Phase2Media Cuts, But Sees Light at End of Tunnel

Web ad rep Phase2Media is restructuring its domestic sales and U.K. operations, and the company said it’s now better positioned to take advantage of traditional advertisers’ increasing interest in online media.

The New York-based company said it has shuttered its U.S. telephone sales team and its London office. The layoffs follow Phase2Media’s decision last week to withdraw its $57 million planned IPO, citing market conditions. While the news suggests the online ad rep firms — which often position their services as a better alternative to representation by the ad networks — aren’t immune to the current market environment, there are upsides.

Most importantly, the cuts trim areas of the company that were focused on immature or floundering markets, spokespeople say. For instance, the 30-person, New York-based telephone sales team largely had been focused on dot-com clients.

Meanwhile, company chairman and chief executive Richy Glassberg called the London office “a little bit of a gamble. The U.K. marketplace is two to three years behind the U.S. marketplace … it wasn’t developing and was hurt badly by what happened in the past year.”

In place of the dot-coms, Phase2Media said it’s seen increased interest in online media from traditional advertisers — and especially with their agencies, who are beginning to take over online buying duties.

“We’re seeing a lot of good movement in terms of traditional agencies — our work is more with the agencies now,” said spokesperson Cathy O’Brien. “We were doing a lot of business direct with the client, and a lot of them were dot-com clients, business which has definitely decreased. But the agencies are more involved with the business, and that’s good news.”

For instance, the company has seen increased online media efforts — by agencies like Bcom3, Grey Global Group, Omnicom Group, Ogilvy & Mather, Digitas, and others — that’s serving to bolster the industry.

“There are some people who are really getting the job done and their act together,” Glassberg said. “The Internet is part of a strategic media plan, and … Web buying is getting taken back in by traditional agency groups, who I think are making more efficient buys — we’ve thought that all along.”

The company also said its client roster is reflecting this trend, having recently added names including the U.S. Army, Crisco, H&R Block, Southwest Airlines and Chevrolet.

“Since the beginning of 2001, 72 percent of our new business has come from traditional companies and products,” Glassberg added, saying that he believes his company will be able to be back at 2000 levels by the end of the year.

“We’re feeling OK, but we also need to get profitable now,” he said.