• by Masha Geller , September 25, 2001

A tight economy, the threat of competition and the national disaster of September 11 are all factors that contributed to one more Internet media company closing its doors. The latest addition to the "ceased operation" list is MediaPassage, a media company that debuted in January 1997 with a determination to simplify the complexities, reduce the high potential for error, and eliminate the inefficiencies in buying newspaper advertising. The goal of the company was to provide a single, Internet-enabled system that would allow a transaction to be completed, tracked, and archived - start to finish. Having invested nearly $15 million over the last 6 years in software development, the company closed its doors yesterday morning and terminated all 150 employees, except for a stay-behind team responsible for liquidating assets.

According to Carl Bryant, MediaPassage's EVP of Business Development, the company did not run out of money unlike almost all previous Internet casualties. "We were not in Chapter 11," he said. "We were a clearinghouse for funds between the buyer and the seller. We felt it was the most responsible thing to do is to have a controlled shut down." Bryant said all efforts are currently being made to return media funds to their proper place.

"We were a venture-funded enterprise and as with everyone, venture people required profitability. We were on a nice path [to profitability] in April and May and for the first two quarters, we were ahead of our plan, which was December for a break even. With the tanking of the media economy, profitability became clouded."

But uncertain profitability wasn't the only reason. The second deciding factor for MediaPassage was the formation of MediaPort - a brainchild of Michael Lotito, former president of Initiative Media who is now CEO of Mediaport, and a joint collaboration of the Interpublic Group, Omnicom Group and WPP Group to develop an online media buying system that promises to streamline the way media is bought. According to Bryant, MediaPort chased off a lot of investors, and a lot of potential customers.

And last but not least, Bryant said there were efforts to try to sell the business, but September 11 was right in the middle of those efforts. "Our third largest category of business behind wireless and banks was travel," he said. "We had 4 airline accounts, 3 cruise ship accounts, and it obviously took a big hit."

"We believe we did the responsible thing. Nobody wanted to go down the path of running the thing into the ground," Bryant said. "To continue to seek investors and continuing to seek a sale could have resulted in that."

The closing of the company was not met with much surprise in the industry. The first indication of trouble came in the beginning of August, when MediaPassage closed its broadcast operations, developed through the company's merger with broadcastspots.com just a year earlier. At the time, Linda Waldman, VP of Marketing said, "We believe the opportunity is there in broadcast, but our systems are more fully functional in print. We'll build up the broadcast side since the general opinion is the need for broadcast services is growing. We're hopeful it won't be too long."

At the same time, while closing the broadcast side of its business, Mediapassage introduced enhancements to its print buying systems. The improvements included eRFP and MediaStores; an increase in the sales force; and a completely redesigned website. Waldman said the new systems -- eRFP, and MediaStores -- were both designed to make print advertising easier to buy, and to improve the relationship between newspapers and their customers.

A month ago, MediaPassage quietly closed the books on another unfortunate acquisition - OneMediaPlace (which started out as AdAuction at the beginning of the online ad era). Bryant said OneMediaPlace "had not developed a revenue model and when it became clear that there was no revenue to be forthcoming from their suite of products all of those activities were discontinued."

What does all of this mean for the future of the media e-commerce? Bryant says the industry is heavily invested in faxes and phones, and it will take more years to go to an e-commerce model. He maintains that it's not a question of 'if,' but rather a question of 'when' online ad exchanges will see the light of day. Unfortunately, he says, "I don't know if anyone at the moment could attract any finding whatsoever."