'They're paying the same premiums that the movie industry pays, and they're eating up the inventory, especially in things like news and sports.  A market crash and a pull-out by the dot.coms would free up a lot of that inventory, and we in the ad industry would know how to take advantage of that.'

       

 

 

 

 
Should the market tumble,
expect a thinning of dot.com ads

Bug-outs will leave behind hefty inventories

By Dave Lindorff

      With the NASDAQ in a dither over recent days, as dot.com stocks took hits one after the other, and America Online shareholders saw their holdings abruptly devalued in the Time Warner merger, a very obvious question arises: If the stock market were to drop, how long would it take for the dot.coms to flee from the media marketplace?
      The high-flying high-tech sector is going to correct sooner or later, whether it's a 10 percent or 50 percent assignation with reality.
     The answer appears to be: About as long as a skinny New York second.
        One need look no further than ABC's Super Bowl to find the evidence.
        As the technology-heavy NASDAQ index plunged 8.5 percent in the first week of the new millennium, Angeltips and Screaming Media, two of the 14 dot.com companies that had paid upward of $2 million a pop for spots on the Super Bowl, promptly pulled out of their commitments, according to several media directors and sports ad buyers.
        Now an 8.5 percent dip is no big deal for a market that just rose 85 percent last year.  So imagine a real tumble.
    "If the stock market really goes down, a lot of these internet companies are going to start spending their money a lot more carefully," predicts Hans Zucker,  media director at Korey Kaye & Partners. "And if they pull  a lot of their money out of television, there would be a lot more inventory in the scatter market."
        How big an influence have the dot.coms had on TV ad pricing?
        It depends where you look.
        Zucker notes that a year ago, when there was only one dot.com ad on the Super Bowl, spots were going for $1.6 million.  "Now they're up to $2-3 million, and that's all dot.coms," he says.
        The impact on other TV rates is certainly much less, but is still significant.
        "The dot.coms are jacking up the prices for everybody," says Jerry Solomon, president  of national broadcast for SFM Media. "I'd guess they're paying the same premiums that the movie industry pays, and they're eating up the inventory, especially in things like news and sports. A market crash and a pull-out by the dot.coms would free up a lot of that inventory, and we in the ad industry would know how to take advantage of that."
        In fact, many ad agencies and networks, wary of the reliability of dot.com commitments in a volatile market environment, are hedging their bets by demanding cash up front.
        ABC is said to have rejected some dot.com Super Bowl ad deals because they couldn't get advance payment, and industry sources say at least one of the two canceled deals was a cash commitment that will be converted into other time slots, with no money refunds. Efforts to get a comment from ABC on the Super Bowl ads reports were unsuccessful.
        While dealing in cash could protect the nets from losses stemming from any sudden dot.com advertising pullback, it would still leave them with lots of inventory to sell.
        And such a situation could develop quickly, as ABC's experience suggests.
        "If the market corrects and the dot.coms lose all their funny money," says Kevin Malloy, senior vice president and director of North American media operations at D'Arcy Masius Benton & Bowles,  "they are going to see advertising as a luxury."
        Some media industry people think there may be some slowdown in dot.com advertising this year even if there isn't a major market correction.
        "These companies may realize after the fourth quarter that it's more important for them to invest in the service side of their business," says Ellen Oppenheim, senior vice president and media director at Foote Cone & Belding. She notes that many e-business firms had order delivery problems at year's end.
        Larry Blasius, head of national broadcast at FCB, agrees.
    "There was a lot of e-business ad spending in the fourth quarter," he says, "but I'm not sure it paid off for those companies, and if it didn't pay off, will they do it again next year? I'm not sure."
        But Blasius adds that if the dot.coms were to suddenly pull out of the market because of a stock crash in their sector, it would not be the end of the world.
        "One of the drivers of this marketplace has been the dot.com category," he says, "but I don't think that their impact would be as great as when tobacco left the airwaves."

-Dave Lindorff covers television and research for Media Life.