Special Report: High-flying balloon loses altitude

By Published on .

Even as Nasdaq stocks gyrated with uncertainty this spring and early summer, dot-coms have been pumping a record amount into magazine advertising. Dot-com spending on magazine ads exploded to $641.9 million dollars for the first five months of 2000, up 441.4% from the same period last year, according to Competitive Media Reporting. Dot-coms' share also surged, hitting 9.3% of all magazine ad dollars spent during the first five months of the year compared with just 2% during the year-earlier period. Internet service providers and Web sites are included in the dot-com measure.


While spending has been strong, soft spots have begun to emerge. "We are starting to see a slowdown or shakeout due to fewer companies getting funding or companies postponing their IPOs. Also, the number of sheer companies coming to market has slowed down," says Steve Thompson, publisher of The Industry Standard, whose ad pages are soaring nonetheless. Mr. Thompson says the publication is on track to close 7,000 ad pages this year, up 126% from last year. The market slowdown so far hasn't meant thinner issues for The Standard, owned by International Data Group. That's because the publication got so thick that it imposed an ad cap in April of 272 total pages for the weekly and 360 pages for special reports, both with a ratio of 60% ads and 40% editorial content. Now the weekly waiting list for advertisers, which has had as many as 40 companies, has just a few. Meredith Corp. also is enjoying the dot-com wave even as it sees some softening in ad spending. The first half of 2000 was stronger for Meredith than the second half of 1999, when dot-coms unleashed a gusher of marketing dollars. For the first half of the year, dot-com ads represented 3% to 4% of pages and revenue at Meredith. "But we see some of the dot-com companies that have been advertising with us are trimming back on their overall budgets," says Christopher Little, publishing group president at Meredith.


Summer doldrums can be blamed for some of the dot-com advertising slowdown, but most of it has resulted from more finely tuned media planning in addition to mergers, closures and tighter reins on available dollars. "There is definitely some coming and going (of dot-com advertisers)," says David Morris, publisher of Entertainment Weekly. "The established companies are staying with their marketing budgets, but they are tighter and are analyzing buys more. In the fourth quarter last year, dot-coms were running wherever they could get in. Now it is time for them to catch their breath, find an established ad agency or media-buying company. We are definitely seeing more planning, more long-term decisionmaking than just quick hits left and right." Time Inc.-owned Entertainment Weekly's first-half 2000 dot-com advertising represented about 11% of ad pages, up from just 4% during the same period last year. As dot-com start-ups pull back, established offline companies are spending to build Internet franchises. And new dot-com start-ups continue to emerge, so no one expects dot-com advertising to come to a screeching halt. "Up until now, the lion's share of the dot-com advertising we've been getting has come from relatively new Internet companies," says Meredith's Mr. Little. "Going forward, we will see a larger percentage of dot-com advertising coming from established companies." Mr. Morris sees growth in Internet peripheral companies, products and services, such as non-PC Web access devices, that help people access the Internet. "These types of companies are starting to advertise more and more with consistency," Mr. Morris says.


But there is uncertainty about the fourth quarter. "For the first half of the year, we are up about 500% in dot-coms," says Nick Matarazzo, senior VP-group publishing director at Hachette Filipacchi Magazines, whose titles include Car & Driver and Elle. "Is this robust growth? Absolutely. But given the volatility of the industry, who knows? I still look at it as a growth category, but as the shakeout continues, you don't know." "If what has happened in the first five months continues, the second half will do the same," Mr. Matarazzo says. "It could be a 900-page category by the end of the year." Steven Deluca, associate publisher of Time Inc.'s In Style, is optimistic. "We have high hopes for the second half of this year," he says. "The gold rush mentality could still be happening for another year or so."M1

Copyright August 2000, Crain Communications Inc.

Most Popular
In this article: