Please raise your glass and celebrate with me. We have finally reached the end of the Stupid Portal Deal Era.
Although the effects of this era will continue to be felt for at least the next couple years, we media buyers can start looking forward to the end of the idiocy. How many times have you been frustrated by conversations with sales reps that resemble the following?
- “I’m sorry, but we can’t do business. Your competitor XYZ.com just cut an exclusive deal with us and now your company is locked out of advertising with us for the next five years. They gave us $190 million, warrants to purchase 85 percent of their company, and 100 percent of the revenues generated by auctioning off their first-born kids on eBay.”
- “We need a $10 million ‘slotting fee’ to make this deal go through. Your competitors are willing to pay at least that for the brand association.”
- “I’m sorry I didn’t return your call promptly. I was momentarily distracted by the mobs of dot-com entrepreneurs waving giant wads of cash in my face.”
Thanks to the Nasdaq crash, we can all look forward to more reasonable pricing for portal advertising. Most of us media planners try to find deals for our clients that make sense deals that deliver on client goals at a reasonable price. It’s been frustrating over the past couple of years to watch our clients’ competitors rush to sign portal deals that can’t possibly deliver a favorable ROI.
It’s frustrating because it usually forces our clients into the position of having to sign a bad deal or quickly find ten smaller ad deals to replace the original one. And if we allow our competitors to outbid us, many times it results in a situation in which the stupid are rewarded and the smart are punished. Greg and Emily put it best last week in their column “Chapter11.com.” I quote:
[W]e have second- and third-tier industry players funded with massive marketing budgets but with no wisdom for spending it wisely. Such iDiOT-COMs repeatedly blow their wads outbidding more rational e-businesses for distribution deals, advertising, employee recruitment, acquisitions, and even office space. If you give a kid a $10,000-a-week allowance, don’t be surprised by the circus elephant in the backyard.
But now the market’s magnifying glass is focused on smart business and not on the latest company to do a deal with AOL or Yahoo. The New York Times ran an article on Monday that brightened my whole week.
Bob Tedeschi, in his E-Commerce Report, focused on e-tailers’ re-evaluation of portal deals and several smart companies that “Just Say No” to excessive slotting fees and outrageous customer acquisition costs. And he raises a question that should be on the minds of all media buyers right now: Will this focus on reasonable marketing costs bring about a more flexible bargaining environment?
I’d like to think that it will. I think we’re going to see a trend toward maintaining customer acquisition and retention costs at reasonable levels. Those companies that refuse to come out of the clouds and pay attention to what it costs them to acquire and retain a customer will be selected against. Trust me the shakeout will be terrible. People will be cracking Dr. Koop jokes and everything. Now that the Stupid Portal Deal Era is over, we can return to some semblance of reality-based portal advertising costs.
Perhaps now would probably be a great time to reapproach portals that turned down your business for that of your competitors. In the past, portals may have focused on the company in a competitive set that was capable of bringing the most money to the table, but now we’re seeing the portals shift more toward other factors in their decision making:
- Which companies in a competitive set will most likely be around in five or ten years?
- Which potential partner can best enhance the user experience for the portal?
- Which potential partner is in the best financial shape?
Odds are, if you’ve been making smart decisions with your clients all along, your business will begin to look a lot more attractive to the portals. So raise your glass you’ve earned a celebratory drink for playing it smart. Now we get to watch the shakeout and see those who have overextended themselves go out of business.