Silicon Alley Daily

Media, Finance, and Technology
in New York

21 September 2001
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Issue 39: Idealab


previous article  Online Advertising in the Aftermath next  

by Brian Morrissey

With the online advertising doldrums stretching on, the sector is assessing the fallout that last week's catastrophe could produce in an already hard-hit industry.

Today, DoubleClick (Nasdaq: DCLK) joined the parade of companies warning that profits will come up short in the third quarter. The company said it would dip further into the red, now expecting to record a loss of 9 cents to 11 cents a share. The loss could be as much as twice what DoubleClick previously expected.

"The tragic events of September 11 have led to softness in both online advertising and software sales," Bruce Dalziel, DoubleClick's CFO, said in a statement. "This has diminished the outlook for revenues in our media business, and to some extent in our technology business as well."

DoubleClick is expecting revenue of between $87 million and $90 million, compared with the previously expected range of $96 million to $102 million.

The company is not alone in the troubles it faces. Overall, the advertising market, already stagnating, has been hit hard by last week's terrorist attacks. Network TV has led the way, losing a week's advertisements to the wall-to-wall coverage devoted to the attack. Print has also been hit hard, as newspapers scrambled to publish special editions without ads that might be construed as inappropriate.

The iVillage Preacher

With his background in the cable industry, iVillage CEO Doug McCormick is a convert to online advertising, preaching its merits with the zeal of a traveling evangelist.

And he's about to be in charge of a company in the black. Although its revenues are much lower than a year before, iVillage announced today that it would post its first-ever cash profit in the third quarter. While this profit is something of an unattainable mirage (iVillage, like most Net companies, doesn't include so-called one-time charges and expenses when it calculates profits), it still is an important benchmark to proving iVillage's sustainability.

McCormick is sure advertisers will flock to the online space in due time. Even during a downturn, he thinks ads on the Net will get a second look from the big traditional advertisers.

"Can I spend less on advertising and get more bang for my buck?" he asks rhetorically. "I think this will cause advertisers to rethink their media mix, which might help the Internet."

But with just 5 percent of the overall advertising market, the Web may need McCormick to keep spreading the word.

On the Web, news sites also pulled advertising, often to help their pages load faster as the sites dealt with a deluge of traffic from a news-hungry public. At, the site went back to advertising on Thursday, posting ads from its two largest advertisers, Nieman Marcus and Tiffany's. While some travel companies did choose to pull their ads, Christine Mohan, a spokeswoman for New York Times Digital, said the long-term effect of the catastrophe is unclear.

"It's a little early to tell right now," she said. "We do have strong relationships with our clients, and I think you'll see more people returning to Web and print advertising."

But with the travel industry in disarray, online advertising will most likely feel the effects of curtailed ad budgets from airlines and online travel sites. The week before the terrorist attacks, travel ranked as the sixth biggest advertising sector, as tracked by AdRelevance, Jupiter Media Metrix's ad research company. The following week, its advertising had halved, dropping it to the No. 10 slot. Web advertising's big three remains media, retail, and financial services, which together account for around 60 percent of Web ad impressions.

Overall, AdRelevance research shows that ad impressions remained fairly steady. But many of those ads were converted into charity advertisements for the Red Cross or Salvation Army. Even X-10, the bad boy of the online advertising world, changed its pop-under advertisements to help victims.

Charlie Buckwalter, VP of media research at Jupiter Media Metrix, thinks online advertising, while certainly in line for more pressure from an uncertain economic climate, might fare better (or at least not as poorly) as the overall advertising market, which is expected to suffer broadly. Pointing to the bargain-basement prices that online ads are now sold for, he said, "A case can be made that online ad activity will certainly be impacted by a continuing downturn, but to a lesser degree than offline advertising activity."

IVillage CEO Doug McCormick echoed this sentiment. "The advertising business was somewhat under pressure to begin with, and I haven't really seen too much of a short-term hit to our advertising," he said. One of the most harped-on weaknesses of online advertising--its unobtrusiveness, compared with media like television--might help it in grave times, when people's minds are on war and the missing.

"If people are coming to a website, you don't have that interruption," McCormick said.

Teen site Bolt's CEO, Dan Pelson, said online advertising's challenge is pretty much the same as that facing the rest of the economy and the country: getting back to business after unspeakable loss and grief. "The main problem is uncertainty," he said. "Anything as dramatic and devastating as [the attacks] will only add to that uncertainty. The question is how strong are American businesses, and how tough we are ourselves with getting back to business."

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previous article  Alley Companies Volunteer IT Services   

by Dakota Smith

As the grisly search for bodies continues, Alley companies are joining in the relief effort, volunteering to rebuild IT networks for businesses affected by the World Trade Center attacks--without cost, or at significantly reduced prices.

New York-based Lenape is offering free computer network services, as well as free hardware including hubs, switches, routers, and firewalls. Broadband solutions provider INYC is providing e-mail, Web hosting, and Web design free of charge.

With the cost of setting up a network ranging from $15,000 to $50,000, depending on the needs of a business, the goodwill is appreciated, but it's unclear how many companies are actually reaching out to use the volunteer services.

NPowerNY, which has long matched not-for-profit companies with IT suppliers, has spent the last week working with Welfare Law Service to find IT supplies. Already, NPowerNY has been contacted by affected not-for-profits Community Resource Exchange and New York Public Internet Research Group, according to Barbara Chang, executive director of NPowerNY.

With the cost of setting up a network ranging from $15,000 to $50,000, depending on the needs of a business, the goodwill is appreciated, but it's unclear how many companies are actually reaching out to use the volunteer services. The New York Software Industry Association, a trade group, said it has received calls from about a dozen affected companies looking for IT services. Earlier in the week, NYSIA built a contact database matching donated or loaned IT equipment with companies in need. About 50 companies have signed up this week alone to offer services for free or at below-market prices.

Meanwhile, Michael Drapkin, CEO of XB5 Partners, an IT and management consultancy company, has organized resources to create the "World Trade Center IT Mobilization" to offer IT expertise to companies free of charge. Announced last night, the consortium of Alley companies includes Penton Media, the New York eCommerce Association, AlleyCat News, and advertising agency LLKFB. Volunteers are offering day-to-day IT operations and management services, sales, and marketing, as well as recovery and damage estimates.

Drapkin, who is also chair of eCommerce Management for Columbia University's Executive IT Management program, said he has no idea what kind of response his effort will generate.

"Right now, a lot of companies are working on basic infrastructure needs like finding office space," Drapkin says. "I'm just as curious as you as to what kind of response we will get."

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  News Briefs
previous article  SWF Looking for Free Content: Yahoo Says Pay Up next  

With these Yahoo features sporting a price tag ...
  • personal ads
  • job classifieds
  • financial research reports
  • auction listings
  • expedited website listings

... can these be far behind?

  • My Yahoo stock quotes
  • Calendar
  • Briefcase
  • Mobile Alerts
  • e-mail

On Tuesday, Yahoo (Nasdaq: YHOO) took further steps to end the days of free content. Starting on Oct. 3, the uber portal will charge for its personal ads, making users pony up $19.95 a month (or $42.95 for three months, or $89.95 for one year) to find the woman or man of their dreams. To pry open lonely hearts' purse strings, Yahoo will also introduce "enhanced ads" for $4.95 a piece that will allow users to post up to five photos of themselves on their classified. But browsing the ads will remain free. Eighty percent of Yahoo's revenue stream comes from online advertising, which has been crushed over the past year-and-a-half; to compensate, Yahoo has slowly begun imposing fees for some of its premium services, like job classifieds, auction listings, and financial research reports. But whether or not the ploy will drive away users remains to be seen. When Yahoo switched over to a pay-to-play model with its auction listings last winter, there was a sharp drop-off in use, though since that time traffic has stabilized. A company spokesman said the personal ads fees will help attract more serious daters to the website.

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previous article  Priceline's Braddock to Buy 750,000 Shares   

Just a day after Hong Kong billionaire Li Ka-shing moved to up his stake in Priceline (Nasdaq: PCLN), the suddenly wobbly company got another vote of confidence from its chief executive, Richard Braddock, who scrapped previous plans to sell shares in the company. Instead, Braddock said he would buy 750,000 shares through stock options.

Braddock, who does not draw a salary at the company, said in a statement that he was confident of Priceline's future, despite the near-term challenges wrought by last week's terror attacks. In August, he moved to sell 2 million shares over a 12-month period as part of estate planning. But with the company's shares battered, he has moved to give his company a vote of confidence a day after its board approved Li Ka-shing's request to up his stake in Priceline to 37.5 percent.

With air travel halted last week and fear of flying on the rise, Priceline and other online travel companies now expect to see sharply lower revenues in the near term. Just two days ago, Priceline announced its quarterly revenue for the third quarter would fall by as much as 18 percent.

The market has reacted by taking thick slices out of Priceline's market cap, dropping its share price by 54 percent over the course of the week. In early afternoon trading, Priceline's shares were down slightly at $2.23.

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  Press Releases [PAID]
previous article  About the Press Release Section   

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Press releases running in the Silicon Alley Daily are produced by our sponsors and are not endorsed by Rising Tide Studios.

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For all other advertising inquiries, contact Director of Online Sales, William A. Alena at [email protected] or Jay Chicoy at [email protected]

SAR welcomes feedback from readers at [email protected]. All letters become property of SAR and may be edited for space and clarity.



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