GM Kills $10 Million Facebook Ad Campaign Because It Didn't Work
PC Upgrades on Byte-Size Budgets -- Savings ExperimentIf Google, Inc. (NASDAQ:GOOG) has its way, its program for buying newspaper ads and radio time will automate a process that is now being handled by ad agencies. The process is fairly labor intensive. At least for now.
As Google moves into the offline ad buying business, it is being followed by eBay, Inc. (NASDAQ:EBAY) and Yahoo!, Inc. (NASDAQ:YHOO). EBay has set up a TV buying service and Yahoo! recently announced an online ad deal with 176 newspapers.
All of this could make life for public ad agency giants like Interpublic Group of Companies, Inc. (NYSE:IPG), Omnicom Group, Inc. (NYSE:OMC) and WPP Group ADS (NASDAQ:WPPGY) a little tough. Selling advertising through online auction systems takes away a key ad agency function -- selected ad buying media for large marketing clients.
Some large advertisers are already jumping over the fence.
When eBay set up a TV buying service, companies like Home Depot Co. (NYSE:HD) and Koninklijke Philips Electron N (NYSE:PHG) were early adopters.
The ad agency business is in enough trouble already.
Although its stock has had a minor rally recently, shares in Interpublic, which has had a history of financial reporting problems, have fallen from $34 in May 2002 to under $11 recently. Clients are squeezing companies like Interpublic by demanding better fees for their services. Interpublic's revenue has been fairly flat over the last several quarters.
Omnicom has done better than Interpublic. Over the last five years, Omnicom's stock has matched the S&P 500 in performance.
Shares in WPP have not made much progress. In February 2004, its shares traded above $60. They now change hands at just below $65.
If advertisers turn increasingly to the Internet giants for their ad buying service, the pressure on traditional ad agency shares will certainly continue.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
11-21-2006 @ 12:26PM
Gordon Anderson said...
The internet is death to middle men.
11-22-2006 @ 1:32AM
Gary Bourgeault (thealphamarketer.com) said...
It does seem that probably more than anybody else, maybe with the exception of print newspaper, ad agencies are going to be continually pressured in their respective field.
Their leaders, when responding, are sounding too much like people that don't know how to combat it. They are calling for the rank and file to not give in to user-generated marketing, and look to themselves for the quality marketing.
They miss the point entirely with this type of thinking. Some demographics don't care at all if the message brought has some lower quality elements in the video, as a matter of fact, many of them are suspect when something is done too professionally.
I wouldn't invest in any ad agency, not unless something extraordinary happens to change the picture. I don't see that happening.