This Week’s Agenda: Avenue A Takes a Turn

Calling this a tough year is pure understatement. Avenue A of Seattle hasn’t been immune to hard times. The company has reorganized, let go of some staff, traded polo shirts for ties in its executive suite (hiring experienced agency hands), and launched a new strategy.

Fortunately, Mike Galgon, with whom I’ve spoken several times in the past, remains on board. These days his title is chief strategy officer. Now that the strategy is set, his job is to sell it to a skeptical market.

The strategy is to sell Avenue A’s internal software (the Atlas DMT buy-side suite, developed and executed in Seattle) to agencies and to target Madison Avenue ad buyers from offices in New York.

So far, the Madison Avenue side of the strategy has borne deals with L’Oréal’s Lancôme Paris unit and AT&T Wireless. Both companies signed on the dotted line this summer, Galgon said.

For an interactive agency such as Avenue A, such contracts represent bedrock and indicate a market bottom. “At the beginning of the year, you’d come in every day getting emails saying clients were cutting back or closing. You weren’t sure where to put your feet down,” he said.

On the other hand, “these will be dollars spent from operating cash flow. That’s something you can build a business model on.”

So Galgon remains an optimist. The Internet draws 10 percent of the time Americans spend on media, he said, while drawing just 2 percent of the ad dollars. Some time between now and 2005, he figures, that gap will close. Growth is coming, and the word that will accelerate it is “measurement.”

The Atlas DMT software can help, delivering buyers interactive reports based on gross rating points (GRPs) that compare directly with TV or radio ratings. “That tells you the number of people who saw it,” he said.

To make sure the message got through, Avenue A is “cracking with brand surveys and interactive surveys, which have helped a great deal in measuring the ads in front of a person.” The result is a report on how many people saw an ad, how many times they saw it, and what the impact of that was on brand awareness.

Consumer packaged-goods marketers need more than numbers, however. They need to verify exactly who those numbers represent.

It’s in publishers’ interests to deliver that verification, because “run-of-network ads are still being priced as something with unlimited supply. Ad inventory isn’t yet supply constrained.”

Bundling ads into premium spaces can help sites break out of the run-of-network trap. So can verifying exactly who is seeing them, Galgon said.

“Registration is one important way to build user profiles. Another is to build channels. A third is to append data sets to existing profiles so you can serve up geographies, and let someone just buy one part of the country.”

“Publishers need to continue to innovate,” he concluded. “You need better profiles of users, more attractive bundles, and pricing models that map to the objectives of media placement and advertiser goals.”

In the end, “you will get a split like TV — there are some who use TV as direct marketing and never buy ‘Seinfeld,’ while [there are] others who would never buy it cheap but need the ‘Seinfeld’ presence.”

Registration, exclusivity, and sites becoming brands will eventually bring those premium prices. At that point, the content business will turn around, just as Galgon says Avenue A has.

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