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M stands for “many moons”

by henrycopeland
Tuesday, February 3rd, 2009

Group M, the parent company to some of the world’s largest advertising agencies, is proposing new terms for online advertising deals that could triple the time publishers have to wait to get paid for ads they’ve run.

While the industry norm, at least on paper, is payment within 60 days of a campaign’s launch, under Group M’s new terms, a publishers would have to wait fully 180 days before even complaining to the end advertiser that it hasn’t received payment. Here’s the relevant clause in M’s new terms:

Payments will be made in accordance with the payment schedule set forth in the IO or, if no payment schedule is specified, payment will be made pro rata in arrears on a monthly basis (not in a lump sum) based on advertising actually delivered. No invoice shall be sent by Media Company until on or after 30 days from the media start date, and payment shall be effected 60 days from receipt of the applicable Media Company’s invoice. … Media Company may notify Agency that it has not received payment in accordance with the foregoing provisions and whether it intends to seek payment directly from Advertiser pursuant to Section III(c), and may do so no sooner than 90 days after providing such notice to Agency.

In contrast, here are the IAB standard terms used by 90% of advertisers and their agencies today: a) invoice must be sent within 30 days of first month’s delivery or completion of the IO, b) agency will make payment 30 days from receipt of invoice and c) media company may contact advertiser (end client) for payment after this 30 day period is up.

Group M’s daughter agencies include MAXUS, MediaCom, Beyond Interaction, Mediaedge:cia and Mindshare. Their clients include Diageo, Volkswagon, Deutsche Bank, Puma, Mitsubishi, Sony, Ericsson, Bayer, Beiersdorf, Unilever, Motorola, IBM, Land Rover, American Express, Lufthansa, Nike, Kelloggs, Ford, Castrol, HSBC, BP, SAP, Kodak, Volvo, Kraft, Nestle, Kimberly Clark, Diesel, Rolex, Jaguar, Heineken, Warner Brothers… and many others.

The ramifacations are obvious. First, high overhead publishers who are already cash-flow thin will be stretched beyond the breaking point. Second Group M wants a license to sit on cash owed to publishers for 90 days before paying it out. (Group M, which calls itself “the leading global investment management operation,” seems also to be managing its own cash flow very aggressively.)

Other portions of the new terms have been getting some press, but as far as I can tell, nobody is squawking about this egregious cash grab.

Update: We got the terms along with an RFP on January 26. This pleasant note accompanied them: “Also attached are the new GroupM terms we will be using for all campaigns moving forward. Please take a moment to look through them. By submitting your proposal you are accepting to these terms for any IO for this campaign. If there are any objections, we need to know at the time of submission, as it may affect consideration for this campaign.”

The end of advertising?

by henrycopeland
Monday, February 2nd, 2009

Back in November, I suggested that online ad sales might fall 40% in 2009 as a deep recession carved into online ad budgets. Looks like the market is headed that… or worse, at least according to this Ad Age article:

Cost-per-thousand ad impressions for online publishers are generally off about 20%, according to several people on both the buying and selling side, and sell-through rates are dropping. And where publishers used to unload 60% of their inventory, some are now able to sell only 30%.

But perhaps indicating more trouble ahead is just how cheap the low end of the market has gotten. An August study from the Interactive Advertising Bureau and Bain & Co.* found the average CPMs on ad networks ranged from 60 cents to $1.10, only 6% to 11% of the prices publishers could command when they sold inventory directly. And the pricing for networks appears to be getting worse not better. CPMs for ad-network-sold ads are dropping, some by 50% year-over-year, according to a recent study of pricing by Pubmatic, which tracks pricing among many Long Tail ad networks.

Put those percentages together and you’ll discover that some publishers have seen revenues collapse 60% or more.

Compounding the recession-driven collapse in revenues is the fact that the volume of online content is still doubling yearly, thanks to all the blog posts, comments, photos, videos, ratings, interactions and e-phemera that we all create singly and socially.

With supply doubling and demand stagnant or down, advertising prices are headed to zero for any property that doesn’t deliver VERY compelling value to advertisers.

What a lot of publishers don’t get is that “selling” is only a tiny portion of the formula for survival in the short run, and success longer term. The real keys are innovating, keeping overheads low, improving processes and talking relentlessly to your customers about what they want.

Black boxes within black boxes

by henrycopeland
Monday, December 15th, 2008

Bloomberg: “There are roughly three funds-of-funds for every single hedge fund, up from one to seven in 2001, according HFR.”

We are all Kerviel Madoff

by henrycopeland
Sunday, December 14th, 2008

And so it goes. From the FT.

Investors around the world were rushing on Friday to assess potential losses from what could be Wall Street’s biggest fraud – a multi-billion-dollar scheme allegedly perpetrated by investment manager Bernard Madoff.

The case threatens to stoke fears among investors and encourage withdrawals from hedge funds struggling to raise cash to meet redemptions. …

“These people went to sleep Wednesday night thinking they had a comfortable retirement and now they are thrown into a spiral of horror,” said Stephen Weiss, a lawyer representing people who had invested a combined $1bn with Mr Madoff. “Some of these people don’t know how they are going to pay their mortgage.”

The number being bandied around is $50 billion.

Scroll back 10 months. At that point, the world was horrified that fraud by a young French trader, Jerome Kerviel, had cost one of Europe’s biggest banks $7 billion. How could this happen? As I wrote then

Kerviel — speculating wildly, way beyond his limits, hiding his speculation from everyone with a series of offsetting paper trades — is a near perfect metaphor for our entire economy. Everyone is in on it and nobody wants to look too closely at how rotten the whole scheme is.

With Madoff’s fraud, the trend becomes ever more evident. Multiple giant hedge funds were happy pad their portfolio’s with his easy, steady returns: borrow at 5% and get a guaranteed 10% return year-in and year-out? Why not do a couple billion of that trade? The SEC, which got multiple tipoffs that Madoff’s business was giga-Ponzi scheme, failed to follow through. The old idiot had to turn himself in.

There’s a pattern here people. Kerviel loses $7 billion in February; Madoff loses $50 billion in December. Citigroup asks for $25 billion in government aid; then 6 weeks later needs $300 billion. The government asks for $700 billion to bailout banks, then lends them $2 trillion behind the scenes.

The rule of thumb is add a zero every 6 to 12 months. Where does the next zero take us?

As I mentioned a few weeks back, it’s $65 trillion. That’s the size of the credit default swap market, the hidden metastatic cancer that oozes through every pore of our financial system. At some point soon, that sinkhole is going to swallow all the girders we’ve bolted together around its borders, all the concrete we’ve tried to pour to stabilize the inexorable earthward sucking.

We’re engaged in a game of mutual self-deception — things can’t be that bad. Can they?

Can they?


We’re living a giant Ponzi scheme.

House buyers knowingly and eagerly borrowed more than they could afford, believing that some new sucker would come to bail them out of their houses.

Banks knowingly lent money to uncredit-worthy borrowers in the pursuit of next quarter’s bonus.

Insurance companies and other premium hungry miscreants wrote insurance promises against the failure of other businesses, called Credit Default Swaps (CDS), creating liabilities that far exceed their assets. These liabilities don’t offset each other, they are lined up like dominoes and will tumble quickly when the right wind blows. The hand of God would not be powerful enough to turn back the tsunami of defaults that a few large defaults will set off. (In total, CDS liabilities are $65 trillion, five times bigger than the entire US GDP.)

Now, governments give “temporary” aid to banks that are known to have irreparable (unless there’s a violent paroxysm of inflation) holes in their balance sheets. Free market Republicans grab money intended to shore up housing prices to bailout automakers. Bernanke says, in almost as many words, that we’ll just have inflate our way out of housing defaults.

Prudent folks will head for the hills or prepare for hyperinflation.

Others will just keep grinning like Madoff’s investors when they went to bed last Thursday night.

Real social media video CPMs?

by henrycopeland
Thursday, September 4th, 2008

Reading a VC salivate about the fact that some social media CPMs are $15 and headed to $17 — “I think that $15 CPMs with no content creation costs sound pretty good to me!” makes me laugh.

Do a little math and you’ll see that the reality is just not there. Google’s Youtube, according to a recent Forbes article, is now doing 1 billion views a day on and should garner roughly $200 million in sales this year.

That’s a $00.0006 CPM.

Politico.com provides good barometer for state of online political advertising

by henrycopeland
Monday, August 18th, 2008

Politico.com is a huge success, writes Lindsey McPherson in the American Journalism Review. “In May, it had 3.5 million unique visitors and 25.1 million page views, according to Nielsen/Net Ratings. Editor & Publisher ranked Politico the 10th-most-visited newspaper site that month.”

The site IS highly regarded and highly trafficked. But read another way, Politico is a raging bonfire of greenbacks, a financial failure. Turns out, Politico.com piggybacks a tiny print publication — 27,000 copies published just three days a week — that happens to generate 150% more revenue than the site. As Ezra Klein sums up the situation:

Were they actually web only, they’d be losing catastrophic amounts of money. If The Politico was an experiment to see if people would read more stuff about politics, it was a success. But insofar as it sought a new business model that would bring economic viability to online reportage, it’s as adrift as everyone else.

A whole raft of aspiring publishing moguls are lined up expecting to get rich on politics this year — it’s gonna be interesting to see how many players are left come January 15, 2009 when they’ve made moderate profits (a few) or (mostly) abysmal losses and face an 18 month drought into the next election cycle.

UK blogs fail financially

by henrycopeland
Thursday, August 14th, 2008

Here’s an interesting dissection of the absence of a blogging bubble in the UK.

Gatsby 2.0

by henrycopeland
Tuesday, August 12th, 2008

Did anyone else read Tim Arango’s recent NYTimes’ article about Vivi Nevo, Internet man of mystery, and wonder why the journalist didn’t invoke Jay Gatsby, the self-made man of another bubble-infused age?

Of all the characters the media business attracts — and creates, for that matter — perhaps no one is more remarked upon, wondered about or marveled at than Mr. Nevo. Among his many overlapping circles of friends, nearly all say that Mr. Nevo is a force in their lives: a loyal friend, a trusted conveyor and keeper of information and someone who never forgets a birthday or a bar mitzvah.

You get the feeling Arango had some off-the-record allegations he wanted to unleash but couldn’t cajole into the daylight, hence the repeated and elaborate “what does Vivi really do?” incantations?

Those who knew Mr. Nevo in the 1980s, after he moved to New York from Israel, have watched his rise with curiosity.

“You’re asking questions I’ve asked myself many times,” said Nicolas Rachline, who met Mr. Nevo in the late 1980s when both were part of a fashionable New York expatriate crowd that hung out at Le Bilboquet, a French restaurant on the Upper East Side. “What the hell does Vivi do? He seems to be a powerful player in the entertainment industry. How, I don’t know.”

Maybe we’ll know someday.

Newspaper advertising revenues plunge

by henrycopeland
Wednesday, July 30th, 2008

Newspaper holding company AH Belo announced yesterday that ad revenues were down 21% in the second quarter. That 21% is the biggest decline I’ve seen yet. (Belo publishes four daily newspapers, including the Dallas Morning News and Providence Journal.)

For broader context: here’s an article about the ill newspaper industry in the International Herald Tribune, ironically, a newspaper I used to write for. Yes, the article includes that dire phrase “since the Great Depression.”

More thoughts on the phrase “worst since the Great Depression”.

Cuil lacks advertising

by henrycopeland
Monday, July 28th, 2008

The new Google killer looks slick. But it lacks advertising. I’m not just talking about the kind that pays the bills, I’m talking about the entire content category.

Look Ma, no advertising!

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