EBay cuts long-term ad commitment with AOL
PALO ALTO, Calif. (Reuters) - EBay Inc. has reduced future payment terms of its advertising contract with America Online by about 20 percent, providing another indication of how the online ad business remains depressed and could pressure results at Internet content sites.
Terms of the new contract were disclosed in a Securities and Exchange Commission filing by eBay, the popular Internet auction site and a major advertiser on AOL Time Warner Inc.'s America Online.
Although the loss to AOL from the new eBay deal is not considered significant in itself, analysts said it could be more worrisome if it became reflective of other advertising deals coming up for renewal.
AOL entered a number of lucrative, multi-year advertising contracts a few years ago when the online ad market was thriving, and those deals are gradually coming up for renewal.
"We're talking about a difference of less than $4 million a year," said S.G. Cowen analyst Peter Mirsky. "It's not a lot, although it does suggest that advertisers are able to extract better terms.
America Online was not immediately available to comment on the deal. An eBay spokesman would only say that eBay had won the better terms because of the advertising market remains soft.
In its SEC filing, eBay said it amended an advertising agreement to spend $18.75 million on AOL in the year ending March 23, 2004, to one worth about $15 million. The new deal is also contingent upon certain performance goals being met; if they are met, AOL would have the right to extend the agreement through March 23, 2005, with an obligation for an additional $10 million in ads.
EBay is still obligated to spend $18.75 million on ads on AOL through March 23, 2003, the filing said.
EBay also said it amended an ad representation agreement it has with AOL to adjust the commission structure, reduce the term of the deal by nine months and give AOL a one-year extension option should certain goals be met.
That agreement now ends March 31, 2003. The nature of the changed commission structure was not immediately clear.
AOL in late April reported that ad and commerce revenue fell 31 percent in the first quarter over the year-earlier period, and said it expects revenue for ads and commerce to be down as much as $900 million this year over last.
05/10/02 17:46 ET |
