Phil Sim

Web, media, PR and… footy

TechCrunch to dump Federated Media

TechCrunch looks certain to dump Federated Media as its ad partner with the growing media organisation now investing in a direct sales force.

Michael Arrington has previously questioned their relationship with Federated Media, complaining about both the margins Federated were taking and also the fact that TechCrunch was effectively holding up other lesser blogs. Then today, I noticed that on the Crunch Board, TechCrunch is advertising for not one, but two sales directors.

The ad says: “[Techcrunch is] expanding our direct-sales effort to deepen sales relationships with each agencies, branded advertisers and start-ups.  Sales directors will be self-starters who can both design custom programs and sell packages to agencies and direct to clients.”

Given that in January this year, Arrington wrote a post which for all intents and purpose, looked like a final warning that Techcrunch was about to give Federated the flick, it seems almost certain the relationship is about to end.

Arrington wrote: “I don’t make any advertising or revenue decisions around here, that’s left to our CEO Heather Harde. But I’m nervous about our ad partner Federated Media, which supplies about a third of our total revenue. They’re going through layoffs (I read this on their blog), and payments from them have dipped substantially in recent months (which isn’t a surprise given market conditions).”

This raises two issues. One is the future health of Federated Media. If they do lose Techcrunch it comes on the back of Digg, and Om Malik’s network going elsewhere. They have restructured recently, cutting back staff.  In that ‘Is it time to switch ad partners?’ blog, Arrington beefs that when TechCrunch generates a lead, it goes to Federated Media who will then disperse the budget around a variety of blogs. Clearly, Federated gains a great deal from having those flagship blogs which do an awful lot of its marketing legwork for it. Its problem is, as organisations like TechCrunch become bigger and able to support a direct force they don’t need Federated anymore. But Federated kind of needs them.

The second point is this would apprear to signal an aggressive growth strategy from TechCrunch. The company is also hiring an Events director, an executive assistant and a bookkeeper. Certainly, TechCrunch looks well placed to start thinking bigger. They have been profitable since inception so Arrington would have built up a relatively tidy warchest over that time. And with ad income plummeting and other blogs likely to be in financial trouble, I can see TechCrunch starting the great tech blog rollup that Arrington has blogged about previously

If TechCrunch wasn’t planning a big growth push, it would likely have just switched ad networks, the fact that it’s investing in a significant internal sales force suggests its aiming to go into expansion mode and to do that in this climate, it needs to expand its network.

If you’re betting on the outcome at The Industry Standard, I think it’s a whole lot greater chance than 33 per cent of this happening.

Filed under: AJAX Challenge,

One Response

  1. Hi Phil –

    At FM we try not to talk about partner relationships in public – at least as far as the business side of our relationship is concerned. So I won’t address TechCrunch specifically. But, there are some misconceptions pertaining to FM that I’d like to point out.

    “…the future health of Federated Media”

    FM exists for and because of its partners. What’s good for our partners is good for us. But note that FM is far more than Digg, TechCrunch and GigaOm. No site represents more than 5% of our business at any given time. While we still value our tech sites just as we always have (it’s where we got our start), we have expanded far beyond the bounds of tech content and into many other verticals. Our space is rapidly evolving and we think that nimbleness is a virtue – for FM and for FM partners.

    “…this would appear to signal an aggressive growth strategy from TechCrunch.”

    We certainly hope so! Growth is good. But no matter the site, news such as this doesn’t necessarily put FM on the sideline as you suggest. Sales staff is but a part of the equation when it comes to a successful publishing business. The question for that business is, what’s the balance of internal and external resources that will contribute the greatest revenue and profit? FM’s sales crew consists of 30+ veteran sellers in four offices across the country, supported by dozens more in strategic programs, author services, marketing, finance and etc. It requires a significant organization to do the kind of work that large brands expect in exchange for the large marketing investments they make.

    Matthew DiPietro, Federated Media

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