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Jan 17, 2009

CLIP Federated Media Shifts Away From Display Ads; Restructuring Includes Some Job Cuts

imageFederated Media is meeting with its staff now to tell them about a decision to move the company away from display advertising and devote more resources to conversational marketing, paidContent has learned. The company is cutting seven jobs in the display area but publisher and chief revenue officer Chas Edwards (right) tells us FM has added some 25 jobs since July 1 and continues to hire. FM will have about 80 people on staff following the layoffs.

Edwards said when the company reached out to advertisers about their coming needs in the tough economy, small advertisers said they would be disappearing for 12-18 months while larger companies—Fortune 500 and the megabrands—- said: "Our competitors are going to be under a rock for the next 18 months—maybe 12; we're going to take 2009 to steal market share but we're going to do it for less. ... We're not going to do dumb display advertising on the internet, buying display banners through ad networks." The interest was more in conversation marketing and that's where FM is putting its resources, expanding the part of sales that focuses on major accounts and the back-office operations to support them.

Edwards shies away from descriptions of FM as an ad network. "As an ad network, FM is a failure. We're not organized to sell a lot of broad-based banner campaigns across zillions of sites. The approach we take is more of a publisher with a portfolio." FM, which represents more than 150 websites, partners with ad networks to sell remnant inventory.

Much more after the jump

Revenues: Edwards spoke in broad terms about revenues: "'08 wraps up around $39-40 million in revenues, up 70-80 percent from 2007. We still had a pretty good year of growth, although we had a pretty crappy Q4 like everyone else." Even so, he's projecting 2009 will be up somewhere between 35-50 percent. When I asked why he was so optimistic in such a down time, he responded, "I think the online market overall is going to be flat. The reason we have this optimism is the conversation we're having with marketers. We're coming off of frankly, a pretty small base of revenue in the overall scheme of things." He thinks FM will take advantage of what he expects to be a migration from print during the recession.

Chairman and CEO John Battelle explained the decision in a post on the company blog that went live during the meeting.

UpdateOver at TechCrunch, Mike Arrington says he's worried about his company's relationship with FM, which accounts for a third of his company's income, and, though he says the decision is up to CEO Heather Harde, wonders out loud if it's time for a new ad partner. Payments have dipped recently and he contends that staying with FM is more costly: "The biggest issue is that as a market leader among tech blogs, we end up subsidizing others. An example - an advertiser comes to us with, say, a $100,000 spend. They are referred through to Federated, who if they make the sale gets a 40% cut. That cut is fine. But what Federated then does is spread that $100k around to many different blogs. In the end we may only see a small fraction of it spent on TechCrunch." Battelle tells him FM will be focusinbg more on the kind of advertising that;s good for TC.

Justin Davis counters, saying he likes the way FM reps his four sites (Modojo.com, Destructoid.com, Gamersyde.com, and GoNintendo.com): "Mike… you're so dramatic, sometimes. FM makes it EXTREMELY easy for the sites they represent to follow up on leads themselves. They literally have a whole self-serve platform set up you can point ad buyers to, and if they place an ad buy, #1 it doesn't get split with a half-dozen other sites and #2 FM doesn't take it's 40% split - it takes 10% for serving the ads."

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