Did Allhiphop.com Get the Short End?
We recently reported that Allhiphop.com signed a 5 year multi-million dollar exclusive ad deal with Radio One’s Interactive One. On the surface the ad deal looked like a win win for both companies. AHH, gets rid of the burden of searching for ad inventory by teaming up with Radio One’s well connected urban radio ad sales division, while Interactive One further extends their internet ad reach. Sounds like a perfect match right? I am not convinced.
AHH’s primary revenue stream is now in the hands of relative newcomer in the online advertising business. Radio One is a proven leader in radio ad sales in the urban market, but has not really reflected its radio ad sales success online yet. It’s not that I doubt Interactive One’s ability to draw advertisers (I’m sure their rolodex is filled with the who’s who of urban advertisers) but I do think that AHH generates too much traffic to settle with an ad group who has limited experience in online ad sales. Interactive One’s recent acquisition of Community Connect could bring some experience to their online ad sales division, but can AHH afford to wait for the two companies to synergize? And even after the two companies integrate, where do you think the large majority of Interactive One’s time and resources will go? Will they be focused on monetizing their own web properties or AHH?
Ad sales at AHH’s level is not just about filling advertising inventory, it’s about working with advertisers to create branding and sponsorships campaigns (the real money in web advertising). In the original press release, Interactive One stated they would act as AHH’s ad sales representative. But as you read on it seems as if Interactive One is interested in combining AHH with the rest of their online web properties to create one large advertising network (big difference). If this is the case, AHH is sure to suffer. Ad networks spread advertising campaigns and proceeds across a number of different web properties. The campaigns are usually very broad, and work well for medium and small web publishers who don’t have the traffic to single-handedly tackle larger campaigns. AHH is one of the most widely read online Hip-Hop publications serving millions of monthly unique visitor surpassing the need to “split” impressions and revenue.
Another possible consequence of the AHH deal is the lose (potential lose) of the relationship with their advertisers. In the media business the second most important relationship you have, behind the relationship of your reader, is the relationship with your advertisers. Without advertisers, there’s no money, without money there’s no power, without power there’s no respect (cue Lil’ Kim). While AHH focuses on content, Radio One is building direct relationships with the advertisers at AHH’s expense. Keep in mind that Interactive One’s primary business is content creation. AHH’s power is relinquished and Interactive One can use those relationships to compete within the same space.
I am not against ad networks, but I guess I am against exclusive deals with inexperienced ad networks that compete within the same space. Maybe I’m just trippin’. What do you think?
May 21st, 2008 at 3:21 pm
I completely agree with you on this one. At the end of the day it may have come down to the % of revenues they were allowed to keep in this relationship, but they just have easily could have done a non-exclusive deal with BET….who has experience in the online space, and the same, if not more urban ad relationships.
May 22nd, 2008 at 10:03 am
I am with you! I can’t think of any commission percentage that would make me like this deal. 99% of nothing still leaves nothing.
May 22nd, 2008 at 7:09 pm
Interesting read… and I totally agree. Relationships with advertisers (as well as your user community) are the key to success in any ad revenue supported business. Allhiphop is now at the mercy of Radio One’s commitment to the success of their property. And I’m sure Radio One focus will be on monetizing the entire network (via an ad network model) which is likely to result in lower cpm ads running on AllHipHop.
That said, if the ad deal involves a monthly/annual guarantee, then that changes this discussion…
May 22nd, 2008 at 8:19 pm
@J.Lee
You’re right it does change the conversation, but only if the annual/monthly guarantee is equivalent or more than their actual annual/monthly revenue. Either way that method is a crap shoot for both companies. That’s why I am a fan of the “you don’t work, you don’t eat” method of ad sales.
May 22nd, 2008 at 9:59 pm
I think if within the contract they have an option to fill inventory that One Interactive can not they are in a good position. By teaming with Radio One it should allow them to take their brand into new areas i.e radio, events, etc.
May 23rd, 2008 at 11:12 am
Slim you’re right, AHH could use their relationship with Radio One to some how collaborate on the radio side, but I am sure they could have worked on an arrangement that didn’t involve an exclusive ad sales deal.
May 25th, 2008 at 11:28 pm
@Markus….no doubt they have an out clause im sure. AHH has jumped to more revenue partners than Nick Cannon has to bad b*tch*s in the last few years and I don’t expect that to end (on either side lol)
@Slim2.0….most ad agencies who buy interactive don’t have dual expertise in Radio and many campaign teams are silo’d (especially for those advertisers who have a portfolio of agencies)
This is a great article and very well written
I 100% agree with you here. Why a publisher would join a network model with a company who has business in the same space has continued to baffle given that all of these publishers have tried to start ad networks (BET, Essence, and now Radio One). At the end of they day…these ad supported companies are ALWAYS going to look out for themselves first where possible…ALWAYS. Why…because there is no split there. There are also a few ad networks popping up from agencies as well…this is dangerous as well (ThinkTank marketing started an ad network too). This is also a dangerous proposition when the buying agent is also the network and I sincerely hope this isnt a trend across ad agencies. Gorilla Nation also renewed their interest in the Urban space (has a press release a few weeks ago)..I had a friend with them…they also require exclusivity at some levels for participation (EFF THAT)
A LOT of publishers are already aware of this and go with pure-play ad networks. There is one out there with some lineage in the multucultural space and probably the first….AdGroups.com. They are a multicultural ad network…they are minority owned….and have been in the game since 1997 according to their website. We’ve been with them (on a 100% voluntary exclusive basis to a non-exclusive contract) since 2003. The experience with them has changed our lives….literally. Ok thats enough of the promo for them….back to the AHH issue…
Things to consider:
- If RadioOne is so business savvy why is their stock always hovering around a dollar (too funny)
- RadioOne enters established markets by acquisition. We’ve already seen them fail on that.
- They have no earthly idea of how much running a large scale internet business can cost
I have a lot to say because we’ve been approached by every single one of these ad networks. I would advise all publishers to run from any ad network initiated by a company with a major ad supported initiative in the same space (blood is thicker than water)
My 32 cents
May 27th, 2008 at 8:59 pm
@MrMecca - I’ll be brief. Small publishers with limited to no staff (other than oneself) should run “To” these urban focused ad networks…. because they allow you to monetize your inventory at significantly higher rates that general audience ad networks like Casale, ValueClick, Ad.com, etc. Additionally, they allow publishers to serve relevant ads that they’re audience may actually be interested in. This presents a win-win-win scenario - The ads add value to the user experience - The Advertiser gets greater engagement with their ad - The Publisher can actually claim to add value to both the advertiser and user. However, publishers must have options for maximizing their revenue - and exclusive deals do not allow that.
May 27th, 2008 at 9:49 pm
@ J Lee Gainey — i didnt say people shouldnt use urban ad networks i was saying there are options out there to work with non-exclusive companies that are not tied to any ad supported publisher in the same space. Our site works with that kind of urban ad network
Even the majors have migrated to language of describing themselves as ‘independent’ ad networks.
I think we were agreeing
May 29th, 2008 at 5:43 am
I agree. This thing is so new and the technology and business models change so much that I would never tie myself to anyone or anything unless there was a significant upfront fee. I don’t do advertising on my current blog, but it is something I am looking at for future prospects. For some reason I have the impression that revenue form a niche blog like my own wouldn’t likely come from ad impressions but another model. Kind of like the difference between HBO and broadcast television
June 2nd, 2008 at 1:10 pm
The deal is a potential economic bust for RadioOne or maybe not. One has to ask the question, “Is RadioOne interested in the 12-24 demographic?”
There are strong dollars in this segment but not the same spending power in that group as there is among older working adults. There was $744 Billion dollars in gross earned income from Black household from 2006 data, and based on 2004 data 68% of the Black population was over the age of 18.
Overall, I think this was a good deal for InteractiveOne, for the following reasons:
1. It strategically aligns with a market (hip-hop music & culture) and demographic (12 - 24) that they already being served via other platforms (i.e., Radio) that the RadioOne/InteractiveOne organization can leverage to optimize the deal.
2. If they are insightful, they could be following the Viacom model in which they are seeking to capture consumers where they are in their lifestage and then trying to own that consumer through their entire lifecycle. So they get the eyeballs of a younger demo from the AllHipHop.com audience, and they can attempt to carry those eyeballs through and across their other properties which are adult contemporary (25 - 54).
3. AllHipHop.com was probably low hanging fruit that was not ripe for acquisition, but this network deal gives RadioOne/InteractiveOne the opportunity to look at the business from an inside-out perspective.