Dot-Com Super Bowl Advertisers Fumble But Down Under, LifeMinders.com may win at Olympics
San Francisco Chronicle
Blowing your advertising wad on the Super Bowl was a winning strategy for dot-com companies in 1999, but a bad call in 2000.
A study by Thomas Weisel Partners shows that none of the publicly held Internet-related companies that advertised on this year’s Super Bowl has seen its stock price increase since the NFL championship aired Jan. 30.
The most “successful” was E- Trade, whose shares had slumped only 13 percent as of Friday. E- Trade aired three spots, including one of the funniest with a man being rushed through the emergency room because he had money coming out the wazoo.
Shares in three Super Bowl advertisers — Healtheon/WebMD, Kforce.com and MicroStrategy — are down more than 70 percent. During the same period, the Dow Jones composite Internet index was off 19 percent.
Of the 10 private companies that advertised, two managed to go public, but their stocks have fallen like a bad punt — Pets.com is down 91 percent since its first-day close, Netpliance is down 82 percent.
Seven of the private companies are still private and one — Epidemic.com — failed to secure a second round of financing and threw in the towel in June.
“In 1999, only two dot-com ads appeared on the Super Bowl — Monster.com and Hotjobs.com. Those are the two major online recruiting sites today,” says Weisel analyst Perry Boyle.
This year, however, nearly 20 percent of the 61 television spots were gobbled up by Net companies, which paid $2.2 million on average for a 30-second spot.
“The problem was clutter,” Boyle says. But he doesn’t call it an unmitigated disaster. Although all of the advertisers’ stocks are down, some aren’t down nearly as much as their peers.
E-Trade stock has outperformed Ameritrade, TD Waterhouse, Schwab and DLJdirect.
EDS, the information-technology consulting firm that ran the humorous “herding cats,” commercial, has done better than competitors Scient and Viant, but worse than Sapient.
Hotjobs.com, down 31 percent, “has definitely outperformed Kforce (another Super Bowl advertiser) Topjobs.net and Headhunter.com.”
Monster.com, which advertised again this year, is part of TMP Worldwide. It’s reportedly searching for a new advertising agency.
MINDING THE OLYMPICS: Ironically, Boyle says the company that has done the best, relative to its peers, is LifeMinders.com. This company aired the self-proclaimed “Worst Ad on the Super Bowl.” And it was, according to some surveys.
It advertised “highly personalized e-mail” in typewriter script against a yellow background while “Chopsticks” played in the background.
LifeMinders stock is down 38 percent, but Boyle thinks it could get a big boost from the Sydney Olympics, which start Friday.
The company does what is known as “permission marketing” or “opt-in e-mail.”
It has about 18 million members who have registered to receive weekly e-mails with content personalized to their interests, such as gardening, movies or pets. The e- mails, which look like Web pages, are free, but they’re surrounded by (surprise!) paid advertising. It sends simpler messages to wireless devices.
During the summer games, the Herndon, Va., company will send daily, personalized e-mail updates to users who register through the official Olympic Web site, www.olympics.com. Users can choose which events, athletes or teams they want to read about.
IBM, which runs the official Olympic site, “has estimated that 10 million to 30 million people will sign up for these e-mails,” Boyle says.
These people won’t automatically become LifeMinders members, but they can choose to do so.
“We’re estimating that 1 million to 2 million will stick,” says Lisa Haas, an analyst with Wit Soundview.
“They’re at 18 million members now. We estimate they’ll have 19.5 million” at the end of the third quarter. “That’s slightly ahead of (company) guidance. If they come out at the end of the third quarter and greatly exceed membership estimates, that’ll be a positive” for the stock, she says.
Boyle points out that America Online has only 23 million subscribers.
LifeMinders doesn’t get any subscription revenues, like AOL does. But it does get about $4 per member per year in advertising revenues.
Boyle estimates that the company will generate $60 million in revenue this year and break even during the first quarter of next year.
Eventually, he says, the company can generate $10 or more in revenue per customer by selling its own products such as credit cards.
Its biggest challenge is the same one facing all e-media companies, “bringing traditional advertisers into the new-media world.”
A slowdown in the growth of Internet advertising has hurt all dot-com stocks lately, even the big ones like Yahoo and AOL.
“But LifeMinders has an advantage,” Boyle says. “It has a very demonstrable superior response rates at a lower cost than the portals.”
Haas agrees. “We like the fact that LifeMinders has scale. It has permission or consent from 18 million members. A lot of companies are having weakness in online advertising. We think e-mail is a better platform long term.”
ANOTHER WEB-AD WARNING? Internet bulls are quick to point out that the absolute level of Internet advertising is not declining, merely the rate of growth. But a report issued this week calls that into question.
AdZone Interactive reported that U.S. Internet advertising during August fell 7.6 percent, to $1.41 billion, from $1.54 billion during July 2000.
This was the first month-to- month decline this year. The dip could be seasonal; August is generally a weak advertising month. There’s no comparison because AdZone only started tracking Web advertising in January.
AdZone Chief Executive Officer Charles Cardona points out that July was a very strong month: Estimated Web ad revenues jumped 21 percent from June.
In Europe, which he says is a couple of years behind the United States, Internet advertising continued to grow during August, reaching $109 million, up 11 percent from July.
Critics say AdZone’s survey is flawed because it doesn’t measure actual ad expenditures. It monitors Web site advertising and uses standard rate cards to estimate revenues. Even so, it’s worth noting.
Net Worth runs Tuesdays, Wednesdays and Fridays. E-mail Kathleen Pender at [email protected] .com.
Here’s a look at what happened to Internet-related companies since they advertised on the Super Bowl XXXIV telecast in January.
Change in company stock
Company price since Jan. 31
(x) As ofFriday
PRIVATE COMPANIES THAT WENT PUBLIC
Company Change in stock since first-day close
(a) – IPO on March 17
(b) – IPO on Feb. 11
PRIVATE COMPANIES THAT REMAINED PRIVATE
PRIVATE COMPANY THAT WENT OUT OF BUSINESS
Source: Thomas Weisel Partners