Martha advertisers wary

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Martha Stewart Living Omnimedia last week showed the first cracks in its usually impeccable facade when executives admitted in a conference call with analysts that advertisers have shown "skittishness" over its eponymous chairman-CEO's link to an insider trading scandal.

The company appears to be bracing for the worst as Ms. Stewart faces multiple federal investigations about her role in selling shares of ImClone just before the price plunged last year.

In the conference call, Omnimedia executives President-Chief Operating Officer Sharon Patrick and Exec VP-Chief Financial Officer James Follo took the offensive and said advertisers have expressed concerns about Ms. Stewart's involvement in the matter, and are taking a "wait and see" approach as they weigh committing future ad dollars. Ms. Patrick added, however, they believe that consumers separate Ms. Stewart's personal activities from her publications.

In an interview two days later, Suzanne Sobel, Omnimedia's exec VP-advertising sales and marketing, downplayed advertiser wariness, calling it "minuscule." The company is in the throes of negotiating with marketers on 2003 schedules and Ms. Sobel said: "All indicators are that most of our advertisers-a very high percent-are going to be renewing for next year, sticking with us. There are ... a very few that are concerned, that have said they want to take a `wait and see,' but that's a very small number. And I find after I meet with a lot of them and talk to them they get more comfortable with the situation." Ms. Sobel declined to cite any of the concerned advertisers.

The fate of the October issue of Martha Stewart Living could be the strongest barometer yet whether Ms. Stewart's problems will result in the "wait and see" becoming no deal for advertisers. The company says it expects the issue to close with about the same number of ad pages as last year (179.49, according to Publishers Information Bureau). September had a better fate with a 10% jump, Omnimedia said.

Blue-chip companies-already losing public favor as various corporate scandals unfold-could be wary. "They don't want to risk losing an opportunity ... but at the same time they don't want their ad to run the day after Martha is hauled off in handcuffs," said Kathleen Heaney, analyst and director of research with Brean Murray.


Omnimedia said it would incur increased costs in the current quarter for public relations as it deals with the controversy and has hired the Brunswick Group for strategic assistance, which may impact earnings. (See story, P. 8.)

Some media buyers expressed concern, but none contacted were prepared to abandon the magazine yet. Monica Karo, director of media at Omnicom Group's TBWA/Chiat/Day, Los Angeles, said the agency is beginning to discuss the issue, but has not arrived at a conclusion. But she said, "Certainly, her business and her person are kind of one and the same, so you can't look at one without looking at the other."


"We definitely don't want to plan without her, but I am going to be cautious because I am suspect of what will happen with the readership," said Robin Steinberg, VP-director of print at Carat USA, New York.

An executive close to the matter said the Chrysler brand, which inked a multi-media deal with Omnimedia earlier this year, is "already nervous" about the situation. But a Chrysler spokesman said the carmaker isn't pulling any ads and "the whole project as announced is going forward into next year."

According to Michael Lao, MasterCard International's senior director of global media: "Our relationship with Martha Stewart Omnimedia doesn't have as much to do with her as it does her Web site, her show, and her magazines. To date, we haven't seen any slippage that would set off alarm bells, so we're taking a wait-and-see attitude."

Spokespeople for General Motors, Microsoft Corp.'s MSN, Johnson & Johnson's Neutrogena, Kmart, Dannon Co., Kodak and Sears Roebuck & Co. all confirmed they were continuing with plans to advertise."

contributing: mercedes m. cardona, alice z. cuneo, cara b. dipasquale, tobi elkin, jean halliday, jack neff, lisa sanders, stephanie thompson

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