Everywhere I turn these days I'm either giving a speech about banner advertising, listening to a speech about it or being asked to sit on a banner advertising panel. Yet most Web sites are finding it hard to attract enough banner advertising to stay afloat. They must try new revenue strategies or risk going under. Clearly, this is Topic A on every Internet publisher's priority list - the pocketbook issue that must be addressed before Internet publishing can be deemed viable.
Earlier this year, I was at the AdTech conference in New Orleans where I'd been invited to share my views on "reach" and "frequency" in Internet advertising. Because I wasn't scheduled to go on until 10.30am, I decided to take in Rick Boyce's session. Boyce, who is vice-president and director of advertising sales for HotWired (www.hotwired.com), Wired magazine's digital sister, pioneered banner advertising on the Web when HotWired launched in October 1994.
You can imagine my surprise when Boyce revealed his company's bold new advertising strategy - to involve "microsites" sponsored by HotWired advertisers.
Sponsored sites, he explained, are less intrusive than banner ads and visitors will credit the sponsor with making the content possible. A case in point is Dream Jobs and Dockers, a sponsored site developed by HotWired to promote the idea that, in your dream job, you can wear dockers (casual trousers) to work.
"The more deeply you can connect the content and th (advertising message," Boyce said, "the deeper the communication you can achieve."
Not exactly what I expected from the man who invented banner advertising on the Internet. In my own presentation an hour later, I noted the disappointing results the Ferndale site had experienced when its producer, Songline Studios (www.songline.com) purchased a banner ad on HotWired last spring and I suggested that HotWired's new foray into microsites might be a reaction to this. During the question and answer period that followed, Boyce defended his online magazine by asserting that Ferndale, an interactive soap opera, probably wasn't a good fit for HotWired's primarily male, techno-savvy readership. When I asked him whether he would take Songline's money if he had to do it again, he said "yes", explaining that selling ads was his job.
Where's the money going?
Two days after I returned from the conference, I attended the inaugural meeting of the Internet Advertising Bureau at the McGraw-Hill auditorium in New York City. More than 300 people attended from ad agencies, online publications, Web design firms and the trade press. IAB's goal is to help content providers sell advertising on the Internet and online services.
One of the group's first projects is to launch an ad measurement research programme to collect and aggregate ad spending figures from member companies.
IAB has hired Coopers & Lybrand, the Big Six accounting firm, to administer the programme and audit the numbers. Members of its steering committee include Kate Everett of c-net, Molly Ford of InfoSeek, Steve Goldberg of Microsoft, Rich LeFurgy of Starwave, Leslie Loredo of Softbank, Linda McCutcheon of Time NewMedia, Jed Savage of Juno Online, Scott Schiller of Prodigy and Dan Stone of Turner Interactive. LeFurgy, arguably the most successful ad salesman on the Internet, is acting executive director.
Beneath all the hoopla and excitement ran an undercurrent of fear - fear that this brave new Web medium might die on the vine for lack of advertiser support. Bill Harvey, a veteran of Prodigy, one of the big US online service providers and president of Next Century Network, pointed out that television attracts $60 billion a year in advertising while radio rakes in $10 billion.
Web advertising, for its part, totalled roughly $50 million last year - and that's assuming nobody swapped links and every advertiser paid the full rate. LeFurgy, who spoke next, pointed out that two-thirds of all Internet ad revenues in the first quarter of this year came from Web and computer-related companies and that two-thirds of all ad spend went to 10 large sites.
"Twenty-five million dollars, $50 million - it's still not billions," Harvey said. Instead of peddling Web sites on a CPM (cost per thousand) page views basis comparable to print or broadcast models, online publishers should be trying to focus their advertisers' attention on the medium's ability to facilitate one-to-one marketing, he explained.
LeFurgy, for his part, urged his fellow content providers to "stop the madness" and agree on a common set of standards which would make Internet advertising easier for ad agencies to buy.
But the most interesting part of the meeting came at the end, as a panel of four leading ad agency reps discussed what they and their clients were looking for in an online media buy. While publishers whined about the difficulty of making money on the Web and the high cost of producing multimedia sites, the reps were clearly relishing their place in the driver's seat.
"If I could get away with paying for click-throughs (as opposed to impressions or page-views) that would be fantastic," said John Nardone of Modem Media.
Later on, he asked for a show of hands to see how many publishers would be willing to submit to a $2,000 "test" before asking an advertiser to commit to a longer term buy. At least half the hands in the audience went up.
It may be premature to write its obituary but banner advertising is clearly in trouble. The reality is that the vast majority of Web ad dollars are ending up in the pockets of a small group of big players, primarily search engines and directories. Netscape Communications, developer of the popular Web browser, is the leader in Web ad sales, scoring $5 million apiece from each of five Internet search engines.
The only original content providers making any serious Internet ad money are publishers such as ESPNet SportsZone (http://espnet.sportszone.com), Wall Street Journal Interactive (www.wsj.com), c-net (www.cnet.com), Pathfinder (http://pathfinder.com) and HotWired, each of which gets a boost from parent companies in other established media. SportsZone and Journal Interactive sell roughly $5 million each in annual Web advertising - hefty by Web standards but puny compared with the revenues generated in broadcast and print.
Ads that win
Like it or not, the Net is a buyer's market and the chances of a small to mid-size Web publisher floating his boat by selling banner ads are about as good as the odds of the neighbourhood basketball star getting drafted by the NBA. Web publishers who don't draw the 230,000 visitors a day that SportsZone attracts need to step back from the current click-through versus impression debate and acknowledge that they may not be able to sell much banner advertising at all. Instead of trying to stand their ground and "just say no" to free trials, soft dollar link exchanges and clicks-only payment schemes, publishers need to pursue alternative advertising models which are capable of generating revenue in today's market.
Here are three Internet ad strategies which I think are worth pursuing:
I've said it before and I'll say it again - advertorial is a viable business model. As I said earlier, even HotWired, the granddaddy of banner advertising sites, is mixing content and commerce in order to give its sponsors a closer connection to potential customers. And HotWired is not alone. At the AdTech conference, Marty Levin of The Microsoft Network (www.msn.com) spoke at length about Microsoft's plans to team up with advertisers to develop sponsored programming, which consists of "95 per cent entertainment and five per cent marketing message".
If this takes you back to the 1950s and the early days of television, good - that's the stage the Internet's at now. As long as the advertorial is clearly marked and does not unduly influence the editorial staff's coverage of a particular company, industry or news story, I see no ethical problem.
Targeted direct mail
Full-colour banner ads look pretty slick but there is nothing like direct mail to reach out and touch Internet users where they live. Direct email advertising, considered a serious breach of Netiquette just two years ago, has become an acceptable way of doing business in some quarters.
These days, dozens of companies are peddling electronic mailing lists containing names and addresses of online users for direct marketers to target. While "spamming" Internet users with unsolicited email is still unpopular, companies that take the progressive approach of giving users the option of receiving their mail are making friends as well as money.
One publisher who came to our booth at the AdTech show told us he'd recently signed a $25,000 deal with a major software company for a three-month ride on his daily email newsletter that goes out to 8,000 people. That's not too shabby!
Pay per lead
There's more to the Internet ad game than clicks and impressions. Web publishers who have available banner space ought to consider approaches that link ads to sales, or at least to sales leads. True, the advertiser's banner or site might not be compelling, but as the airlines found out long ago, it's better to fill a seat with a frequent flyer than to fly an empty plane.
Recently, our company signed an advertising deal which pays us $5 for every potential customer who clicks on a banner ad on our site, visits the advertiser's site and fills out an order form. Because we believe this advertising service will be attractive to the Internet marketers who frequent our site and because we can use our PostMaster URL announcement service (www.netcreations.com/postmaster/) to drive buyers his way, we think we'll make more money than if we had simply sold our advertiser a banner ad based on clicks or impressions. It's time for online publishers to get down from their pedestals and start doing business.
If publishers don't figure out how to deliver value to their advertisers - and soon - they are going to find themselves cut out of the picture altogether by a new wave of Web advertisers who wake up one morning and realise they can do it better themselves. In a medium in which anybody, even advertisers, can be their own publisher, content providers face the very real risk that advertisers will go directly to their customers and sever the traditional link between advertising and editorial content that keeps all media afloat. Remember, it's a buyer's market out there and now is no time for publishers to dictate their terms.
Rosalind Resnick ([email protected]) is president of NetCreations (www.netcreations.com.) in the US. She is a co-author of The Internet Business Guide (Sams, 1995) and editor and publisher of Interactive Publishing Alert, a twice-monthly newsletter tracking trends and developments in online publishing.
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