The real action at CES: Quietly closing the mega-ad deals that keep the consumer Web running

By Sarah Lacy , written on January 9, 2014

From The News Desk

John Battelle has an interesting post today about the many phases of CES: Through clock radios to PCs to the consumer Web to massive TVs and now connected refrigerators. In it, he points out that as the show has gone through different waves, those previous waves haven't been replaced, the new stuff has just been added. Hence the gargantuan size of this thing.

But he doesn't mention the fifth wave of CES -- the real reason that so many Valley and New York tech CEOs whose companies have absolutely nothing to do with electronics are increasingly coming here every year religiously: They are sitting in Strip hotels closing big honking six and seven-figure ad deals.

CES is the time when media moguls get ad buyers to make it rain. We're talking torrential rain. Monsoon rain. Flash flood warning-style rain.

Twitter's Dick Costolo does it. The Pandora guys do it. CEOs of smaller media sites like Thrillist do it. It's probably what Marissa Mayer has been doing before and after her keynote this week as well.

It goes back to those four waves of CES Battelle described. Each of those waves may fall out of media fashion. (Cue the bloggers whining about how nothing good is at CES this year...) But while PCs become commoditized, and none of us -- even Michael Bay -- can articulate the need for a bigger, curved TV, the companies that make those devices all still represent billions of dollars in advertising. The more desperate they get for market share, the more many are willing to spend to reach young influencers who are increasingly not reachable by traditional TV ads. As the shift from traditional media to the Web continues, a lot of it is happening with these types of advertisers, and those deals are being done right here, this week.

BestBuy is a great example. It's not exactly a "hot" company right now, struggling to stay relevant in an Amazon-world. But it's one hell of an advertising whale for even a big Internet company to land.

This shadow-CES pitch-fest has been going on for 10 years, say some media execs here this week. Some years it's a bigger trend than others, but it's mostly grown every year. According to AdAge, it became a thing in the last two years, with advertisers who have nothing to do with tech, like Coca-Cola and Unilever, even attending to hand out deals. From its 2012 CES coverage:

Just a few years ago, CES was the domain of geekier agency executives and digital specialists. Some had to fight to justify the expense of the trip, especially if their client roster didn't include names likeSonyMicrosoft or Intel. Then a few digital-media businesses made CES the unofficial start of the selling season for the likes of Yahoo, Google, Facebook and AOL.

Consumer marketers of all types now attend the show even when their products have nothing to do with technology. This year, the trend is particularly big, as the Web 2.0 wave of companies are now growing up and going public, fighting to scale revenues and build out significant mobile revenue businesses. On the high end there's a giant like Yahoo or Twitter. But there are plenty of companies in the $100 million and up valuation size taking down deals here too.

One of the oldest conferences in the tech industry that's continually pronounced "dead" every year by bloggers is quietly becoming the place where a lot of those bloggers' salaries get paid. Not to mention developers, executives, and everyone else who makes the ad-supported consumer Web function.

A lot of the CEOs I reached out to didn't want to talk about the deals they were pulling down on the record. I'm only here, because we did an event here on Tuesday. I haven't stepped foot in an official CES event. But continually I keep running into people who have nothing to do with electronics and asking them why they are here. The answer is always the same: They are cramming a year of ad pitches into a few days.

This is Thrillist co-founder and CEO Ben Lerer's first time at CES. Another media exec recommended it, and he's been stunned at how productive it's been for teeing up ad deals. "It feels exactly like SXSW, but people actually work here, so you can get a lot done," he said over email. "I'll be coming back for the foreseeable future."

This may sound obvious, but it was news to me. When I was at TechCrunch pre-AOL, we didn't get this at all. The CrunchGear guys would cover CES, but I don't remember our top executives ever coming. In fact, we hosted the Crunchies in January, frequently overlapping with CES, because the assumption was that the startup Web crowd didn't really go. Likewise, last year we had a PandoMonthly in San Francisco with Brian Chesky during this week based on the same assumption. This is only my second time here in some 15 years covering the industry, because I've never covered gadgets and assumed it was irrelevant for me. I'm sold now and will definitely be here from now on.

I've had the opposite take away from a lot of the press groaning about this exhausting behemoth of a conference this week: CES is far from done. For the ad-driven tech world, it appears to be becoming more important than ever. It's to ad deals what Sun Valley is to M&A. Only it's all happening behind closed hotel suite doors.

Pay no attention to the crowded conference halls Battelle describes. That's not where the battle for tech success is being won and lost.