<nettime> Dot.Comedy of Errors: E-Suckers Fleeced by Madison Avenue

["nettime's_roving_reporter" <nettime-l@bbs.thing.net>]

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   The Financial Observer
                                      
   Dot.Comedy of Errors: E-Suckers Fleeced by Madison Avenue
   
   by Gabriel Snyder
   
   Internet companies, whatever their strengths, make lousy
   mass-marketers.
   
   Turn on the television these days, whether it's South Park or Monday
   Night Football, and you face death by dot-com advertising. Each
   commercial break is a barrage of indecipherable spots introducing
   obscure Internet companies that provide indeterminable services.
   
   There's Donald Trump with clay all over his suit, leering at some
   woman's cleavage, and there's Norman Mailer reciting his theory of
   reincarnation, a fat man in a tank top sticking magnets on his head, a
   hand puppet singing "What goes up, must come down," the
   no-longer-Bionic Man wheezing into a video store and a muscle-bound
   trampolinist massaging his sugar-mommy's bunions.
   
   What is being advertised in these spots? It is hard to tell-or at
   least hard to remember. On that level they do not work. But their
   message is loud and clear: the dot-coms are desperate and don't seem
   to mind that they are getting fleeced by Madison Avenue and its old
   friends in the old media.
   
   "It's absolutely a wonderful time to be in advertising," said Tom
   Bernardin, president of Bozell New York, giddy after the agency landed
   the $80 million Datek Online account. "I've been in the business for
   25 years, and I can't recall it ever being quite like this."
   
   The great dot-com advertising rush-made up mostly of low-level
   startups with, say, 50 employees and $30 million in venture capital-is
   basically a quest for mindshare. The dot-coms need to fatten up their
   financials in the fourth quarter or else they will vanish. Christmas
   is coming, and with it a chance to show that they can actually attract
   customers and sell things. If they fail to make a splash, only a few
   will make it to the spring. It is an arms race, comprised of dozens of
   tiny new republics.
   
   The dot-coms are attempting to establish their brands in a field that
   has become hopelessly crowded with aspiring Web sites. They are all
   frantic to rise above the white noise created by their own frantic
   attempts to rise above the white noise. The Internet allows for an
   infinite number of aspirants, but the marketplace is made up of a
   finite number of customers-and a finite number of ways to reach them.
   
   So the dot-coms are turning to advertising agencies and brand
   consultants in droves, pushing account billings to new highs.
   According to Adweek, total account billings through October amounted
   to a record $10.3 billion, of which dot-coms awarded $3 billion worth
   of business. In the same period in 1998, total billings were $6.3
   billion, of which Internet companies accounted for just $200 million.
   The dot-coms are the new suckers, pouring dumb money into the coffers
   of their putative rivals in the old media-radio, print, television,
   outdoor. They don't have marketing strategy; they have cash. The
   agencies and the media outlets are happy to oblige them.
   
   "I have heard through the Internet grapevine that when radio sales
   people hear dot-com attached to a company's name, they double the
   price," said Jonathan Greenberg, chief executive of Gist
   Communications, which puts television listings on the Web. Mr.
   Greenberg doesn't plan to make any ad buys until after New Year's,
   when his company will launch a $10 million on-line, outdoor, radio and
   television campaign. "There is a feeding frenzy taking place among the
   sellers of broadcast advertising. I'm glad that I am not in this
   fourth quarter e-commerce rush, because if I was, we would have to pay
   the dot-com premium. I don't want to buy $10 million worth of
   advertising as a dot-com and get the same thing a non-dot-com would
   get at $5 million."
   
   "Oh, it's huge!" said Cleve Langton, director of business development
   for DDB Worldwide. "It's like the agency business was 30 years ago.
   The clients are saying, `Look, we don't have a marketing department.
   We need you to be the brand steward. We need you to create the brand,
   identify the positioning and build awareness and then drive traffic to
   the site and maintain that.'"
   
   And they're willing to spend whatever it takes. Mr. Langton said that
   out of the $1 billion worth of new business DDB has won this year,
   close to $200 million is dot-com accounts, around $150 million of that
   coming in the third quarter alone. "The dot-com founder or the dot-com
   marketing team will come to us and say, `We think we want to spend $15
   million,'" Mr. Langton said. "And the venture capitalist will come
   back and say, `You're being unrealistic, you need to double that
   budget.' So when we actually write the plan, they're actually spending
   $30 or $40 million because of the V.C.'s assessment."
   
   "The dot-coms are kind of setting their own pricing," said Cindy
   Clements, the head of local affiliate buying at TBWA-Chiat-Day North
   America. "They're buying very last-minute, and they're paying very
   high premiums. But they have the cash."
   
   So now the smart money is forced to sit out. "It makes my work more
   difficult placing time for my regular advertisers," Ms. Clements said.
   "It's the tried-and-true advertisers that are being pre-empted or
   being forced to pay higher rates just to hold their spot in place.
   Some stations don't pre-empt, but some stations are obviously going to
   take the business if they get double the rates for it."
   
   But eventually the tried-and-true will find a way back in. The
   dot-coms whose advertising fails to attract consumers will find they
   don't have as much cash to play with.
   
   "We think there is definitely going to be a shakeout at the end of the
   fourth quarter," said Kozmo.com chief executive Joseph Park. "You're
   going to see a lot of dot-com companies who have blown all their money
   on advertising and didn't win in the fourth-quarter Christmas wars,
   and they're going to be in financial trouble in the first half of next
   year."
   
   Bigger Balls
   
   Lean and nimble, the Internet companies are unencumbered by
   bureaucracy or concern for the bottom line. They don't have to spend
   months crafting marketing campaigns or haggling with their own finance
   departments over the allocation of advertising dollars. So they have
   nothing to stop them from making rash decisions-like spending most of
   their marketing budget on one 30-second Super Bowl ad.
   
   "Typically when you work with a larger, more established brand, you're
   working with a career advertising manager somewhere, and he's a
   corporate guy," said Edward Boches, executive creative director for
   Mullen, an advertising firm in Wenham, Mass., that created ads for
   Monster.com, Cozone.com and Oxygen Media, among others. "Obviously, he
   wants his work to be great, but he's also got to think about his
   internal constituencies: What's the sales force gonna think? What's
   his boss gonna think? So that person is almost forced to be a little
   bit more cautious because he's trying to also keep his job and survive
   and prosper inside a company.
   
   "In these younger companies, more often than not ad agencies are
   working with the top guy. They're working with the boss, the founder.
   Those people are by definition entrepreneurs. And what does that mean?
   They got bigger balls. They're more courageous. They're risk-takers.
   And so they'll do more aggressive advertising."
   
   Aggressive in advertising means expensive. It means booking the most
   coveted time in television. Leslie Winthrop, managing partner of
   agency search consultants AAR-Bob Wolf Partners, said people in
   advertising have begun to refer to the Super Bowl as the Dot-Com Bowl.
   "Who else wants to pay the Super Bowl prices?" she said.
   
   Most well-established advertisers buy their fall ad space in the
   "up-front market" the previous spring, when networks are willing to
   sell at a discount. Last spring, some of the dot-coms that are
   advertising now were just business plans in a venture capitalist's
   briefcase. So the new dot-coms eager to ramp up for Christmas are
   stuck buying in what's called the "scatter market." As a result, they
   are paying a lot more than the AT&T Corporation or the Ford Motor
   Corporation would have in the spring.
   
   Thanks to the dot-coms, the networks are booked solid for November and
   December. "The fourth quarter has essentially sold out," said Dana
   McClintock, a spokesman for CBS Corporation. Nonetheless, if a dot-com
   with fat pockets wants to get on bad enough, Mr. McClintock hinted
   that they can still buy air time-for the right price. "If somebody
   walks in and offers $20 million for a 30-second spot, will we do it?"
   he said. "I mean, put yourself in the business person's shoes."
   
   Interbrand Group, a consulting firm that helps companies find
   themselves, is lining up dot-com clients left and right. John Grace,
   Interbrand's executive director, said, "Ten years ago when I called on
   a V.C. and asked what hot companies do you have and who can we help
   position, they'd list out the companies, and then we'd list out our
   fees, whether it was half a million or a million, to work and figure
   out where the brand was. They'd laugh us out of the room. Now the
   V.C.'s are the first in line asking how much can we spend with you to
   help define our brand? The impact of that is that our fees have gone
   through the ceiling."
   
   Mr. Grace added, "We're actually developing brands for ideas that
   don't technologically exist yet. Fifty percent of the people who come
   to us tell us, `Quick! We gotta have a brand because we are going to
   have an I.P.O. in six months.' Our answer is No, or, `Here's a really
   high fee. If you want to pay it we'll do the best we can do.'" And a
   lot of them pay up. "They can't afford not to," he said, "because
   they've got to do the road show for Wall Street."
   
   "I would say conservatively in New York and Chicago we are getting
   eight calls a week from dot-coms, and we are turning down six of
   them," said Mr. Langton of DDB. "Out of those six, four are really
   qualified but for one reason or another they just don't fit our
   criteria. We are now in a position to be able to turn down a lot of
   the e-commerce business. We are approaching it much the way the V.C.'s
   do, and we do a vitality analysis on all the accounts before we
   consider taking them on. Due diligence. In a lot of cases, we are
   requiring payment up front on all third-party costs. We're requiring
   that we have guaranteed income, and we're also checking the business
   plan and making sure that it's valid. We're even going back to the
   V.C. funding and making sure that the V.C. is valid."
   
   How to Call a Turkey
   
   But no matter how discriminating they may be, the dot-coms keep
   coming, one after another, cluttering the airwaves and bus billboards
   with their inane appeals.
   
   "An agency's got two jobs," said Sam Craig, professor of marketing at
   New York University's Stern School of Business. "One is to come up
   with great ads that sell products, and the other is to come up with
   ads that make the client happy. They may be the same thing, but if you
   look at the Internet environment and you have a lot of young
   entrepreneurs, their taste in advertising is quite different. For some
   of these, they may think they're cool. The other side of that, they
   grab your attention but they may not say enough about the brand to get
   you care about the brand."
   
   "You have a lot of dot-com companies out there doing crazy antics just
   to get people's attention," said Mr. Park, the kozmo.com chief, whose
   most recent ad features Lee Majors, the Bionic Man, running errands.
   "But at the end of the day, those crazy antics are all that people
   remember. They don't remember what the company does."
   
   But the Bionic Man?
   
   "It's really about educating our customer but trying to keep their
   attention," Mr. Park said. "So you're sucked in because it's Lee
   Majors. People haven't seen Lee Majors or the Bionic Man in ages, but
   people instantly recognize Lee Majors and as a result they're tuned in
   and then watch the commercial, and it's pretty funny." Maybe the first
   time. In a vacuum.
   
   Even though flooz.com now runs an ad in which Whoopi Goldberg menaces
   befuddled shoppers, Robert Levitan, Flooz.com's chief executive, is
   quick to criticize similar ads for cozone.com, a site that provides
   information about how to use computers. Cozone's ads, created by
   Mullen, feature Donald Trump, Dr. Joyce Brothers and David Robinson
   trying to craft pottery, call turkeys and make quilts.
   
   "You just forget the company," said Mr. Levitan. "It's just about the
   Donald and his women."
   
   Mr. Boches, Mullen's executive creative director, said that in the
   Cozone ads they were trying to show people metaphorically that it is
   O.K. if they don't know how to use a computer. "We are giving people
   permission to admit that they're not supposed to be good at
   everything, even if they're
   really, really good at something else. If Donald Trump, Mr. Master of
   the Universe, can have flaws or have something he isn't good at, then
   certainly you, Mr. Decorator setting up your small interior decorating
   firm, there's no reason for you to be ashamed to not be an expert at
   something other than decorating. It's asking consumers to do a little
   bit of work, but I don't think it's too much work."
   
   Indeed, a little work helps the customer engage with the product, Mr.
   Boches said. "Consumers consume brands and they also consume products,
   but I think people also decide to consume advertising. If you have any
   kind of sensibility for popular culture, I bet you wouldn't buy stuff
   or use stuff if it had offensive advertising, or had advertising that
   didn't amuse you or that didn't make you feel as if I'm in on the joke
   kind of thing."
   
   But Mr. Boches acknowledged that being in on the joke was not enough.
   The builders of these new brands don't have time for that. They need
   the eyeballs now.
   
   Mr. Boches said, "We broke an ad for Northern Light [a search engine]
   and got an e-mail from the president of the company the next day
   saying, `Hey, these many people hit our site or these many people
   didn't hit our site.' For us, it's like, holy shit, the reaction is
   there in 24 hours.
   
   "With typical brand advertising-ads for Budweiser or ads for Nike or
   even a car-you're not expected to buy the beer the next day. You're
   expected to start to feel good about the brand so that the next time
   you are purchasing something in that category maybe I have you at
   least considering this brand. With dot-com advertising, we want you to
   sign on to the damn site tonight, or tomorrow morning or the next day
   at the latest, because we need you to do that because there is no
   other option. Somehow I have to get you to remember a brand-new name
   you've never heard of, in the midst of an environment where there's a
   new one coming at you every 15 minutes."
   
   It's a tall order, but one he is happy to take on, if the price is
   right.
   
   This column ran on page 29 in the 11/15/99 edition of The New York
   Observer. 
   
                              COPYRIGHT � 1999
                           THE NEW YORK OBSERVER
                            ALL RIGHTS RESERVED

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