Today we read that Federated Media, John Battelle’s advertising representation website, lost Fark.com from its roster. Apparently, Fark.com decided to get lad magazine Maxim to sell its inventory. I wrote about this last week, thinking the news was public. I guess it wasn’t. My bad. But it’s not like Fark told me about it, having worked in the industry (both men’s space and online ads) I could see some signs.
Had Fark hired anyone else but Maxim, I’d be advising him to start planning for the day he will drop Maxim for his own sales force. But considering it’s Maxim, “this could be different.”
The Ad Repping Conondrum
Jason Calacanis - who founded Silicon Alley Reporter, subequently launched Weblogs Inc. and sold it to Time Warner’s AOL for $25M - offers a good analysis of the advertising representation business. In a nutshell, it is certainly true that if and when an ad reps does a good job of selling a publisher’s ad inventory, then the ad rep gives the publisher the resources (and greed) to hire an in-house ad sales team, making the ad reps vulnerable to a short shelf life.
From 2000 to 2005, I worked as VP of ad sales for a company who competed against and soundly defeated Maxim in the men’s space. Unfortunately, we could have pounded Maxim some more had my boss had the vision to let me build out a real sales force. Instead of doing that, I was Chief Cook and Bottler Washer for the company. I generated about 75% of the company revenue, and 75% of that came directly through my relationships with ad agencies and advertisers, the rest came from ad reps who managed some of the marquee brands. It was frustrating for me: the ad reps were the gatekeeper to most of the relationships, but they accounted 25%. I still had to do my best because internally I was being compared to our peers in the men’s space who would close deals right and left with the very same clients our ad reps would fail to get. More often than not, Maxim in particular would beat us for the big deals, we were left hanging the bag. Happy, happy, happy!
Actually, the real number ad reps generated was 20%, for the additional 5% came from ad networks. In the abovementioned example, going forward, FM will become Fark’s ad network, while Maxim will be Fark’s ad rep.
Top Brands Get Most Attention
The problem is simple (and while Jason does a great job explaining the basic problem of the model, I’d say with all due respect there are a few nuances he leaves out): when an ad rep walks into an agency, the agency wants to talk about the top brands.
Fark, as fun of a site as it might be to visit, probably did not score very high on FM’s contacts’ wish list. After all, if you represent tech sites, VC sites, web blogs, Fark probably scores low in terms of appeal. FM’s ad sales guys spend 90% of their time with tech agencies and clients, people who will shun Fark. That’s why today upon learning the news, John Battelle changed his story from “Fark will be a million dollar profit machine” to “good luck Drew” today.
Unlike FM (who is an ad rep), Maxim is in a different situation. As a print magazine with a growing online presence, its main clients are spending hundreds of thousands of dollars - if not millions - in print. Maxim either deals with mega-agencies who “also do online” or large interactive agencies who reluctantly trust Maxim’s brand and put them on plans.
Maxim is a large site but it does not get - proportionally speaking - as much online dollars as they do offline dollars. But it sees all of the money that is out there, so it reached out to Fark to actualize more dollars. But since Fark is leaving the world of ad networks and entering the ad representation model, it will welcome any incremental dollar that Maxim throws its way. As a new ad rep however, Federated Media was probably getting small deals and not the kind of deals that Fark expected to get.
It was probably that simple.
Maxim can charge higher rates and secure the bulk of the money that is on the table for Maxim’s own site and it can pick up morsels at lower rates and place those on Fark.
You Need to Spend Money to Make Money
Fark runs his site out of Kentucky, so the reality for him is that starting a sales team in NYC or SF is a very costly endeavor. To him, any ad rep is a good proposition, it beats ad networks. It also beats the kind of clients you get directly. Once you hear of who the ad reps are pitching you to, you are willing to wait. But web entrepreneurs are a fickle, impatient bunch. My last two bosses thought that they were the Web.
The real problem in the ad repping business begins when a publisher gets impatient. I was a publisher who operated 500 miles away from Madison Avenue and I outsold the ad reps, but even I was reaslistic in knowing that if you give any ad rep enough time, they will eventually get you some business.
In other words, Jason’s argument about “once an ad rep brings you a lot of money” misses the point: more often than not, ad reps don’t bring in the kind of money you expect. After all, I sure don’t think Fark fired John Battelle because he did too good of a job, he chose Maxim because Maxim was less crappy than Federated Media. And, because Maxim is not an ad rep, but a unique case of “not being able to place and deliver every single penny they get from media buyers wanting to hang out at Maxim parties,” they will be able to help Fark.
Of course, over time, Fark’s expectations will rise and Fark might hire more. Fark does not produce any content, making it a hard sell.
Over time, what is more likely is an ad rep with a better salesman will come and convince Fark that they can do a better job than Maxim because Maxim is not both competing and helping Fark, after all, since Fark is a bigger site than Maxim, over time, why would Maxim want to give Fark any money if they keep 100% of the revenue they place on Fark but fork over 50% to Fark when they get him ad dollars.
Exactly.
Last year, when my erstwhile partners cashed out in a sale of their company, I was shown the door. When I was, I interviewed with an ad rep firm. I decided to turn the job down for specific reasons, but I did not shed too many tears because it was a mixed blessing: I got the shot to develop my own media properties and be in full control of my destiny.
I highly doubt that - bruised ego notwithstanding - John Battelle probably did not shed any tears at the Web 2.0 summit when he realized Fark was saying his goodbyes (though maybe Fark was asking why he was there and not selling his brand at agencies, hence another problem of John’s business, but alas, who the F is I to point that out?).
The truth is that ad reps are always looking for new publishers because they know that publishers will eventually leave them. Some ad rep firms represent a dozen websites, others hundreds, some even thousands. Of course, those that represent hundreds become networks and offer less service. But the simple reality is that ad reps are always looking for new sites, so that is a self-correcting reality that is “priced into the model.” The hidden truth is that when a publisher leaves an ad rep, it’s a blessing in disguise. Today, John Battelle could stop making excuses for Fark. a
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