American Apparel could be the bane of Rupert Murdoch. Its success stems from his Web division's weakness.
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The clothing company, known for ads resembling 1980s porn and for the pervy antics of controversial founder Dov Charney, is seeing sales climb as it buys up more cheap ad space on sites such as MySpace and Facebook than any other U.S. apparel retailer.
In April alone, it placed 483 million internet display ads-more than heavyweights such as Nike and Levi Strauss & Co., according to new data from comScore Ad Metrix. American Apparel also had the lead in March and came in second in February and January.
To get such huge Web reach, though, the chain spent just $333,000 during the first quarter, reports TNS Media Intelligence, a market research group. That's six times less than Nike, which weighed in at 61 million display ads to 18 million unique Web users.
Those numbers are big, but sites such as MySpace and Google's YouTube still are grappling with ways to turn their young, cool, but often poor masses of readers into cash cows. Even as News Corp. reported solid results from its Web division Tuesday, much of the loot is being spent developing new features and ventures.
Now for the money shot-in spite of the lack of consumer confidence and recessionary pressure in this country, American Apparel's sales are up.
In the first quarter of 2008, American Apparel's U.S. retail operations increased $11.9 million, or 56.1 percent, compared to the same period in 2007, according to the company's S.E.C. filings. The chain added stores, growing to 106 at the end of March 2008, from 93 the year before. In April, American Apparel reports comparable store sales up 27 percent over the prior year period.
It's hard to know how much internet advertising boosts in-store sales-American Apparel didn't comment for this story. But it's easy to see that the company is getting a lot of advertising for a small budget. The trick, at least in April, was placing nearly half of the ads either on Facebook or on Fox Interactive Media, which includes MySpace.
"MySpace has lots and lots of display advertising sold for very, very low rates," says Debra Aho Williamson, senior analyst at market-research company eMarketer. "There's just a huge amount of inventory."
Peter Chernin, president and chief operating officer of News Corp., touched on this challenge in May after admitting Fox Interactive Media would fall short of its "aggressive" revenue projections. "As pages on MySpace and Facebook continue to grow, the lack of scarcity creates a liquidity challenge," he says.
The moral of the story is that buzz doesn't distribute the wealth evenly, and the company branded by scantily clad girls will probably win.