Under Pressure from Parent, Real Media to Cede Media Business

Greater-than-expected losses are prompting Swiss ad sales giant PubliGroupe to rethink its online operations in the U.S., particularly its New York-based ad network and server, Real Media.

Lausanne, Switzerland-based PubliGroupe said it would be restructuring Real Media to help compensate for losses — due in large part to online advertising woes — that brought the company’s profits down to CHF 8 million, or $4.73 million. That’s a fifth of the company’s profits last year at this time.

That news comes just months after PubliGroupe said that it was “strategically aligning” Real Media with its traditional media sales agency, Dallas-based Publicitas U.S., in a setup that would see each reselling the other’s inventory. Spokespeople at the time denied that the effort would lead to consolidation among PubliGroupe’s U.S. properties.

Yet four months later, that now appears to be the case. By the end of next week, the Swiss company is aiming to have handed Real Media’s ad sales operations over to be administered by the more stable Publicitas. As a result, Real Media will be left as a pure technology player, focusing on its OpenAdStream ad server.

According to sources, the exact details of such an arrangement won’t be finalized for several days, although the entire transition of Real Media’s sales business to Publicitas is expected to take place within just a few weeks.

Despite the sizable changes, Real Media’s vice president of marketing Mark Naples said that nothing much should be different for clients, thanks to that earlier arrangement between Publicitas and Real Media.

“I know Publicitas and PubliGroupe are standing by the [online sales] business. They’re going to keep that integrated,” Naples said. “This is something for which the synergies have already existed … meaning that our customers aren’t even going to notice a difference. They’ll be dealing with the same people and the same sites. Everything will remain the same.”

However, that might not necessarily be said of PubliGroupe. The company said its PubliOnline division — which includes Real Media and two smaller firms — posted mid-year losses of CHF 24 million ($14 million), despite efforts to cap costs for the entire year at CHF 37 million ($21.87 million).

As a result, the company is also reorganizing the management structure overseeing its online division, eliminating the position held by PubliOnline division director Hans Steiner. Walter Annasohn — who held the both chief executive posts at Publicitas U.S. and at Real Media — will now concentrate purely on Real Media. (Publicitas will be overseen directly by Hans-Peter Rohner, the head of Publicitas in Europe and Asia.)

“This downturn reflects the contraction of online advertising budgets of the major advertisers and the disappearance of a good many new economy companies whose heavy communication expenditure was invested in the Internet,” PubliGroupe said in its earnings report this week. “Far from stabilizing, this trend gathered pace in recent months. As a result, many advertisers and media companies have redimensioned their online activities and integrated them into their basic structure. This situation also necessitates a new series of restructuring measures for the PubliGroupe online activities … These measures will lead to a new focus on strategic business activities for the main divisions of PubliGroupe and new partnerships. ”

It’s not known at this time whether PubliGroupe will require Real Media to further reduce its workforce as a result of the changes, although sources say company executives have discussed laying off a total of 200 employees across PubliOnline.

At any rate, the news marks the second time a major online ad network has given up its media business to focus on technology. Last month, CMGI’s Engage said it was seeking a buyer for its ad network, which would be shut down if not sold.

Other players, however, aren’t far behind. Last month also saw 24/7 Media cut off funding to its European subsidiary, forcing it into bankruptcy this week. Additionally, industry leader DoubleClick also restructured its media division this year, to concentrate on higher-margin software sales, such as those of its DART ad server.

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