Patriotism: The Last Refuge of ... CMGI?

CMGI's(CMGI) Patriotism is admirable. But it may not be worth $114 million.

Standing Ovation CMGI rises on stadium deal

The Internet conglomerate said Wednesday that it would be spending at least $7.6 million per year over 15 years for the right to name the New England Patriots' new stadium "CMGI Field." But the deal -- among the richest such sports-venue agreements ever, on the heels of recent stadium-naming deals involving the likes of 3Com(COMS), Pacific Bell and Entergy(ETR) -- raises questions about what kind of audience CMGI is playing to, and the cost-effectiveness of measures it's taking to reach that audience.

Clearly, the deal to name the stadium will give CMGI a lot more visibility than, say, the now-maligned strategy of paying for a 30-second ad during the Super Bowl. Between signs on scoreboards, at the stadium's main entrance and on nearby roads and highways, CMGI will get 2.8 billion ad impressions per year, estimates CMGI Chairman David Wetherell. And that figure apparently doesn't include other benefits of the deal, such as a suite at the stadium and sponsorship rights to each season's first home preseason game. (The payments begin in 2002, when the new football field in Foxboro, Mass., is slated for completion.)

Building

CMGI says it will use the deal to promote its own brand as well as the businesses of firms it controls or in which it holds a majority stake. Those include the advertising firm Engage (ENGA) and the AltaVista portal, whose IPO CMGI postponed after the tech stock downturn earlier this year.

Measuring the benefits of stadium-naming deals is difficult, but there are some positives -- at least on the home turf. In a 1997 survey conducted by sports marketing firm Performance Research, 90% of people questioned could recall, without any prompting, the corporate sponsor of their local sports arena. In addition, the company found, 61% felt that a sports facility named after a corporation was a positive for their community.

It's another question, though, whether the deal with the Patriots, the home team of Andover, Mass.-based CMGI, will help the company build a national or international audience. "We think we're going to get a lot of national visibility out of this," says David Andonian, CMGI's president of corporate development. The Patriots have already introduced CMGI to the National Football League, he adds.

CMGI says the agreement is only one step the company is taking to build up CMGI as a national brand targeted at both business and consumer audiences. (Wetherell pointedly noted in the press conference announcing the deal that CMGI's revenue was greater than Yahoo!'s(YHOO).) "This isn't the only or the primary outlet for that national exposure," Andonian says. He acknowledged, however, that the company already has reversed itself on one of those other efforts: Earlier this year, the company said it would launch a loyalty program called CMGI Points, which now uses a noncompany-specific name.

Other Ideas

One authority on stadium-naming deals, though, said the deal didn't sound like a good way for CMGI to build a national brand, and was wildly expensive to boot.

"It's not enough to put a sign up and say, 'I'm a sponsor,'" says Lesa Ukman, editor of IEG Sponsorship Report, which covers sports, arts, entertainment and cause-related marketing. Although CMGI might get national exposure, the deal won't make it a national brand, Ukman says. "You have no footprint in the rest of the country," she says. "You're aligning with one team as opposed to everyone's team."

Ukman said the market value of the exposure that CMGI will get is worth perhaps half of what it's paying. Better strategies for building a national audience among consumers and business, she says, might include spending money on hospitality suites at several different stadiums, or creating promotions that more tangibly drive sales or change people's opinions about one's brand.

If Ukman is right, at least CMGI has room for error. As of April 30, the company had $2 billion in cash and marketable securities on hand. Over the first nine months of its fiscal year ended July 31, the company reported $314 million in selling expenses; $7.6 million, though certainly a lot of money, is a relative drop in that bucket.

Hang It on the Stock

Uri Landesman, chief investment officer of CMGI shareholder Fleck T.I.M.E. Fund, says he thinks the deal make sense because it will help bolster CMGI's reputation as a stock. The company has been hurt in the market, he says, because the business-to-consumer sector, accounting for a significant portion of the company's revenue, is out of fashion, and because investors have turned on Internet stocks.

Standing Eight-Count? CMGI 75% off year's high

Source: BigCharts

CMGI's stock has fallen more than 75% off its all-time high of 163 1/2; on Wednesday afternoon, the stock was up 8% for the day, trading at 40 3/4.

"Fairly or unfairly ... their reputation as an operating company doesn't match what their reputation used to be as a venture-capital company," says Landesman. "Cash isn't really CMGI's problem. Perception is CMGI's problem. ... I'm happy to see they're taking steps to turn the perception of the stock around."

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