Last week I ran down a list of potential acquisition targets for CBS Interactive. I ended up with the conclusion that only CNET would provide a strategic fit with enough leverage. Mind you, with his ability to peer into upcoming trends and opportunities, CBS’ President Quincy Smith is enamored with Web 2.0 (that’s not a knock) and CNET is certainly a tad too Web 1.0 for CBS’ liking.
So who else is out there? Well, how about health pioneer Web MD? Like CNET, the company commands a billion-plus valuation… but unlike CNET (who has been in a rut for ages) Web MD just reduced guidance and its stock got pummeled.
Web MD is now worth $1.47B, with 2007 revenues of $330M, pretty close to CNET’s $400M run rate. Mind you, advertisers love health and health is seen as a growth category; though Web MD’s recent announcement does not suggest that:
WebMD now expects net income for the year between $29.5 million and $37.5 million on revenue of $380 million to $395 million, down from prior estimates for profit of $36.5 million to $46 million on revenue of $395 million to $415 million.
Big, traditional media has so many contacts deep with marketing agencies and F500 advertisers that it can make up for any shortfall new media players see or encounter… but the question remains: is Web MD sexy enough for CBS?
This, after all, is a company:
- that bought Last.fm for a cool $280M,
- whose Interactive President Smith once claimed that he would prefer to own Facebook over CBS (should be taken into the right context) and
- whose CEO Leslie Moonves was a former actor…
I was about to pen something on why and how CBS should focus more on everything and everyone in between Silicon Valley, Hollywood and Madison Avenue if it wants to win on Main Street. This post might sum it up, I say buck the trend and go for substance, after all:
The problem with the so-called sexier W2.0 stuff is that they lack revenue to make a dent in CBS’ eroding business and will continue to lack revenue for years to come.
We shall see. I do know one thing, as unsexy as it might be: by buying both CNET and Web MD, CBS will pay $3B (which is a lot, no doubt) but adding Web MD’s $400M in revenues to CNET’s $400M in revenues to their $200M revenue base for CBS Interactive yields a $1B-a-year-in-revenue franchise.
That’s a mere 3x revenues… and CBS can then add smaller acquisitions to really scale revenues further.
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WatchMojo NewsletterAre meetings a waste of time? Craig Newmark mentioned once that his 20 or so staffers did more and were productive than your usual lot of 20 because they did not waste time in meetings. I agree to a large extent. My old boss would have excruciatingly long and painful meetings every morning in some weak attempt to exert control. Meetings would start at 9:45am; the first painfest would drag out until 10:30am, then “mgmt” would stay back for a nauseating match of nonsense until 11:30am…
By the time you got out and asked yourself how you would ever get back that time… the day was half done. Mind you that was a company of 10 or so.
Yahoo! is a company of 10,000 and they are 1,00x worst, literally and figuratively.
We’ve been able to keep meetings to a minimum, but our company is growing, rapidly… so this begs the question, how can I maintain an efficient management system? Something I need to think of, defo.
Some things bring a smile to my face… and worth sharing with y’all.
Background
Contracts always have governing law clauses, it’s standard stuff. Sometimes you have no say in the matter, such as an M&A. With employment contracts, it can be tricky, too. For example, in California, a non-compete holds no water, so putting a non-compete agreement in a contract where the governing law is California is not even worth the paper it’s printed on.
What You Should Try to Do
Anyway, in sales deals, I like to be fair and I usually ask for something down the middle: if you want to pursue us the publisher, you should come in our area; if we want to pursue you, we will trek out to where you operate out of. It’s more fair and avoids frivolous litigation (for the record, no advertiser of mine has ever, ever even considered pursuing me or a site I have repped, and I have sold $10M worth of ad deals in my life to hundreds of clients).
Leverage, Common Sense Prevail
Naturally, the bigger the clients, the less leverage you have to change the Governing Law. You’re not going to tell Avenue A, for example, what terms they need to accept. Most of my clients are US-based… but today I was closing a deal with an Israeli-based advertiser.
An Iranian-Canadian Trying to Get Into Israel: Good Luck
I am a Canadian citizen (if you have not figured it out yet). However, I was born in Iran. The Governing Law in this deal is Israel. I won’t object but when I saw that, I could not help but laugh. Say the client does not pay up or I have to go to Israel to resolve a disagreement…
I get on a flight and land in Israel, they ask for my passport, and see I am born in Tehran…
Imagine the dialog:
Israeli Customs Guard: May I see your passport?
Me: Sure thing, here it is Sir.
Israeli: Canada? Oh - You were born in Iran? What brings you to Israel, sir?
Me: I’m here to collect some money.
Israeli: Collect money?
Me: I am having a disagreement with a client.
Israeli: Really? Come with me, we have some questions to ask you.
Yeah, something tells me I should change the governing law on that IO.
Related:
Now that WatchMojo.com is growing and our syndication network is off the chart… we’re getting a lot of advertising inquiries. Most of it is small and medium-sized advertisers, a few of them are big ad agencies submitting RFPs.
With ad agencies, it’s usually for big branded advertisers, but even these have specific objectives with regards to signups, sales or what not. Once in a while, you will get lucky and get pure-branding deals… but online, those are rare.
Measurability = Good; Impatience = Bad
Those are rare, frankly, because we online salespeople are the big fat idiots who have been promoting the measurability of online media.
We’ve set out the sword and fall on it every day because suddenly, whereas outdoor, print, radio and TV advertising has always been a long term exercise, suddenly marketers were led to believe that online could be a short term exercise. This was a cardinal mistake that we did. We did this initially to get marketers attention, but it’s not too late to retrain marketers into accepting the truth:
You Can’t Handle The Truth!
NO marketing provides a short term payoff. None. It takes years for marketers to harness strategies and optimize campaigns before they can plan for campaigns and allocate budgets in an effective manner.
Goodwill = Value of Brand, Basically
In fact, back in business school, one of my marketing profs said “Coca Cola can stop advertising and not see any impact on their market share, but by the second year, they sure will”. I think he is right. Online, I have never embraced the CPA or CPC model. Google embraced the CPC model and rode it to billions. But they had to given the tough ad climate in which theu launched Ad Sense.
CPM, CPA, CPC
As an ad salesman, I always favored CPM pricing models. Obviously, advertisers favor CPA and publishers prefer CPM. I think those publishers who can sell on a CPM can dictate terms and only take on CPM deals, those who can’t have no choice and accept CPA.
At my old job I sold $10M worth of ads in a very tough ad climate by putting my foot down and drawing a line in the sand. Had I accepted every CPA deal that came in the door, I don’t think we would have sold as much revenue. I know, CPA is ongoing, recurring, blah-blah, BS. In my opinion, 1 out of 100 CPA campaign is worth it, the rest are not. When the marketer is not taking on any risk, they don’t put in the time to improve the message, their landing page, the product, etc. They ask publishers to “give it a try”. Why?
Real Risk Sharing
My thinking is as follows:
Out of principle alone, I think advertisers should take some risk, too. It’s unfair and reasonable for marketers - who need to spend on marketing (advertising, PR, etc.) - to ask publishers to take on all of the risk and accept CPA deals. It’s expensive to create content and build an audience. If you want to reach my audience, you should pay for that privilege, no?
If after you take that risk we realize there is a fit between our audience and your product and your marketing message, then we might consider a CPA deal. Why should it be the other way around? When a CPA “advertiser” insists, I tell them to go advertise on social networking sites where the only content is user-generated-crap. If they want to advertise alongside professional content, then they should take on some risk.
People, Stop Lying
I understand there’s a greater problem and that is dishonest salespeople. Every marketer tells me horror stories of salespeople who promise X and Y and don’t deliver, only to give a “hey, shit happens” answer afterwards. This is shameful and representative of the culture we live in where everyone is out for the quick buck. It’s also why I tell my salesmen not to lie. Tell marketers the truth: if you want to build a business, you need to promote, that costs money. It costs me to produce content.
Time is Money
Bear one thing in mind: any time I take on a client, there’s a lot of work on our end. Reaching deal terms and implementing campaigns is a timely process. Optimizing campaigns even more so. All in all, a publisher should be compensated for that alone. Again, the problem is too many ad sales people lie and mislead marketers into thinking campaigns will be slam dunks. I tell them truth: campaigns are hard, marketing messages are everywhere and the truth is: I don’t care how great your products and services are, users find marketing annoying and obtrusive. Plain and simple. You are interrupting the informational and educational content consumption process… a process which online is in a free, ad-supported environment.
What I like to ask those promoters of CPA programs is “would you work for free, only to be compensated when a sale takes place?” I doubt it, and I hope not.
Long story short, I am not knocking the entire affiliate marketing industry here. I think some of the best marketing campaigns come from that segment of the online media space. However, if we all take a step back and wonder why online video sales are not yet booming etc., maybe, just maybe, it’s that content creators are not being rewarded for the time and effort to create good content.
The Adman’s Manifesto
It’s a catch-22… but to solve it, the steps are simple:
1. Don’t lie to marketers: don’t hype results and manage their expectations.
2. Be candid with advertisers: you have to spend to advertise, there are no free lunches.
3. Stand up to protect your inventory.
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