Ad Networks Look Overseas in Tough Times
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As the domestic Web advertising market continues to lag, several U.S. industry players are stepping up efforts to expand their businesses abroad -- just as one international player is reducing its exposure to the American ad downturn.
On Wednesday, CMGI-owned ad network Engage signed an alliance with Australian advertising and e-business solutions firm Pacific Access Pty Ltd., a subsidiary of Aussie telecom provider Telstra Corp.
As a result of that deal, Pacific Access will be the exclusive reseller of inventory on Andover, Mass.-based Engage's ad network.
In addition to the deal's expanding Engage's reach and advertising offerings in Australia, the company's chief executive Tony Nuzzo said the two partners were "exploring" new joint ventures in the Asia-Pacific region.
Meanwhile, Engage competitor and industry leader DoubleClick is signaling its intent to move back into the region. After previously shuttering its media operations in Australia and moving most of its technology unit to Hong Kong, Alley-based DoubleClick has set its sights on the client base of a regional competitor, Sabela Media, which it acquired earlier this month.
Sabela, previously owned by 24/7 Media, has about 500 clients in the Asian-Pacific region. Through the agreement with cash-strapped 24/7 Media, DoubleClick stands to double the number of its regional clients by offering to take over their contracts, once it terminates Sabela operations.
At least one of those Sabela customers is already willing to migrate to DoubleClick. Hong Kong-based ad network BMCMedia, a major Web media presence in the region, on Wednesday agreed to a six-year arrangement with DoubleClick to outsource its ad serving.
Los Angeles' L90, a third major U.S. player in the field, also signed a deal with Canadian ad network ABOVEtheFOLD.NET to provide technology powering its banner serving.
The moves by American ad networks come as one international player is scaling back its U.S. operations, due to the States' lackluster advertising market.
Nuremberg, Germany-based ad pepper media, a European-focused banner network and representation firm, said Wednesday that it's planning to downsize its U.S. operations by closing "at least" one of its three American offices, said chief sales officer Niels Nussler.
At press time, the company said it was still in the process of deciding which of its three U.S. offices it would keep open. In its push to penetrate the U.S. market, the company had established offices in New York, San Francisco, and Los Angeles.
"We are working pretty intensively on scaling it down in the U.S.," Nussler said. "We are going to keep a few employees but much less than we had before."
Ad pepper reported its annual revenues were up 337 percent to EUR 15.3 million, while consolidated net losses grew 285 percent to EUR 9.6 million, as it expanded into the U.S. and elsewhere.
Nussler said the main difficulties arose from the troubles plaguing the U.S. Internet advertising market. While the company said it's seen success in selling European inventory to American advertisers, it hasn't worked the other way around, he said.
"The pricing in the U.S. and the whole U.S. market has been pretty bad for us, revenue-wise," Nussler said. "The price has come down from normal campaigns ... our competitors are selling for less than $1 CPM, and that does not make it feasible for us. We can do turnover, but we cannot do any bottom-line."
If that's indeed the case, then U.S. networks' interest in overseas markets isn't necessarily a move to grab share in emerging areas -- but it's a way to reduce their exposure to the sickly domestic market.
"People go where the money is and where the clients are," said L90's Mike Leo, who is president of the company's Technology Solutions business. "There are clients abroad. And although I think Canadians may resent being called an emerging market, to a certain extent Europe, Canada, and ... Australia are all places that are starting to use richer marketing experiences which require different kinds of sales, higher CPMs, and different kinds of technology. So the market is opening up over there."
While Web media is more consolidated in overseas markets -- so there's less overall business to pursue -- a lower dependence on dot-com dollars in the past makes non-U.S. markets better able to withstand the shakeout, Leo said.
"There's not a lot of dot-com money out there, so CPMs haven't come down as far," he said. "Money that was in the space was either traditional or backed by traditional companies ... the community hasn't seen the 'waterfall drop' we've seen in the U.S."
"Certainly the damage is less significant," he added. "You can tell that not just in the CPMs, the mood there is considerably more uplifting. [A lot of U.S. firms] see opportunity to move ahead while the U.S. is really stalled right now."