Media Firms Feel dotcom Bust Chillgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Sunday October 8 6:56 PM ET
Media Firms Feel dotcom Bust Chill
By Jennifer Laidlaw
NEW YORK (Reuters) - Broadcasters and advertising companies are bracing for the dot-com bust as recently high-flying Internet companies such as gas-and-groceries venture WebHouse stumble, industry experts say. WebHouse Club, the gas-and-groceries licensee of name-your-own-price online company Priceline.com Inc. (PCLN.0), said on Thursday that it would shut down, sending Priceline stock down by more than a third.
A rash of budget cuts and dot-com failures is likely to affect smaller advertising agencies the most as many had specialized in services for dot-coms specifically, experts say. They say that dot-coms are definitely cutting back on their broadcast advertising, and that radio is likely to more affected than television.
``It will have an immediate and significant impact that will influence the revenue stream for advertising agencies and other communications resources that have depended on this kind of income,'' said Robert Bloom, chief executive officer of French advertising giant Publicis Groupe SA (PUBP.PA) (NYSE:PUB - news)'s U.S. operations.
Dot-com advertising has provided a huge boost to broadcasters. According to Global Entertainment and Media Outlook by PriceWaterhouseCoopers, dot-com advertising on broadcasters and cable networks surged to $1.5 billion in 1999 from $230 million the year before.
But industry experts say this year is not likely to be the same story, with dot-coms unwilling to commit to long-term advertising contracts.
Pat Dermody, president of the media and integrated ventures group at advertising company DDB Chicago, said dot-coms have not wanted to sign up to new advertising contracts for the new broadcasting season from fall 2000 to fall 2001.
``They have been unwilling to commit,'' she said. ``That gives you an indication about their ability to get into commitments that they can't get out of.''
Major upcoming TV events are also not likely to see huge demand for advertising from online companies, analysts say.
``We are not going to see 17 dot-coms advertising on the SuperBowl,'' said Laura Mitrovich, who covers online advertising for the Yankee Group. ``We are going to see a real rationalization there.''
But analysts said that broadcasters shouldn't suffer too much from the dot-com slowdown, saying that demand from traditional companies will offset any lost accounts.
``Rather than a slowdown, we will see a return to the normal growth of advertising,'' said Jim Nail, senior analyst at Forrester Research. ``What we saw last year was a very abnormal spike,'' he said.
Nail said there were too many dot-coms running around with ill-conceived business plans too ready to throw money at advertising in order to get their name out on the street.
``There was a bunch of money, but it was a bunch of dumb money,'' he said.
Getting together a feasible business plan is now key as the dot-com market faces a shakeout. DDB's Dermody said Webhouse's closure may be due to the fact that there just is not enough demand for groceries and gas online.
``There has a be a consumer need,'' she said.
Industry experts said that radio may feel the squeeze from the dot-com bust more as there were more dot-coms who used radio rather than television for advertising.
Brian Goodall, president of New York-based advertising company Hampel Stefanides, said there were periods at the end of 1999 and early 2000 in some parts of the country when radio advertising was completely sold out to online companies.
``It was driven by the dot-coms,'' he said. ``I don't think that's the case any more.''
Newspapers won't feel the pinch so much as most dot-coms were trying to build their brand awareness through broadcasters, he said.
Among the advertising agencies, it will be the smaller specialist ones which are hit because most of the larger agencies had wised up to the potential crash in the online market.
Publicis' Bloom said a lot of small agencies had looked as if they were in the pink, but that just wasn't the case.
``There were many that came to us to be acquired that looked fat and happy,'' he said. ``But we decided that their revenue stream was not dependable.
-- Carl Jenkins (Somewherepress@aol.com), October 08, 2000
This is a telling development.
If so many dot.com companies are unwilling to commit during the fall advertising season, it says much about their financial condition.
Apparently the fast and easy days of quick IPO money and stock option enhancments to reduce payroll costs are over--at least for the time being.
-- JackW (firstname.lastname@example.org), October 09, 2000.
Specious profits have undoubtedly gone by the boards.
-- Billiver (email@example.com), October 09, 2000.