A year ago the airwaves were full of gerbils being shot from a cannon, a hammy actor crooning a song woefully off key, a college student who burps the alphabet. Now the media is almost free of the bizarre and often annoying efforts of advertisers attempting to build brand identities for thousands of over-funded dotcoms that believed, along with much of the rest of the business world, that the basics of profit and loss had been superseded by a consensual mass hallucination known as 'the new economy'.
The spectacle of, say, five online companies competing to sell dog food was always tinged with a sense of lunacy. When the funds dried up in about the middle of this year the dotcom casualties began, first as a trickle and now as a flood. The procession of closures and lay-offs has become so routine they are now barely reported.
Last week, some of the biggest dotcom names that haven't collapsed altogether were fighting to remain listed on the Nasdaq which has lost 45 per cent of its value since March, with many dotcoms now selling at a tenth of their top prices. The shares of media companies such as iVillage, women.com and Salon.com, as well as web retailers such as barnesandnoble.com and Drkoop.com, had dipped dangerously close to $1 from once astronomic values. If a company's stock closes under $1 for 30 days, the exchange begins a process that leads to de-enlistment.
The routing of the dotcoms and slowing of the US retail economy has taken its toll on the media. Once happy fattening itself on the dotcom and technology advertising bonanza, a barrage of bad news from marketers and the media has been described as the gloomiest since the recession of the early 1990s.
Media giants such as Knight Ridder have already announced layoffs, and hiring freezes have been imposed by News Corp. and NBC, which has also asked its divisions to reconsider throwing Christmas parties. Opinion is divided as to whether the unusually prosperous times for the media are coming to an abrupt end or merely slowing like the rest of the US economy. 'We're at the precipice, looking a little scared,' says Jon Mandel, director of the media services firm MediaCom.
Don Logan, chief executive at the magazine giant Time Inc., says the disappearance of the estimated $200 million per month on dotcom advertising is the major reason for the squeeze. 'We've had extraordinary increases for the last couple of years. Some of it was fuelled by dotcoms, whose spending we hadn't seen before, and it showed up in television and advertising especially.'
Last year the showcase of the advertising market - the Superbowl in January - was crowded with dozens of unknown dotcoms eager to build brand at a cost of $3m for a single 30-second slot. Next year, just a handful of online firms - mostly brokerage companies - are expected to take the plunge.
To many in advertising the loss of the dotcom dollars was to be expected. They 'spent like drunk monkeys trying to build their brands', said one TV executive. They were unsophisticated and in a hurry.' Gene DeWitt, a longtime sceptic of the dotcom rush and chairman of the ad buying company Optimedia, says 'dotcom money was like a fool's gold rush. The fools may still be around, but the gold is gone'.
What has surprised the media and ad industries is not so much that the bonanza is over but that it disappeared so quickly. An advertising slowdown usually happens slowly but as sales of the mainstays of the consumer economy - cars, appliances, personal computers and clothing - have dropped gently, advertising has plummeted. 'It's like the market fell off a cliff,' said Bill Cella, a director of Universal McCann, a unit of advertising giant McCann-Erickson.
Ironically, the slowdown has occurred just as e-commerce sales are picking up. A recent Goldman Sachs report showed that e-sales are up 50 per cent over last year as US consumers spent $1.34 billion online in the week ending 3 December. But overall the study is not good news for e-tailers desperate to show their investors they can reach profitability. Compared with November, which registered a 169 per cent e-sales increase over the previous year, this month has been a dud.
E-tailers are concerned that the newness of buying online may have given way to frustration after widespread reports of consumer dissatisfaction. eToys, often regarded as one of the best hopes, has actually experienced a drop in visitors from 2.54 million in October 1999 to 2.29m in the same month this year.
Many dotcom e-tailers simply failed to factor in that customers would require a high degree of hand-holding when buying online. Internet analysts the Gartner Group estimates that it costs a web retailer about $20 every time a customer picks up the phone and dials for help. But perhaps the biggest problem for the sector - one that is behind the collapse of the dotcom boom - is that Wall Street has changed the rules of the game: last year, investors wanted growth at any price. 'Get big fast' was the mantra. Now they want profitability. And that's making for a chilly season.
