Federated Media Cuts Reliance on Display Ads, Lays Off Seven

Federated Media Publishing has dismissed seven people as part of a shift away from display sales.

Falling ad prices and reduced spending by mid-sized marketers have led the company to focus more on its custom and strategic marketing programs, which appeal to prominent brands that make up the bulk of its clients. It expects to make several new hires in those areas in coming weeks.

“We’ve talked to a lot of smaller customers who’ve said, ‘Call us back in a year,'” said Matthew DiPietro, marketing manager at FM. “They’re hiding under a rock and not spending any money. Large customers are saying we need you to do more of what you’re doing, but for less.”

Moritz Loew, senior director of national sales at MSNBC, confirmed last month that many mid-sized advertisers have cut digital ad spending.

“The middle class is gone from marketers right now,” he said. “You see the bottom feeders getting stronger. In the top tier, we’re getting more big deals than ever before — the big custom branding stuff. It’s the middle, your bread and butter $50,000 to $250,000 RFPs, that are going away.”

In the coming months FM plans to hire several new staffers to support its conversational and strategic marketing services. The current ratio of its display ad revenue to its larger conversational marketing campaigns is about 70 percent to 30 percent, according to DiPietro. He said the company is trying to change that ratio to about 80/20.

In a display ad report earlier this week, PubMatic found the price for advertising on Web sites of all sizes fell by about 53 percent from Q4 2007 to Q4 2008.

FM’s DiPietro said FM expects display prices to be squeezed for at least the next two quarters.

The layoffs were spread across all FM locations, including those in San Francisco, Chicago, and New York. In a post on FM’s blog, founder and CEO John Battelle thanked the departing employees and affirmed the company’s commitment to executing “complex media programs” for clients.

“While the economy is in deep recession…the media business is also in a historic transition from models based on mass distribution to models based on social interaction,” he wrote.

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