2008

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Published: May 16, 2008

YAHOO plans to announce Friday that it has formed a partnership with the WPP Group, the advertising holding company, that will give WPP’s clients a broader swath of Web sites where they can aim their messages.

Under the deal, the thousands of Web publishers that use Yahoo’s advertising auction service to sell space on their sites will get more direct access to WPP’s clients. Those clients, in turn, will be able to funnel their messages to Web site visitors who might be particularly receptive, using technology from an ad-targeting division of WPP called 24/7 Real Media.

WPP’s clients will also benefit from the extra information the agency will be able to collect about the behavior and demographic profile of people who visit sites on the Yahoo auction service, which is called Right Media. Those details will enhance the database that GroupM, which is WPP’s flagship planning and buying agency, collects about customer behavior.

The deal is “about enabling WPP’s full range of agencies to buy digital display advertising across the entire Internet in a much more efficient way,” said Hilary Schneider, executive vice president for global partner solutions at Yahoo. The companies would not disclose the financial terms.

Although the deal is one of many similar partnerships that each side plans to make, it comes at a significant time for Yahoo. Having just rebuffed a takeover bid from Microsoft, the company now faces a proxy battle by Carl C. Icahn, the activist investor who is trying to strong-arm Yahoo into selling itself to Microsoft.

WPP’s chief executive, Martin Sorrell, said in an interview last week that he was disappointed that Microsoft and Yahoo had not reached an agreement.

“Anybody who is a customer in the marketplace likes to see balance in it,” Mr. Sorrell said. “No one likes oligopolies. Search in America is imbalanced. That’s what Yahoo and Microsoft offered, a bit more balance.”

Perhaps Mr. Sorrell and his company are looking forward to a day when WPP’s clients can enjoy the full fruit of not only Yahoo’s sites, but Microsoft’s as well. The idea of the partnership is to combine the technological expertise of 24/7 Real Media, which directs ads to relevant Web pages, with the broad reach of Yahoo’s Right Media advertising exchange.

The bigger the 24/7 network, the more likely it will detect users it recognizes, and will then be able to deliver specific ads to them. Then its sister agency, GroupM, will be able to collect more data about how viewers behave when they see an ad.

“Basically, the network gets smarter and smarter the more data points it gets added to it,” said Rob Norman, the chief executive of GroupM Interaction, which handles GroupM’s online buying. “We believe we’ll be able to do greater customization of campaigns.”

For example, say GroupM is working for a car company, and knows through its research that people who have visited the company’s site are likely to respond to a rebate offer for a car. People who visit the car company’s site are tagged with a cookie, or small piece of code, so that they can be identified by 24/7, which tracks the cookies, when they visit other sites.

Then, after GroupM bids for ads on Yahoo’s exchange on behalf of the car client, 24/7’s targeting technology can show the rebate ads to the appropriate users — people who have visited the car site in the past — as they surf different sites across the Real Media network.

WPP’s digital approach has been threefold. It is trying to add digital abilities to its existing companies, and investing in outside technology companies (GroupM, for example, recently took a minority stake in Invidi Technologies, which targets ads on cable and satellite television). Finally, it has acquired companies like 24/7 Real Media, for which it paid $649 million a year ago.

And WPP already has thought of ways it could work with services that compete with Yahoo’s Right Media — like Microsoft’s DrivePm advertising network.

”It’s not implausible that 24/7 could do a very similar project with DrivePm in the Microsoft world,” Mr. Norman of GroupM said. “Clients need to have access under the best possible circumstances to the best possible range of inventory in the marketplace.”

Miguel Helft contributed reporting.

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Revenue Grows 8.6%, Propelled by Digital

Posted by Mort Greenberg on May 10, 2008

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Our Agency Report Finds the Business in Surprisingly Good Health

Published: May 05, 2008

CHICAGO ( — Revenue for U.S. agencies — advertising, marketing services and media — jumped 8.6% in 2007 despite a tepid ad market. And for that, you can thank digital.

Agency Report 2008

Ad Age estimates that the Big 4 ad firms — Omnicom Group, WPP Group, Interpublic Group of Cos. and Publicis Groupe — last year generated 12.3% of worldwide revenue from digital services.

Related Resources:

point bug Agency Report 2008
point bug Agency Family Trees 2008

While it comes as no surprise that revenue at digital specialty agencies rocketed last year (up 26.8% in the U.S.), it’s clear that digital services have become a way of life (or a way to avoid death) for agencies of all disciplines. In fact, U.S. ad agencies reported an average 10.2% of revenue from digital in 2007.

And in some cases, it was a lot more. Goodby, Silverstein & Partners — Ad Age’s 2008 Agency of the Year — said digital services last year generated 52% of its revenue. The San Francisco agency works for such digitally connected clients as Hewlett-Packard Co.

Of the more than 860 agencies that participated in the 2008 Agency Report, 60% broke out digital revenue.

Digital helps explain the solid growth experienced by major media agencies despite flat spending in traditional media. WPP Group said worldwide digital revenue for media unit Group M last year soared 53% to $238 million. Ad Age DataCenter estimates that digital accounted for more than 11% of 2007 revenue for Group M, the world’s largest media-agency group.

Digital has reshaped direct marketing, and that has turned top-tier direct shops such as Rapp Collins and Wunderman into some of the biggest digital agencies.

Ad Age estimates that the Big 4 ad firms — Omnicom Group, WPP Group, Interpublic Group of Cos. and Publicis Groupe — last year generated 12.3% of worldwide revenue from digital services.

Digital is about technology and platforms; it’s not a narrowly defined discipline. For the U.S. digital ranking, Ad Age tracked agencies’ digital revenue regardless of discipline, resulting in an eclectic list of agencies — digital pure plays as well as advertising, marketing-services and media shops — all dialing for digital dollars.

Digitas tops that digital list; Publicis bought Digitas last year and is moving fast to make it a global agency brand. Avenue A/Razorfish, acquired last year by Microsoft Corp., came in second. New to the list: IBM Interactive, a rebranded rollup of IBM’s digital-marketing services.

Last year’s U.S. revenue growth rate for agencies of all disciplines — 8.6% — was slightly below 2006 growth (8.8%). Agency revenue grew 7.2% in 2005 and 8.6% in 2004. Revenue for U.S. ad, marketing-services and media agencies in 2007 reached $31.1 billion, according to Ad Age estimates.

Marketing-services agencies — direct, promotion, branding, healthcare and public relations as well as digital specialists — accounted for 47.1% of U.S. revenue for marketing-communications agencies analyzed in this report. The rest came from advertising and media.

Key points from the report:

  • Omnicom’s BBDO Worldwide topped Ad Age’s new ranking of U.S. agencies across disciplines. The ranking shows how agency brands stack up regardless of whether an agency gets revenue from advertising, marketing services, media or a combination of the three.
  • WPP’s Group M ranks No. 1 in worldwide media revenue. Omnicom’s OMD Worldwide is the world’s largest media agency, while WPP’s MindShare is tops in the U.S., according to Ad Age estimates.
  • WPP’s CommonHealth leads the ranking of U.S. healthcare agencies. This is Ad Age’s first broad ranking of healthcare agencies since major holding companies opted to limit disclosure after passage of the 2002 Sarbanes-Oxley Act.

Posted in Ad Agencies, Ad Spending, Brand Advertising, Content, Data & Metrics, Demos & Audiences, Marketplace Trends, Media Company Stocks, Multi-Channel, News Highlights, Online Video News, Research, Resources | Leave a Comment »

NBC to Enter All-Local-News Arena

Posted by Mort Greenberg on May 10, 2008

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May 8, 2008; Page B10

General Electric Co.’s NBC Universal is starting a 24-hour local news network in New York, in what could be the first of several such channels around the country. NBC hopes the network will draw in new viewers and help the company weather a weak local TV advertising market that has depressed revenue at many of its individual stations.

The 24-hour “hyper-local” news network will launch on the digital tier in November and share newsgathering resources with WNBC, New York’s NBC-owned station, which will continue to have its own daily newscasts.

The new network will face competition from several existing 24-hour local news outlets, including Time Warner Inc.’s NY1 network in New York City and Cablevision Systems Corp.’s seven News 12 cable networks in the New York metropolitan area, including Long Island, Connecticut and New Jersey.

NBC is investing several million dollars in the venture, building a “content center” that will house local TV staff and operations. NBC doesn’t plan to hire a new staff for the channel, but instead said it will retrain its existing staff to produce news for the regular affiliate broadcasts, the 24-hour network and a new version of WNBC’s Web site, to be called NBC New York.

If successful, the New York channel will serve as a model for other markets, including Los Angeles, Philadelphia and Chicago, where NBC owns the NBC-branded local station. In most smaller markets, the NBC-branded affiliate is owned by another affiliate group.

“We think this will be better for advertisers,” said WNBC General Manager Tom O’Brien. “We’ll be able to aggregate different audiences and create a bigger audience, and that gives us a lot more opportunities to go to the advertising marketplace.”

In an email to his staff Wednesday, NBC local media division President John Wallace said the reorganization “marks an important change in the station’s philosophy in how it serves the community. Rather than focusing on any one distribution platform, WNBC is redesigning its operations to be content-focused rather than platform-driven, something that is essential to ensure long-term growth in today’s media environment.”

Steve Paulus, regional vice president of NY1, said that although his channel is profitable and ad sales are “holding strong if not increasing,” the advertising market for 24-hour local news isn’t notably better than it is for any other local programming.

Posted in Local, Marketplace Trends, Media Company Stocks, Multi-Channel, Online Video News, Television & Video | Leave a Comment »

Cox Enterprises to buy online ad company

Posted by Mort Greenberg on April 29, 2008

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The Atlanta Journal-Constitution
Published on: 04/29/08

Adify Corp., a 3-year-old company that knits together many Web sites into large audiences that are attractive to advertisers, is being bought by Atlanta-based Cox Enterprises Inc. for $300 million.

Adify began as a startup idea by a trio of people sitting around a cabana in Silicon Valley, but it represents “the next step in advertising,” said John Dyer, Cox Enterprises’ executive vice president of finance. Cox announced the all-cash deal today.

The purchase means Cox properties will be better positioned to take advantage of a growing online marketplace, said Dyer. The company is buying Adify at a time of shrinking newspaper and television advertising revenues. The Atlanta Journal-Constitution is owned by Cox Enterprises.

“This gives us the opportunity to participate in the growth of online advertising,” Dyer said. “We think this will work.”

Adify, based in San Bruno, Calif., allows media companies to extend their advertising sales beyond their own Web sites, said Adify Chief Executive Russ Fradin. It identifies prospective Web sites with common subject matter — for instance, parenting or travel — and offers them as a package to advertisers wanting to reach their readers without having to buy ads from each site individually.

“If you’re a media company, you need to deliver advertising to a larger audience,” he said.

Fradin, one of Adify’s co-founders, likened the company’s business model to one created more than two decades ago when TV networks faced competition from cable channels. As cable fragmented their traditional audience, said Fradin, the networks responded by acquiring specialty networks to keep advertisers from fleeing.

The principle also is comparable for national magazines, which offer sales packages to regional advertisers, he said.

Adify debuted Oct. 31, 2005, and was based on a business model Fradin and two others developed on a whiteboard while sitting at a Silicon Valley cabana.

Adify quickly secured two clients and now has more than 130, he said. The company has about 80 employees.

The customer list includes entrepreneurs and established media outlets, such as Forbes, The Guardian, HotChalk, Houseblogs, Martha Stewart, NBC Universal, Reuters, Time Warner and Washington Post Co.

Adify started with $3 million in investments, said Fradin. In less than two years, it had added nearly $24 million from investors confident the company would keep growing.

Then Cox offered it more than 10 times that amount to become part of a diversified company that owns the Journal-Constitution as well as other newspapers, television and radio stations, cable TV and high-speed Internet systems, and auto auctions.

Joining Cox, said Fradin, allows Adity to pay its investors. “They’re getting a good return on their money.”

It also means Adify doesn’t have to worry about raising more capital, he said.

The transaction should be complete in May, officials said. Cox plans to let Adify remain a stand-alone unit run by Fradin.

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WPP’s Q4 organic revenue grows 4.8 percent

Posted by Mort Greenberg on April 27, 2008

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Friday April 25, 5:32 pm ET


WPP Group reports first-quarter organic revenue growth 4.8 percent


PARIS (AP) — WPP Group PLC on Friday reported first-quarter organic revenue growth of 4.8 percent, missing analysts’ expectations of 5.4 percent.Still, the British advertising holding company’s revenue was strong in the period, boosted by strength in emerging markets and by new business wins.

On a reported basis, WPP, which owns agencies including JWT, Young & Rubicam and Group M, said revenue rose 14 percent to 1.56 billion pounds ($3.08 billion) in the three months to March 31, compared with 1.37 billion pounds a year earlier. The latest figure beat analysts’ forecasts.

The world’s second-largest advertising and marketing services group by sales, also confirmed its full-year margin target of 15.5 percent.

WPP said Asia Pacific, Latin America, Africa and the Middle East remain its fastest-growing regions, with constant currency growth of over 15 percent.

WPP released strong first quarter revenue numbers but organic revenue growth, a closely-watched industry metric which strips out the impact of acquisitions, disposals and currency movements, was slightly disappointing, Lehman said.

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BlackBerry’s Quest: Fend Off the iPhone

Posted by Mort Greenberg on April 27, 2008

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Published: April 27, 2008

STEVE JOBS, Apple’s chief executive and field general, has Napoleonic dreams of global conquest for his 10-month-old wonder gadget, the iPhone. So it may be fitting that he’s encountering his most serious resistance in a city called Waterloo.
J. P. Moczulski/Reuter

Jim Balsillieleft, and Mike Lazaridis are co-chief executives of Research In Motion, the maker of the BlackBerry.

Tony Cenicola/The New York Times

The company had focused on e-mail-craving executives, but with Apple’s iPhone breathing down its neck, it is trying to lure more consumers with phones like the Pearl, left, and the Curve.

That is where, 70 miles west of Toronto in Ontario, 19 nondescript, low-rise office buildings comprise the headquarters of Research In Motion, maker of the BlackBerry.

R.I.M. is the North American leader in building smartphones, those versatile handsets that operate more like computers than phones. But R.I.M. may have trouble dominating the market’s next phase. Once the exclusive domain of e-mail-obsessed professionals, smartphones are now prized by consumers who want easy access to the Web, digital music and video even more than an omnipresent connection to their in-boxes.

Since the iPhone went on sale last summer, amid long lines of shoppers and media adulation, the contours of the smartphone market have begun to shift rapidly toward consumers. An industry once characterized by brain-numbing acronyms and droning discussions about enterprise security is now defined by buzz around handset design, video games and mobile social networks.

That means R.I.M., which has historically viewed big corporations and wireless carriers as its bedrock customers, needs to alter its DNA in a hurry. While business is booming in Waterloo, analysts are raising an important question about R.I.M.’s future: Can a company that defined mobile e-mail for a generation of thumb-jockeys with bad posture also dominate the new consumer market for smartphones?

“The vultures are circling,” says Roger L. Kay, president of Endpoint Technologies Associates, a research firm in Wayland, Mass. “There is this sense that the R.I.M. franchise is under assault.”

In the short term, Apple’s noisy entrance into the smartphone market has elevated the visibility of smartphones and enhanced the prospects of most of its rivals. Worldwide, smartphone shipments jumped 60 percent in the last three months of 2007 over the same period the previous year, according to IDC, the tracking firm. Of the two billion cellphones sold last year, nearly 125 million were smartphones — a share that analysts expect to inexorably grow.

R.I.M. added 6.5 million subscribers in its last fiscal year, twice the previous year’s amount, and its stock hit the stratosphere, more than doubling in value as investors anticipated the coming Age of the Smartphone. And R.I.M. has already introduced catchy mainstream gadgetry. The BlackBerry Pearl and Curve, two phones aimed explicitly at the consumer market, have sold well, particularly during the holiday season, and now account for a majority of R.I.M.’s device sales.

But there are also signs that R.I.M. faces steeper challenges. At the end of last year, BlackBerry had a 40 percent share of the United States smartphone market, down from 45 percent at the end of 2006, thanks largely to the 17.4 percent share the iPhone grabbed in its first six months.

In March, Mr. Jobs announced that Apple would take the rare step of licensing Microsoft’s corporate e-mail technology, to allow iPhones to connect directly to business computers — a dagger aimed at the heart of R.I.M.’s strength in the corporate market. In Apple’s quarterly conference call last week, Apple executives said that one-third of Fortune 500 companies were interested in giving iPhones to their employees.

Apple, meanwhile, in an effort to further increase its appeal to consumers, is also expected to introduce a new 3G version of the iPhone in June, which will work on speedier wireless networks and may further attract a new segment of customers to the iPhone in the United States and abroad.

In describing the threat that Apple poses to R.I.M., Charlie Wolf, an analyst at Needham & Company, describes his wife’s entirely common use of the iPhone, which she takes to bed with her each night to browse the Web.

“Some consumers who might have considered the BlackBerry, who don’t have the e-mail urgency of a mobile professional, are going to start selecting the iPhone,” Mr. Wolf says. “This isn’t going to stop R.I.M., but it is going to slow them down.”

Up in Waterloo, where the towering winter snowpacks finally melted this month, R.I.M. executives appear nonplused. Though they would not reveal details, R.I.M. itself is expected to unveil a new 3G phone sometime in May and deliver it to wireless carriers throughout the year.

R.I.M. employees and outside developers who are writing programs for the new phone, which has the internal code name “Meteor,” say that it will have faster processors, a larger screen and a better browser that more closely resembles the Web experience on a computer.

Photographs of the device, leaked to gadget news sites, also indicate that the new BlackBerry will have elegant curves suggestive of the iPhone. It will also have a physical keyboard like previous R.I.M. devices, as opposed to the glass touch screen found on the iPhone.

THERE’S a reason that R.I.M. is averse to the iPhone’s glass pad. “I couldn’t type on it and I still can’t type on it, and a lot of my friends can’t type on it,” says Mike Lazaridis, R.I.M.’s co-chief executive and technological visionary. “It’s hard to type on a piece of glass.”

Mr. Lazaridis thinks that e-mail-dependent BlackBerry owners demand the reliability and tactile feedback of a keyboard. But, despite his critique of the iPhone, he does not dismiss the possibility that R.I.M. may itself one day sell a touch-screen phone, aimed specifically at consumers without the e-mail demands of BlackBerry’s core users.

Indeed, two independent developers writing software for coming R.I.M. devices say that a touch-screen BlackBerry is in the works, and that R.I.M. engineers privately refer to it as the A.K. — for “Apple Killer.”

R.I.M. would not comment on future devices or media reports last week that at least one carrier, AT&T, was delaying its introduction of the newest R.I.M. phone because of problems with call quality. Those reports sent R.I.M.’s stock down nearly 3 percent in trading on Friday.

Mr. Lazaridis says only that “I wouldn’t underestimate the amount of research we’ve done on user interfaces and technologies. We are not afraid to reinvent ourselves.”

Keypads and touch screens aside, R.I.M. is facing a lot of competitors in addition to Apple in the booming smartphone market.

For years, Microsoft has tried to have manufacturers use its operating system for smartphones, Windows Mobile, which analysts generally think is overly complex and too difficult for consumers. The companies that license it, including Motorola, Palm and HTC, a Taiwanese manufacturer, have carved out only small fractions of the overall smartphone market.

Then there is Google. Later this year, phone manufacturers have promised to start selling smartphones running Android, Google software based on the open-source operating system Linux and backed by a coalition of 34 wireless-industry companies. Google’s idea is that Android can be a more open and a less expensive alternative to the proprietary mobile technologies of Apple, Microsoft, R.I.M. and Nokia in Europe.

Executives in Waterloo acknowledge these assaults but argue that R.I.M. is the only company that isn’t trying to leverage strengths in ancillary markets, and can therefore focus exclusively on mobile-phone innovation. They also seem to relish the prospect of savvy high-technology companies jockeying for position on their home turf.

“There’s no question the level of focus and intensity on wireless platforms has gone up an order of magnitude,” says Jim Balsillie, R.I.M.’s wiry, jargon-slinging co-chief executive and strategic brain. “The stakes are so very high, not only in the size of the market and market share, but in who has the important position in the ecosystem.”

Mr. Balsillie thinks that R.I.M. is in the best tactical position for the coming fight. He points to its close relationships with 350 carriers around the world — like Verizon and AT&T — that sell, often at steep discounts, BlackBerry phones and the accompanying monthly e-mail service.

Apple and Google, on the other hand, are vocally trying to dislodge the carriers from the nexus of the North American wireless market. Unlike other phone makers in the United States, Apple sells iPhones from its own stores and has negotiated relatively stingy contracts with the carriers, in exchange for limited periods of exclusivity. Google, for its part, unsuccessfully bid for wireless spectrum this year in an effort to force carriers to be more open to allowing various handsets and Internet services on their networks.

R.I.M. makes its alliances clear. “We are sort of polite and amiable and we gently interrelate with the carriers and try to find compatibility,” Mr. Balsillie said. “It may be a better strategy to fight the carrier. We may be wrong. The carrier may get disintermediated, in which case we fade with them.”

R.I.M. is also betting on security, which hinges on the fact that its handsets and e-mail systems are relatively impervious to hackers. Mr. Lazaridis predicts that corporations will not give iPhones to their workers because they have already proved vulnerable to hackers eager to pry iPhones off AT&T’s system and make them work on other wireless networks.

“It’s not that simple for an I.T. manager to give up security,” he said.

INDEED, R.I.M.’s allure to carriers and corporations may be irresistible and impossible for Apple to weaken, even if Apple improves iPhone security. But some analysts still wonder what will happen to the BlackBerry’s dominance when everyday consumers start driving growth in the smartphone market.

R.I.M. has always moved deliberately in embracing new handset technologies, in order to reassure corporations anxious about possible security breaches. For example, it added digital cameras and slots for removable memory cards to its phones only at the end of 2006, years after they became popular in other devices. Companies feared that these features would leave confidential corporate data vulnerable, but consumers demanded them and R.I.M. ended up providing them.

Consumers also want to choose from a growing pool of entertaining software programs to buy and load onto their devices. On this front, R.I.M. may be falling behind. Apple released a set of programming tools for outside developers in March, and recently said that 200,000 programmers had downloaded the tools.

The BlackBerry has been open to developers since R.I.M. started using the Java programming language in 2001. But for now, those programs are simpler and more primitive than what’s coming on the iPhone. For example, some of the new software available for the iPhone will take advantage of its support for 3-D graphics and innovative features like its motion sensor, which allows users to rotate their screens. The BlackBerry does not support 3-D graphics; it also doesn’t have a motion sensor. If motion-sensitive gaming — like that found on Nintendo’s popular Wii console — finds a home on smartphones, R.I.M. may be at a disadvantage.

Analysts say that R.I.M.’s greatest challenge in a consumer-driven smartphone industry may simply be creating devices that people admire and covet as much as the iPhone. Despite the faithfulness of its flock, R.I.M. is not there yet.

In a survey this year of 3,600 professionals by ChangeWave, a research company, 54 percent of BlackBerry users said they were very satisfied with their devices.

Even so, the BlackBerry was a distant second in the survey: the comparable figure for the iPhone was 79 percent.

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Yahoo Reveals Details of Its New Ad Sales System

Posted by Mort Greenberg on April 9, 2008


Published: April 7, 2008
SUNNYVALE, Calif. — Yahoo is beginning to pull the wraps off an online advertising system that the company said would help it and its partners drive sales of graphical and other premium ads.

Jim Wilson/The New York Times

Yahoo executives Hilary Schneider and Michael Walrath.

Yahoo said the system, called AMP and still months away from being ready, would greatly simplify the task of selling online ads, allowing Yahoo’s publishing partners, for instance, to place ads on their own sites as well as on Yahoo and on the sites of other publishers in the company’s growing network. Advertisers will be able to focus those ads by demographic profile, geography and online behavior, the company said.

Yahoo is developing the system as other Internet giants, including Google, Microsoft and AOL, are all stepping up their efforts to become sellers and brokers of all types of ads on sites across the Web. Many analysts expect Google, which recently completed its acquisition of the ad-serving specialist DoubleClick, to begin making inroads into the market for graphical ads online, which Yahoo dominates.

“This gives Yahoo a little leadership in vision,” said Rachel Happe, an analyst with IDC, a consulting firm. But Ms. Happe noted that Yahoo’s last big advertising project, a platform known as Panama and intended to reach people searching the Internet, was plagued by lengthy delays. She said it would be “problematic” for Yahoo if it were not able to deliver AMP on time.

Yahoo executives first discussed the new system publicly in February at an Interactive Advertising Bureau meeting, calling it the Advertiser and Publisher Exchange. Yahoo executives, trying to convince shareholders that a bid by Microsoft to acquire the company underestimated Yahoo’s worth, said the new system would help Yahoo outpace the growth of the online graphical advertising market over the next three years.

Yahoo has begun showing the system to publishers in its newspaper consortium, which includes hundreds of daily and weekly newspapers. Those newspapers are slated to become the first users of AMP, which Yahoo expects to begin rolling out in the late summer or in the fall. The New York Times Company’s Regional Media Group, which includes 15 newspapers, is a member of the consortium.

“Yahoo clearly has put a full-court press on developing this platform,” said George B. Irish, president of Hearst Newspapers, which owns 12 dailies that are part of the Yahoo consortium.

“I think it’s going to be very important for us,” said William Dean Singleton, chief executive of MediaNews Group, which operates 57 daily newspapers in 12 states. “Giving us the ability to sell targeted online advertising will allow us, I think, to charge more for advertising online.”

Hilary Schneider, Yahoo’s executive vice president for global partner solutions, said that AMP was “about opening Yahoo’s capabilities to the entire Web.”

With AMP, a newspaper ad sales representative working with an advertiser, like a car dealer, would be able to easily see the ad space available on not only the newspaper’s site but also Yahoo and other Web publishers’ sites. The sales person could slice that inventory by demographic profile to, for instance, aim ads for a new hybrid S.U.V. to females of a specific income and age group. The system will help streamline a manual and time-consuming effort, Ms. Schneider said.

The system, which was built out of a combination of technologies developed at Yahoo and others Yahoo obtained when it bought Right Media, BlueLithium and other companies, will also serve ads directly to publishers’ sites and allow marketers to monitor their performance.

AMP’s targeting capabilities could, in theory, help Yahoo and others sell ads at higher prices, said Barry Parr, an analyst with Jupiter Research. But Mr. Parr noted that Yahoo has had difficulty focusing ads effectively on its own site and that AMP’s effectiveness remained to be proved.

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Staples Keep Ad Market Afloat

Posted by Mort Greenberg on April 9, 2008


April 9, 2008

Yogurt, cheese and Froot Loops may provide a much-needed life raft to the advertising market.

While overall advertising spending is threatened by the battered economy, makers of household staples, such as General Mills Inc. and Kraft Foods Inc., are holding the line or increasing their ad and marketing budgets, partly to try to make sure penny-pinching shoppers don’t switch their favorite shampoo or macaroni for a cheaper off-brand substitute.

“As they’re battling for shelf space for their brands and products, one of the things to back that up is advertising and marketing support,” said Jon Swallen of market-research concern TNS Media Intelligence.

In 2007, companies making consumer products such as food and drugstore salves increased their ad spending by 8% or better, even as the overall ad market was nearly flat, according to TNS. That’s significant because makers of such household staples are big spenders, responsible for roughly one in 10 ad dollars spent in the U.S.

While continued strong spending by such companies is unlikely to lift the whole ad market, especially if advertisers move to nonconventional pitches, it at least offers a spot of good news to media companies hurt by overall slower ad growth.

Hearst Corp., publisher of Good Housekeeping and Cosmopolitan magazines, reported its most profitable year in 2007. Nearly a dozen top accounts each juiced spending by $30 million more in Hearst magazines last year, led by an 80% jump from Campbell Soup Co., according to Jeff Hamill, senior vice president of Hearst’s corporate advertising unit.

Consumer-product companies say increasing marketing costs translate into higher sales.

General Mills, which makes Cheerios cereal, Hamburger Helper and other pantry favorites, raised consumer-marketing spending by 13% for the third quarter ended in February. The company posted a 12% sales increase for three months ended in February, a jump General Mills credited to its ad spending uptick.

“We believe this investment is and will continue to fuel sales growth,” Chief Financial Officer Don Mulligan told investors last month.

Last year, Kellogg’s ad spending rose 16% to $1 billion, and the cereal maker isn’t backing off. “We believe that continued investment in our brands increases our dependability as a company,” Kellogg Chief Executive David Mackay said at a conference in February, when he discussed his company’s increases in ad spending.

Overall Market

The pickup in some categories, however, may not be enough to salvage the overall advertising market. Forecasts are calling for U.S. ad spending to grow at an anemic pace of 4% or slower this year, even with the significant lift expected from the U.S. presidential election and the Summer Olympics. In 2004, the last presidential and Olympic year, the pace of growth was about 10%.

The ad pain results from a storm of factors. Many financial-services firms, battered by the housing-lending crisis, are paring marketing. General Motors Corp. and other top advertisers in auto, media and telecom are cautious, too, spurring ad watchers to retreat from their spending forecasts in recent months.

Robert Coen, the closely watched ad-spending maven at Interpublic Group of Cos.’s Universal McCann, expects ad spending to be 3.7% higher this year than in 2007, down from a 5% increase he initially expected. Others also are wary.

“No question this is going to be a challenging year,” said Richard Beckman, chief marketing officer of Conde Nast Publications. “As the economy goes, so goes the advertising market.”

However, media companies and ad-agency giants say they haven’t felt any advertising pullback, for the most part. But pessimistic observers say ad budgets, set months in advance, have not caught up with the cooling economy yet. The second quarter or later could start reflecting the ad weakness in media companies’ bottom lines.

Madison Avenue acknowledges the weakness but says advertising and media will weather the economic storm.

“The truth of the matter is there are too many people saying the sky is falling,” Mr. Beckman said.

Media companies say they’re benefiting as companies focus less on winning low prices for ad pages or TV air time. Instead, media outlets and advertisers are working more closely together to develop elaborate and potentially pricey full-service ad campaigns.

Hearst worked with Unilever NV’s Dove on a campaign for hair-care products. Ads ran in the magazine, and Hearst created a Web site called “Love Your Hair,” packed with content and video touting the benefits of Dove’s wares.

Non-Traditional Spending

Consumer-staples companies can afford to boost ad spending because their sales hold steady even in a weaker economy. But even as they pitch their wares, not all of their dollars may go toward traditional advertising.

“You could see shifting of some marketing dollars into the store,” said Jason Gere, a household-products analyst at Wachovia Capital Markets.

In-store merchandising can refer to anything from the way products are displayed to signs. About 70% of consumers’ purchasing decisions are believed to be made while in the store.

“It’s important the message inside the store is just as sharp, particularly in a weaker economy,” Mr. Gere said.

Other deep-pocketed companies are spending in different ways, homing their marketing on a few important brands or key consumer groups.

“We are spending more, but not in ways we always have,” says Doug Moore, vice president for advertising at General Mills. The company, for instance, is spending more on digital marketing and targeting Hispanic consumers with ads in Spanish for Yoplait and Honey Nut Cheerios.

Anheuser-Busch Cos. plans to allocate 10% more for media spending this year compared with 2007 spending, but the leading U.S. brewer has shifted its budget to focus on a few key brands such as Budweiser and Bud Light beers.

Marketers continue to shift ad money to the Internet, where overall ad costs are lower. Online advertising also produces measurable results, arming strapped marketing executives with spreadsheets to prove that their ad campaigns rang digital cash registers.

Consumer-products companies spend about 3% of their ad budgets on online advertising, less than half of what auto makers and other major advertisers spend in that area. The slipping economy may, however, push more advertising dollars toward the Internet.

Write to Shira Ovide at and Anjali Cordeiro at



Posted in Ad Spending, Brand Advertising, Consumer Behavior, Data & Metrics, Demos & Audiences, eCommerce, Marketplace Trends, Media Company Stocks | Tagged: , , | Leave a Comment »

Scripps’ Fuzzy Online Math

Posted by Mort Greenberg on March 6, 2008



Scripps’ Fuzzy Online Math

posted on: March 05, 2008 | about stocks: SSP    
By Ashkan Karbasfrooshan

Scripps (SSP) is one of my favorite media companies.

The E. W. Scripps Company, through its subsidiaries, operates as a media company that provides content and advertising services via the Internet. It operates through four segments: Scripps Networks, Newspapers, Broadcast Television, and Interactive Media. The Scripps Networks segment operates national television networks, including HGTV, Food Network, DIY Network, Fine Living, and Great American Country. The segment also provides video-on-demand and broadband services. The Newspapers segment operates daily and community newspapers in the United States. It also owns and operates Scripps Media Center, as well as operates Internet sites, offering users information, comprehensive news, advertising, e-commerce, and other services. The Broadcast Television segment operates ABC-affiliated stations. The Interactive Media segment offers online comparison shopping services. It operates a comparison shopping service that helps consumers find products offered for sale on the Web by online retailers, as well as operates an online comparison service that helps consumers compare prices and purchase various essential home services. The company also offers BizRate, which is a consumer feedback network that collects consumer reviews of stores and products. The E. W. Scripps Company also offers other services, including syndication and licensing of news features and comics. The company was founded in 1878 and is based in Cincinnati, Ohio.

Like most media companies, Scripps is facing a threat of cannibalization.

Consumers and advertisers are flocking to the Web, but the core business of Scripps – along with all traditional media firms – remains offline. It’s a harrowing experience. One that keeps executives awake at night and creates anxiety and envy. Occasionally, they’ll make $500M decisions that puts them in a corner.

Interestingly, Scripps is in the process of spinning off its slower growing and mature businesses from its higher growth web business. But when you dive into their 10-K, you see a lot of interesting tidbits that shed light on how confused some traditional media companies can become in these digital days.

Tale of the tape

Scripps is worth $6.8B in market capitalization.

For 2007, the company’s total revenues were $2.5B with net income of almost $400M. This translates to a P/E of 18 and a P/S of 2.75.

It makes sense, in some ways, to spin off the new media assets, granted… but you have to wonder about the broader repercussions and realities for old media.

From the 10-K, via Paid Content:

Our Internet sites had advertising revenues of $40 million in 2007 compared with $34.0 million in 2006 and $22.0 million in 2005.

It should be noted that these are advertising sales only. Indeed, Scripps Interactive also consists of Shopzilla and uSwitch. In fact, in 2005, Scripps paid a whopping $525M for Shopzilla, then named Bizrate. At the time of purchase, in 2005, when Scripps bought Shopzilla:

Founded in 1996, Shopzilla, formerly BizRate, is a privately held company that is expected to generate $30 million to $33 million in EBITDA profit, also excluding investment results and unusual items, on revenue of $130 million to $140 million for the full year 2005.

As such, with a price tag of $525M (in cash, no less), at a $135M in revenues, this converted to a 3.9x P/S ratio.

As of Q3, 2007:

Shopzilla and uSwitch, which together make up Scripps’ Interactive Media division, generate upwards of $54M per quarter, driven largely by CPC and CPA-style referral fee revenues.

For what CPC, CPA and CPM mean, along with other standard online ad terminology, click here.

If you project the $200M or so that the referral business generates, at the same 3.9x P/S ratio, the unit should command a whopping $800M in a sale. Scripps is adamant that Shopzilla is not for sale, but that’s not what the rumor mill suggests.

I should disclose now that Shopzilla was an advertiser of our sites in 2007. We do not have any inside information on this matter, however.

Advertising has inherited the world

But advertising is everything these days. Free, ad-supported content is what drives value these days… and much of what Scripps is doing is all about unleashing shareholder value. So let’s focus on that.

Doing the math and focusing only on “Our Internet sites had advertising revenues of $40 million in 2007 compared with $34.0 million in 2006 and $22.0 million in 2005,” then that’s growth of 100% in 2 years but effective annual growth of 54% from 2005 to 2006 but only 17% from 2006 to 2007 .

What about 2008, you ask? The 10-K continues:

Interactive media segment profit is expected to be $13 million in the first quarter”

Multiplying that by 4, you get $52M. From 2007 to 2008, this would be growth of 30%… not bad. What happened in 2007 to kickstart growth from a paltry 17% to 30%?

Acquisitions, that’s what.

“In July 2007, we reached agreements to acquire the Web sites and for total cash consideration of approximately $30 million.

Scripps can file this under “Advice You Didn’t Ask For”, particularly since I’m biased, but I am not sure Scripps is wise to be buying UGC sites, frankly. Don’t take it from me: CNET (CNET) regretted acquiring Webshots; from my vantage point, Scripps will regret buying UGC sites, too. What these sites need is not more low-quality inventory… they need to pull a AOL/Webshots and find a way to create low cost, high quality video content.

strong>What does this mean for the spin-off?

Regardless of what I, a mere mortal, thinks of such acquisitions, the fact remains: the company spent $30M from Scripps’ cash hoard to load up on interactive. That was wise.

Scripps’ balance sheet shows $58.95M of cash but nearly $600M in debt. At even 5% interest charge (presume Scripps $2B in sales guarantee it a low interest rate or cost of debt), that is an annual $30M interest expense. In other words, in 2007, it paid $30M in annual carrying fees to spend $30M in acquisitions to kickstart its interactive growth. That makes sense, I guess: invest today for tomorrow’s growth.

That’s also why, I presume, they want to spin off the new media company: more capital for more acquisitions, and to pay off debt (I am guessing about the latter, I have no idea what management’s actual use of funds and strategy is).


The Web’s online ad markets are growing at 25% per annum, but with quality content you expect Scripps to outgrow the market.

Moreover, while the growth rates are nothing to sneeze at… in absolute markets, they’re puny when the offline unit does $2.45B in annual sales.

You cannot, after all, simply shift your offline content online and expect the same revenues. TV ads in the US were a $75B market in 2007 while web video was a $750M market. Web video and online media in general cannibalizes traditional media and TV in particular cannibalize offline revenues… Scripps is a textbook example of a victim of this phenomenon.

What about the stock?

Of course, it’s all about the share price and market cap… so maybe the financial engineering makes sense. Does it?

Double the P/S and P/E for the online segments (since they are higher growth segments, this basically means that investors would bid twice as much for the growth), a $40M revenue in 2007 x 5.5 P/S ratio project a $220M company. Of course, that is just the online advertising contribution, the referral fees generate over $216M per year (if we simply take that Q3 2007 amount of $54M and multiply it by four).

But multiples on referral fees are in the gutters relative to multiples on ad revenue…

With the obsession over advertising these days, you have to presume that P/S for referral-based businesses is down. But since the Web does indeed command a premium to offline media, we’ll eliminate any discount or premium and simply say that today Scripps would be able to get the same multiple, 3.9x.

But the problem with this rationale is that with $200+M in revenues, that would project nearly $800M in value. I don’t think anyone would pay nearly $1B for Shopzilla.

In fact, given the herd mentality of investors and buyers in general, I doubt they’ll get $525M for Shopzilla because buyers would prefer to spend such an amount on sexier things: video, social networking, video games, etc. As such, if you work backwards and agree that a price is what the market will pay for something, it’s hard to imagine Shopzilla getting $500M on the market, so this means a P/S of about 2.5x.

So what would all of Scripps Interactive be worth?

Regardless, if you combine the businesses comprising interactive:

+ online advertising = $40M in 2007 revenues at 5.5x P/S = $220M
+ referral fees = $216M in 2007 revenues at 3x P/S = $648M

you see that the interactive business should be an almost $1B company.

If Scripps is indeed worth $6.8B… then the rationale is that you can carve out a faster growing segment, sell a portion to investors, raise money, pay down some of the debt, and then make acquisitions at a lower cost of capital.

Of course, this entails that they buy the right assets and the right people. Will they? Time will tell. But considering Scripps bought – then sought to sell – Shopzilla for $525M… you have to understand why the company is going to tread carefully.

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