It's not an online advertising slowdown. It's just part of a big learning experience.
So says online advertising veteran Wenda Millard, who in December stepped down as head of
DoubleClick's (DCLK Quote - Cramer on DCLK - Stock Picks) advertising sales operation to become chief Internet officer of
Ziff Davis Media and president of its
Ziff Davis Internet subsidiary.
Millard's thoughts on the present and future of Net advertising seem particularly relevant on the eve of the first-quarter financial release of
CNet Networks (CNET Quote - Cramer on CNET - Stock Picks), which targets the same technologically curious audience. Ziff Davis Media, which previously had a multiyear deal licensing its print magazine brands and editorial content for online use to CNet and its
ZDNet subsidiary, last year worked out a deal to cut that license short -- the better to compete for online ad dollars itself.
Not From Concentrate!
"I think you're going to see a concentration of dollars in more vertical sites," says Millard, using the common industry terminology for describing sites targeted at specific interests, in contrast to properties such as
Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) that deliver to advertisers a broad cross-section of Internet users.
Though Millard wasn't talking about CNet, her words might lessen the pain for shareholders in CNet, which, having twice reduced 2001 forecasts, is scheduled on Tuesday night to report results for the quarter ended March 31.
Analysts surveyed by
Thomson Financial/First Call are expecting the company to report a per-share loss of 10 cents for the quarter, excluding noncash charges and other items, on revenue of $75.3 million. A year ago, the company earned 2 cents a share on revenue of $92.8 million.
Those figures reflect CNet's warning in early March, when the company slashed first-quarter revenue guidance to $75 million-$80 million from a previous range of $86 million-$92 million. That forecast, in turn, reflected CNet's forecast in early February that its 2001 revenue would be 17% to 20% lower than prior expectations.
Analysts expect CNet to have revenue of about $372 million for the year, down from last year's $427.7 million and down from CNet's February guidance of $450 million to $480 million.
On Monday, CNet shares rose 58 cents to close at $12.27. The company's shares have ranged from $43.38 to $7.78 over the past 52 weeks.
For CNet, the culprit is reduced spending from technology companies suffering slowing sales. "We believe this spending slowdown is a short-term condition," said CEO Shelby Bonnie in a statement, "and we are convinced that over the long term CNet will continue to be the most efficient and effective way for technology advertisers to reach and influence their target audience."
Of course, generalist sites are getting hit, too; on Monday, for example, broadband Internet access provider
Excite@Home (ATHM Quote - Cramer on ATHM - Stock Picks) said it was laying off about 13% of its workforce companywide, and cutting most heavily in its media business, as opposed to the access arm. The company has said it is considering the sale of parts of its media business.
Process Server
But according to Millard, it will be specialty sites, not the generalists, that will be best able to deliver the Internet's promise of customized, one-to-one marketing. "It's going to be more niche, highly focused sites like Ziff Davis Internet that are really going to deliver a very targeted, specialized audience," says Millard, enabling advertisers "not just to reach them ... but to connnect with them."
But some things are necessary along the way, says Millard, primarily education about what makes Internet advertising good and effective. Much-maligned banner ads are similar to the primitive-in-hindsight advertisements that appeared on TV a half century ago. "We know a lot about how people consume other media," such as radio and TV, says Millard. "We don't know enough about user behavior on the Internet."
But, cautions Millard, it's not as if one day a switch will be flipped and all questions about how marketers should use Internet advertising will be answered. "Education is a process," she says. "It's not a destination."
George Mannes
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