George Simpson reviews the response to a Walt Mossberg column, ZenithOptimedia's glum forecast for ad spend, the Intermix acquisition and more.
Editor's note: Masha Geller has the week off.
This week, while the Association of National Advertisers gathered its tribes to ponder how to maintain marketing budgets if CMOs can’t produce a quantifiable ROI (73 percent lacked confidence in their understanding of the effects a campaign can have on sales) the online industry, clearly the most measurable of all media, assembled for a virtual lynching of Wall Street Journal tech columnist Walter Mossberg.
In a July 14 column, Mossberg made no clear distinction between first party and third party cookies and lumped all of them together with adware/spyware since they meet his personal definition of spyware: “computer code placed on a user's computer without his or her permission and without notification.” Although he fails to note that tracking cookies contain no PII, he nonetheless characterizes them as an invasion of privacy and suggests that all third party cookies ask permission before being placed on user computers.
Calling the column “disinformation,” Tom Hespos, President of Underscore Marketing LLC, wrote: “Mossberg's article contains what I would consider to be mischaracterizations of how marketers and online publishers use cookies at best, and inaccurate facts at worst. Mossberg also uses what I would consider to be a grossly unfair analogy for cookie tracking, likening cookie-based systems to a television that tracks what consumers watch and reports the data back to marketing companies. In reality, advertising-side ad serving systems concern themselves not with what content is consumed, but with which ads are displayed where, to which anonymous users, and whether or not a sale or a request for more information was logged. As industry insiders, we know how these systems work and what is done with them. And we know that characterizations like Mossberg's are inaccurate representations.”
Added BURST Media CEO Jarvis Coffin in an email: “Well, of course, the store you purchased your TV from now knows infinitely more about you than anyone relying on cookies to implement an online ad campaign. Prepare to be marketed to. Anonymity in media -- much as in life -- seriously degrades the experience. Unless you plan to pay cash for everything, including your magazines and newspapers, and rely solely on broadcast radio and TV (you'll need rabbit ears and aluminum foil), you don't have the luxury of being an island apart from it all. And among the implied relationships out there that exist as a function of our many transactions (like buying a TV), the humble and anonymous cookie seems a very easygoing partner.”
One of the oldtimers pointed out that Mossberg’s very own WSJ.com routinely uses first and third party cookies. Another suggested that the “spyware solutions” companies that often include all cookies in their “sweep” of user hard drives are behind the spate of negative consumer press on cookies of all flavors.
Mossberg’s nightmares aside, some of the bellwether companies in the online space turned in impressive earnings reports, among them eBay Inc., which earned $291.6 million, or 21 cents per share, for the three months ended in June, a 53 percent increase from $190.4 million, or 14 cents per share at the same time last year. Will this be enough to overcome the harsh criticism eBay has faced for raising its merchant fees and for not being more vigilant about weeding out the mischief makers and scam artists who make bogus bids or peddle merchandise without ever delivering the goods? The backlash has contributed to a 40 percent decline in eBay's stock so far this year, wiping out $30 billion in shareholder wealth.
Growth in search marketing and banner-based brand advertising helped Yahoo!'s income jump 75 percent for the second quarter. The firm posted second-quarter operating income of $261 million, up 75 percent from $149 million in the year-ago period. Revenue on a comparable second-quarter basis jumped 51 percent to $1.25 billion. U.S. second-quarter revenue for the online media giant grew 39 percent and international sales 84 percent. As usual, when companies report spectacular results that fail to meet analyst expectations, Yahoo! shares slid 10 percent.
This week ZenithOptimedia cut its growth forecast for 2005 global advertising spending to 4.7 percent from 5.4 percent. But only because of declining interest in U.S. network television. "Based on ad revenue, TV has been advertisers' favorite medium since 1995, but it may now be beginning a long newspaper-like decline," the firm said. Zenith sees more money being spent on the internet. In fact, it subtracted $3.6 billion from traditional media and put it into the online category for 2005. Thank you very much.
Meanwhile, in a move characterized by Merrill Lynch analyst Jessica Reif Cohen as, “a major step to improve its competitive positioning in the strategically important online space, an area where the company trails its key rivals,” News Corporation announced that it signed a definitive agreement to acquire Intermix Media, Inc. for approximately $580 million in cash. If, as expected, News Corp. completes the buy, it would triple its reach among U.S. internet users and make it an immediate player in online social networking via Intermix's MySpace.com. It also adds a mix of tools and services including blogs, and personal web pages along with gaming and marketing. In addition, Fox gets a vital music component -- one of its most obvious missing pieces. A headline in Good Morning Silicon Valley summed it up best: "Dead tree finally removed from Rupert Murdoch's office."
At the very least, the acquisition will boost the valuation of other social networking companies, says Bill Burnham, managing director of VC firm Celsius Capital. "Whenever a credible company goes out and pays a huge premium for a particular kind of company, it makes all the other properties in the neighborhood worth more."
Yet, PaidContent.com founder Rafat Ali warns, “The deal comes with pitfalls. Some people think MySpace.com may have already jumped the shark, others are waiting for it to follow Friendster.com as the next hot thing to go lukewarm.”
On the same day, News Corporation announced it would create Fox Interactive Media to coordinate internet activities for its U.S. television properties. The new unit is designed to boost ad revenue by selling ad time across all the sites at once, so an advertiser could reach the sites' disparate visitors more easily.
The bottom line on the foxy moves: mergers between traditional media and internet companies (think NTY/About, WSJ/MarketWatch, et cetera) are bound to continue as the online-advertising market dramatically continues to outpace traditional advertising venues, such as magazines and newspapers.
George Simpson works with new media companies to help them tell their stories and promote their brands. Read full bio.