Last week was possibly one of the darkest for the internet industry
- the downgrading of the online advertising market that began last year
was accompanied by news that Yahoo!'s chief executive in the US, Tim
Koogle, was stepping down from the post. Koogle's departure coincided
with a warning from Yahoo! that it would miss its already lowered
expectations during the year.
Why? A drop in online ad revenue because of market uncertainty. That,
and rumours that MSN may charge subscribers for the use of its service
because online ad revenues are not proving to be enough to sustain the
company, painted a rather bleak picture.
Forecasts from UK companies suggest that the European online advertising
market is going to be considerably less damaged than that in the US.
Forrester is predicting a 74 per cent growth in the European online ad
market this year. However, online adspend did drop towards the end of
last year. Marc Cohen, the European adwatch manager at Forrester, said:
'In contrast to the lower overall online advertising spending, November
and December 2000 showed increases in the number of companies
advertising, but they were getting lower rates for each ad
This quiet period in the first half of the year was also predicted by
Forrester, with steeper growth expected in the second half as
traditional advertisers replace dotcoms that are tightening their
Merrill Lynch's predictions are more conservative, predicting growth of
25 per cent in Europe.
Adrian Baker, the managing director of DoubleClick UK, said:
'Advertisers are recognising the importance of talking to their target
audience on niche sites. As the maturity of the market grows, so does
the maturity of the users and these users spend more time on sites that
they have found right for their interests. This understanding has
prompted advertisers such as Volvo to debut its S60 sedan exclusively
online and British Airways introduced its flat beds across Europe
online. We are seeing the trend of traditional advertisers coming online
Despite the constant state of flux characterising the industry,
consolidation in the agency sector continued. Ogilvy Interactive, which
is part of WPP's OgilvyOne, acquired the independent online planning and
buying media agency Tempest. A veritable veteran at the grand old age of
two, Tempest was one of the first agencies to launch as a specialist in
The acquisition of Tempest adds another string to Ogilvy Interactive's
bow. As well as building sites, brands and online strategies and
creating e-mail and viral campaigns, Ogilvy & Mather's digital shop will
now also take full control of clients' online media strategy. But how
has Ogilvy Interactive managed so far? Largely with help from mdigital,
the digital branch of its WPP sister media agency MindShare. Also in the
fold is The Digital Edge, part of The Media Edge, which came with WPP's
Young & Rubicam acquisition. Will the arrival of Tempest's interactive
TV ads change the structure of WPP's existing media relationship with
Ogilvy Interactive and its clients? Unlikely. Nigel Sheldon, a managing
partner at mdigital, said: 'Ogilvy Interactive is a sister company of
ours and we will continue to work with them.'
With the acquisition of Tempest comes the formation of the third online
planning and buying outfit, Ogilvy Interactive Media. This new outfit is
being headed by Richard Collins - Tempest's founder and original
managing director until last week. Tempest will continue to operate as a
separate agency and brand from Ogilvy Interactive Media and, according
to insiders, mdigital will also continue to work with Ogilvy Interactive
on its shared clients.
To some this might seem like a shrewd move by WPP to cover the online
media buying industry. To others, however, it could be perceived as
putting too many fingers in the same pot.
OgilvyOne's chairman, Nigel Howlett, is of course convinced that this is
the best way: 'There were some skills in the digital space that Ogilvy
Interactive didn't have and urgently needed.' Of course, this isn't the
first time that Ogilvy has bought in digital skills. It acquired the
new-media shop Noho Digital, which became Ogilvy Interactive, in June
1999 to boost its digital offering and its managing director and
founder, Tim Carrigan, is now a managing partner at Ogilvy
'Our key focus is to provide the kind of services which our clients
need,' Howlett said. Obviously, but the presence of not one but three
similar online media buying houses could serve to confuse rather than
reassure clients, surely? Howlett said that one of Tempest's
differentiating services and a key sub-brand that will survive within
the agency as well as being brought into Ogilvy Interactive is its
AdvancePositions system, which optimises search engine listings
positions for clients.
One industry source said: 'My view is that this is clearly the beginning
of the end of Tempest.' True, the online media agency didn't have the
best year last year, but then no-one did, really.
So, as they say, everything has worked out beautifully. Tempest gains
the external support it needed from the advertising industry giant, and
Ogilvy Interactive expands into online media. Whether they will all live
happily ever after is a different question.