Financially strapped dot-coms are questioning costly ad deals, and that means less online ad revenue for portals and other properties that had seen Internet start-ups as key advertisers. To tap a potentially more lucrative advertiser base and be top-of-mind in media-buying decisions, online players such as America Online, Yahoo! and EarthLink have recruited people to help build relationships with traditional ad agencies.
Some online players are making the move because they anticipate that interactive ad shops and traditional agencies ultimately will merge.
It's a smart strategy for online companies that want to stay financially viable, said Marissa Gluck, a Jupiter Communications analyst.
"They need to keep building their ad revenue," Ms. Gluck said of portals and other dot-coms. "They can't rely on dot-com advertisers because they have run out of marketing money. They need to develop relationships with automotive manufacturers, healthcare companies, financial services providers . . . all the marketing categories that have traditionally been big spenders" and that increasingly want ad agencies to develop integrated campaigns.
Yahoo!'s ambassador to the agency world is Murray Gaylord, a veteran advertising executive and former exec VP-chief operating officer of the Advertising Council. He joined Yahoo! in April as director of Fusion Marketing.
"The goal is to get traditional agencies to understand what [the Internet's] all about," said Mr. Gaylord at the time of his hiring.
Last week, Yahoo! joined the American Advertising Federation and secured an AAF board post for Mr. Gaylord.
The company historically has gone to big advertisers for big projects; last July, for example, Yahoo! partnered with Procter & Gamble Co. for in-house-developed integrated promotions of certain P&G brands.
But Yahoo! wants to create more integrated marketing opportunities for advertisers as well as educate agencies about the value of the online medium, and is banking on Mr. Gaylord's industry contacts to do that.
In a similar move, AOL this month promoted Richard Ward, formerly VP-business development in the interactive marketing department, to VP-agency relationships with the charter to build ties with ad agencies. Mr. Ward, a former head of FCB Worldwide's San Francisco office, will seek ways to involve agencies in marketing packages with AOL and, after its pending merger, Time Warner.
AOL was due for some agency relationship-building, admitted Myer Berlow, president of interactive marketing.
OUT OF THE LOOP
"Our relationships with agencies had become almost non-existent because the decision [to buy ads on AOL] was made at the CEO or [chief operating officer] level of a company and not driven by the marketing group of a company," Mr. Berlow said. So the marketer's agency was rarely, if ever, part of the loop.
"We were sort of puzzled over what we should do," Mr. Berlow said. "So the assignment we gave Richard was to work with the agencies to both develop relationships with agencies as well as work with agencies to develop a business model that includes them in the process."
Mr. Berlow denied, however, that Mr. Ward's appointment is an attempt on AOL's part to seek more ad revenue from traditional marketers over dot-coms. "I don't think we are seeing ourselves in a position of having to go beyond the dot-coms because the dot-coms don't have the money anymore. Truth is, online marketing from traditional companies has grown 8,000%. We have deals with Unilever, General Motors, Coca-Cola Co. . . . All of those (deals with traditional marketers) predate the dot-com reality."
ENDANGERED WEB SHOPS
Mr. Berlow said he believes the era of the standalone, interactive agency is coming to an end.
"The idea of having an online agency is like what having a TV agency would have been in the 1950s," Mr. Berlow said. "It doesn't make sense. This [online] medium has got to be seen as part of the marketing arsenal," which AOL wants agencies to understand.
Howard Lefkowitz, VP-business development at EarthLink, agreed.
"Clearly, not unlike all previous media, the Internet is looking to assist in the marketing of durable and non-durable goods manufacturers as part of the overall marketing mix," said Mr. Lefkowitz, who for three years has headed content and advertising partnership efforts for the ISP, which also operates a portal for registered members.
EarthLink's advertiser base is a mix of dot-coms and traditional marketers, including American Express Co., eBay, Godiva Chocolatier and kids site MaMaMedia. "There are things that we can do uniquely that other media can't because it's interactive, individual, identifiable and quick. Agencies need to understand that.
"We are in the middle of that heavy lifting: To educate advertisers and agencies, it's one person at a time. We are going to work with them, answer their questions," he said.
AD RENEWALS IN QUESTION
In addition, many multiyear, multimillion-dollar deals dot-coms struck with portals in 1997 and 1998 will come up for renewal soon. Many industry executives said they're not sure they've gotten their money's worth.
"We're looking at each and every one of [the portal deals]," said Steven Babowski, senior VP-marketing at CDnow. "So much as changed. A regular portal deal isn't what it once was."
Contributing: Alice Z. Cuneo
Copyright May 2000, Crain Communications Inc.