It used to be that it was Christmas every day for people who sold Internet advertising. Now they're waiting for the end of the year like everyone else.
As the second-quarter earnings season for advertising-related Net companies revs up -- notably with
earnings release Tuesday and
Thursday -- people who work on the front lines of Internet advertising are feeling the pressure of advertisers' increasing demands and shrinking pocketbooks. (As always, they note that these trends are hurting their competitors, but
Any sign of a broader Net ad slowdown may well play out in these stocks. Despite the stock-buying frenzy that followed
strong earnings report last week, and the good earnings news coming out of portal/ecommerce firm
Monday, investors will be harshly scrutinizing coming earnings reports for any signs of trends that might foretell the key fourth-quarter Net ad climate.
In addition to second-quarter numbers from DoubleClick -- roughly $125 million in revenue and a 5 cent-a-share pro forma loss, according to
First Call/Thomson Financial
-- investors will be looking for guidance from the company about how optimistic they should be about the ad market's performance in the second half of the year.
Worries about the health of the Internet advertising market have driven ad-related stocks sharply lower this year, despite last week's Yahoo!-inspired rebound. DoubleClick, for instance, trades for barely a quarter of its January high, and even fast-growing, world-subjugating AOL is more than a third off its high. That's because money's not as easy as it once was, and people in the industry disagree about what it'll take to make it flow again.
"A lot of dot-com and Web-based companies have come under pressure because the financing has dried up," says Chris Thomas, senior vice president of sales for
, a combination shopping service and discussion site.
An ad salesperson who works for a sports site put the same idea a little more graphically. The salesman, speaking on condition of anonymity, reports of advertisers signing on the dotted line to run ad campaigns -- but pulling them two days before they're scheduled to run. "Their budgets were cut -- just slashed," the salesperson says, while hastening to add that these conditions -- guess what -- aren't hurting his firm's sales. "I definitely see that happening."
A salesman for a consumer-focused site, speaking anonymously, says overall revenue has increased since last summer. But the mood has changed, he says, as advertisers focus more on their return on investment, or ROI. "As far as people spending loosely and worrying about ROI later, they're spending more carefully," he says.
Scott Paternoster, senior vice president of sales for online advertising firm
, agrees. "Advertisers are becoming very ROI-focused," he says. Dot-com advertisers have been shifting their focus, from acquiring customers to retaining current customers, Paternoster adds.
More and more, says the anonymous salesman, Internet firms are structuring deals not so that they'll pay for impressions, or the number of times their ads are displayed, but so that they'll pay based on performance -- such as how many times Internet users click on their ads, or how many people are driven by their advertising to respond to a promotion on the advertiser's site.
Times have certainly changed from two years ago, says the salesman, when he sold advertising at
(now owned by Yahoo!) and a seemingly endless supply of VC money had "loose dollars falling through the ceiling." Back then the answer for anyone who asked for a performance-based deal was just no, he says -- a reflection not of different sites, he says, but of different times.
Gotta Get Tech
Ad sales people are optimistic that business will spike again in the fourth quarter. But industry participants have different ideas for what could cause the market to really take off again.
For business to boom, the sports site salesperson is waiting for greater availability of high-speed connections to the home that will enable more elaborate, media-rich advertising. "My personal time horizon is between a year and two years," the salesperson says; elaborate branding opportunities for companies analogous to sponsorship of athletes and sporting events will have to be possible on the Internet "for the really big bucks to come along."
Deja.com's Thomas is waiting for Internet audience measurement to be standardized the way it is for television programs and print publications. "That just isn't here yet," he says.
He's waiting for high-speed connections to the home, too. "Then I think you've got a really compelling situation," says Thomas. But that won't be immediate, he says.
Yet some salespeople don't see any problem at all. One salesman for a site that caters to technology professionals says that business is booming because of the number of advertisers that want to reach its users. "We are so busy, we can't see straight," he says. But he's aware this isn't true for everybody. "I wouldn't want to be selling
now," he says.