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Monday, January 10, 2005

FLWS miss points to rising PPC ad prices

1-800-flowers.com missed numbers for the December quarter because of higher than expected marketing expenses. In its press release, the company stated:

McCann [the CEO] noted that the Company has "stepped up" its marketing investments, particularly in evolving areas including search and affiliate marketing. The Company also increased its efforts in direct marketing and broadcast advertising programs. "...Our increased spending here reflects both our strategy to become more aggressive in terms of customer acquisition... as well as a response to the increasingly competitive marketplace, particularly in our core floral gift category", he said.

Given that FLWS' revenues were in line with expectations, it's hard to accept that the company stepped up advertising to boost its growth rate. More plausible: increasing competition is driving up keyword prices and raising the cost of customer acquisition.

Broader stock impact: We'll likely see more of this phenomenon this earnings season. Rising keyword prices are good for Google and Overture (Yahoo!), bad for every e-commerce company that pays for keywords.

Posted by David Jackson on January 10, 2005 at 11:01 AM in ticker: FLWS, ticker: GOOG, ticker: YHOO | Permalink

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