Online Ad Slump Still Stymies iVillage

iVillage reported Wednesday that the online advertising slump continued to drag on its results, causing the women-focused Web site to announce another round of cutbacks and a foray into paid search.

Reporting its financial results for the third quarter, iVillage said revenue fell to $14.6 million, off nearly 20 percent from a year ago. Thanks to a variety of cost-containment moves that cut expenses, iVillage managed to narrow its net loss to $5 million, compared to the $8 million it lost in last year’s third quarter.

Doug McCormick, iVillage’s chief executive, extolled the company’s reach in the lucrative women’s demographic but admitted the advertising slump continued to hold iVillage back.

“Advertising as a sector has yet to recover and newer companies like iVillage have not been spared,” McCormick said. “The advertising market had its worst year since the Great Depression and was hit harder than most sectors.”

One of the biggest problems for iVillage was once one of its strengths: long-term deals. With many of these deals running out, iVillage has found the market favoring shorter-term, lower-value deals, according to Scott Levine, iVillage’s chief financial officer.

In an attempt to goose its advertising business, iVillage is turning to one area that’s thrived recently: paid listings. After recently completing a beta test of the listings, iVillage has partnered with cost-per-click search listings provider Sprinks, which is a division of Primedia’s About.com. The product will launch in the first quarter of next year, the company said.

In late July, iVillage hopped on the anti-pop-up bandwagon early, announcing it would no longer serve the ad format, after finding that 92.5 percent of its users found them the most frustrating feature of the site. iVillage, which continues to sell pop-under ads, said the pop-ups only comprised about 5 percent of its ad inventory.

Though optimistic about an ad rebound in 2003, iVillage still made moves to retrench further. It announced a series of cutbacks that it said would save it $1.5 million per quarter. As part of the streamlining, iVillage said it would cut 30 jobs, or 10 percent of its workforce, through both attrition and layoffs. The staff cuts would take place across the board, the company said.

Despite adding 40 new advertisers in the quarter, including Century 21, Ikea, and LEGO, iVillage’s advertising revenues continued to suffer. The company has made a series of moves to diversify its revenue streams, including the rollout of a book series with Rutledge Hill Press, a branded Internet service offering, and a line of vitamins. The company said it would continue to launch branded products in the coming quarters.

iVillage’s pessimistic outlook for the online ad industry stands in contrast to a recent report from the Online Publishers Association, a group of big-name content publishers, which said its members reported average ad revenue growth of 35.7 percent in the third quarter.

McCormick said an ad rebound online would not happen until next year, when tightness in the TV ad market and improved Internet marketing research would drive traditional advertisers online in greater numbers and with greater budgets.

“Advertisers have a more open ear,” McCormick said. “We just need to have a more open wallet from them.”