Getting Ready for Fourth Quarter 2000

Last year at this time, the online advertising marketplace was a madhouse bazaar. Everyone with anything to sell had their tents pitched and tables set up, barking at every passerby to hawk their wares.

Shopping sites were the rage, and every dot-com with even the slightest commerce pitch was rushing to advertise on them. E-tailers throughout the land were desperately clamoring for inventory on every portal and brand-name site. Anyone in possession of a URL was either selling advertising or buying advertising. Buyers couldn’t make enough phone calls or send enough emails, and reps couldn’t return enough of them. Yes, ladies and gentlemen, as the old spiritual goes, “The harvest [was] plenty, the laborers [were] few.”

After the holiday feast, everyone pushed themselves back from the table to loosen their belts and digest their bounty. Gluttons one and all, we smiled with confidence that this was just the beginning, and the best was yet to come.

But at the end of first quarter 2000, the hangovers and dyspepsia set in. Confidence in the new economy – dot-communism – suddenly waned, and the Father Almighty – the stock market – decided to punish all the revelers for gorging themselves at the feet of Baal. Valuations plummeted, budgets dried up, and VCs came in with austere plans and demands for immediate demonstrations of profitability. Grain silos swiftly emptied, and the locusts had ravaged the crops. Suddenly, it seemed, the laborers were many, and the harvest was scarce.

And so second quarter 2000 looked like a Gandhian fast compared to the excesses of just three months earlier. Spending evaporated in almost every medium.

Now third quarter 2000 is ending, and though it wasn’t as bad as the quarter before, the shakeout has continued, and times are still lean. Though industry prognosticators continue to be upbeat and see online advertising as a powerful medium with growing spending levels, the seers of the general economy see more doom and hardship in their crystal balls.

I happen to agree with Internet-industry pundits who see a semibright future. Now that the advertising giants of the jungle have watched what the smaller denizens have eaten and are thus learning to identify which flora is poison and which is not, they will begin to take a taste of the web. This means they’ll allocate money online as part of the media mix. And the big guys have much bigger pockets than those they have been watching.

But the old economy folks aren’t entirely wrong. We know from experience that they’ve almost always been wrong about the Internet remember how they said no one would ever surf the web for news and sang the praises of push as the real value of the Internet?

Still, there is a real slowdown. Yet more and more folks continue coming onto the web, meaning there is more and more inventory being created and larger and larger audiences to which one can advertise. So this poses an excellent opportunity for any and all advertisers left standing that are still interested in online advertising.

Here are a few things to try for what looks to be a soft market:

  • Bonus ROS with every buy. Most buys are targeted to specific areas and categories within a site. Since the preponderance of inventory out there is ROS, and most of it goes unsold, ask for more than you usually would when putting together a buy.

  • “Mendel” buys. A few months ago I talked about “the Mendel buy,” a combination CPC/CPM buy named after the venerable 19th-century Austrian monk who discovered heredity. I’ve approached a lot of publishers with this prospect, and though many are open to discussing it, many have asked for inordinate levels of spending to commit. Now that the wells are drying up, perhaps they’ll be more willing to drink what’s in the cup that’s offered them. Paying market CPM for some inventory while paying a CPC for what will invariably be remnant is really a deal for both buyer and seller.

  • Cost per action. Yup, that’s right. Though I had a number of publishers give me hell for talking about this last time, what none of them seem to understand is that we, the buyers, still have the money. Publishers still insist on acting like they’re doing the United States a favor by selling to us. Last I checked, cash was flowing linearly. Though many sites with which you’ve dealt with by paying CPMs will balk at striking a CPA deal, it never hurts to ask. One of the great things about the raw free market is that someone somewhere will always sell you what you are willing to spend money on.

  • Sponsorship-type placements. What I mean by this is, ask for positioning that is usually reserved for sponsorship advertisers. Sure, on sites that have these sold already, you won’t get it, but not all sites are going to have these positions sold in packages to advertisers yet. If you really want it, position the request as a deal breaker, and see what happens. You never know what you can get if you don’t ask.

This last point is my own personal initiative. And what I am going to cursorily propose here is, in the big picture, only possible from a position of strength and with a united front. It is also most likely a topic for an entire article (or 10) all its own:

  • Ask for site adherence to agency terms and conditions. For the last few years, publishers have gotten together and issued terms and conditions very favorable to themselves and have forced agencies to adhere to them or walk. For a long time now, the American Association of Advertising Agencies has been promising to come up with terms for interactive agencies to present to site properties, but, like the FAST committee (imagine a snail and a slug waltzing in molasses), it hasn’t produced or approved anything usable for the industry.

    Many interactive agencies have decided not to wait for the rulers to lead the charge for change and have instead tried to initiate change themselves. Some of us have issued our own unique terms and conditions. A good number of interactive agencies (Mediasmith, Exile on 7th, Lot21, and Organic, to name a few) have worked together to issue terms and conditions that could be used by ALL interactive agencies. Things like the use of third-party ad server figures for the purposes of reconciliation or the issuance of makegoods have often been dictated by the publishers, with sites requiring agencies to sign THEIR insertion orders and terms and conditions with no quid pro quo. Let’s all try to take advantage of this soft market to get something REALLY significant with our buys… a sea change for the industry. (If you are interested to learn/discuss/hear more about this initiative, feel free to email me!)

Rest assured, one and all, that times won’t be lean forever, but the era of living fat and sassy and worry-free, short though it was, is over. Now it’s time to start being smart and building an industry that lasts.

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