OPINION: Internet spree must be tempered with caution

The growing number of internet companies that seem prepared to toss advertising money around like drunken sailors presents agencies with an acute dilemma.

The growing number of internet companies that seem prepared to toss

advertising money around like drunken sailors presents agencies with an

acute dilemma.



Should they be prepared to relieve them of their cash in the hope that

there is a lot more where that came from or be wary of what might happen

when the would-be client wakes up to sober reality?



The question has become even more apposite with a prediction that many

online companies in the US which have been handing out ad accounts of up

to dollars 20 million could fall victim to a shake-out predicted to hit

the sector by the third quarter of next year.



Flush with cash generated by IPOs or investment bankers, the business

models of 80 per cent of such companies are going to be challenged, it

is claimed, and investors are not going to be happy. The upshot could be

a lot of burned fingers on Madison Avenue as agencies are stuck with

unpaid bills or dot-com companies just disappear.



Since barely a week goes by without another big UK agency picking up

internet business, what happens if the bottom falls out of the market

here too?



For agencies, the need to embrace one of the most exciting media

developments of all time has to be tempered by pragmatism. Just as no

agency could have ignored the advent of commercial TV in the 50s or the

explosion of commercial radio 30 years later, so none dare shun the

potential opportunities presented to them by internet clients.



But that doesn’t mean abandoning caution or diverting a huge amount of

resource into business which may yet prove illusory.



The answer seems to be a measured approach in which resource is

allocated if and when the account grows. Far better to set up a small

division staffed by twentysomething technoturks than devote large

amounts of time and effort to it from the outset.



If the account withers on the vine, the agency has lost only a modest

outlay on overheads. If it flourishes, the agency has a blossoming

division with enough expertise to capitalise on a burgeoning market.



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