Original unsubbed copy for The Australian. October 2005.
In business timing is everything. During the dot.com boom it seemed like the best idea ever to launch agency specialising in buying advertising space online.
Emitch, a spin-off from real world media buyer Mitchell & Partners, listed on the ASX in March 2000, and soon after the market crashed. Its shares fell 27.5 per cent to 87 cents then plunged. The next three years were spent with its share price bumping along below 5 cents.
Now a boom in internet usage, driven by the growth of broadband internet connections, means Emitch is in the right place at the right time.
For the 2004/2005 financial year the company increased its billings by 31 per cent to $17.53m. Its profits increased 136 per cent to $2.4m and its share price has recovered to over 40 cents. The company claims its clients represent 15 per cent of the total online advertising dollars.
What underpinned the business was that it was doing an old-fashioned media buying job that just happened to operate in the Internet world. What worked against the business was a global advertising recession in the early years of the new century.
Chairman Stuart Simson says: “When I came on board the company was experiencing tough times. A low share price, a difficult market and a lack of confidence following the dotcom bust from marketers.”
During that time many companies became distracted as to their core mission. Emitch focused. Because the company focused it now has five years of experience of online media buying to build upon.
Unlike the dotcom boom of the late 90s, which was driven by massive speculative investments, this one is driven by consumers becoming hardwired with broadband internet access. Simson says: “The decision of Telstra in February last year to cut their broadband entry price to $29.99 is the single most important event in our space in the last few years. Because really it was a stick in the sand and it is simply a new beginning for our category.”
There are now 2.2 million broadband users in Australia with about 100,000 new users signing-up each month. This is driving growth in online advertising.
In Australia Internet advertising grew by 62.7 per cent in the past year to $488m. And online advertising is expected to grow 20 per cent each year until 2009.
CEO Lee Stephens says that broadband penetration is bringing a shift in the kind of advertising used. Two years ago online advertising was about acquiring sales leads for companies such as Aussie Homeloans.
Now the big brand advertisers are bringing emotional advertising, similar to TV ads, and big bucks to the medium. Stephens says: “The big difference now with broadband is that you can deliver emotional messages. You can deliver all singing all dancing messages.”
The company is cautiously expanding. Currently it has 20 staff, 13 Sydney and eight in Melbourne.
Stephens that media buying agencies are easy to scale. The company employs an extra person for every extra $2m in revenues. In its last financial results, a $4.5m or 31 per cent increase in billings reflected a cost increase of just $287,000 or 13 per cent.
With this usage boom many new media are emerging. Emitch not only has to pick which it can make money from but also which will medium will sell product for it’s clients.
Stephens has yet to see a way in which the company can make money from, for instance, Bluetooth, a radio technology used to share information between computers, personal digital assistants and mobile phones.
He says: “There’s a difference between keeping tabs on the digital fragmentation and entering it when it’s possible to do so. You can’t be in all of them. It’s just choosing which ones are the best ones.”
There are the challenges of advertising on the emerging 3G mobile phone networks, which offer internet access at broadband speeds.
There are also the challenges of communicating with fragmented digital communities such as bloggers, an important market but only in its formative stages in Australia. Stephens finds there’s so much information on emerging technologies he’s losing his weekends keeping up. He says: “What information isn’t out there is when it’s commercially viable to enter it. That’s the challenge”