It began as an experiment. Bristol-Myers Squibb wanted to see if the Internet was all it was cracked up to be when it came to plugging products and services. So, during the 1997 tax season, the giant drug company teamed up with financial software maker Intuit and launched an online advertising campaign extolling Excedrin as ?the tax headache medicine?.
For 30 days, Bristol-Myers ran adverts on financial Web sites offering a free sample of Excedrin to Net surfers who clicked on the advert and typed in their name and address.
The response was as good as any elixir. In just one month, Bristol-Myers added 30,000 new names to its customer list ? some 1,000 per day, and triple the company?s best-case scenario. What?s more, the cost of obtaining those names was only half that of traditional marketing methods.
In the past nine months, swarms of new advertising banners, buttons, sponsorships, even TV-style commercials in which a car explodes onto the computer screen and speeds away, have splashed their way across the Web.
In the first quarter of 1997, Internet advertising spending in the US hit $133m ? still just a fraction of the billions being spent on TV commercials, but a remarkable five-fold increase over the same period last year. What?s more, analysts now say that Web advertising will approach the $1bn milestone by the year end. ?Net advertising,? says Andrew Grove, CEO of computer chip powerhouse Intel, ?is becoming a big deal.?
Not surprisingly, technical giants ? already the biggest online advertising spenders ? are planning to pump up the volume even louder. In August, Intel announced that it will extend its co-operative advertising programme, which subsidises advertising dollars spent by its industry partners, to include Web promotions ? a move analysts say will boost all online advertising spending 40 per cent in 1998.
IBM says it is placing adverts on 500 Web sites this year, a tactic that will balloon its Web advertising budget 300 per cent above its 1996 level. Software giant Microsoft is upping its Net outlay by as much as 70 per cent in the 1998 financial year, on top of the $24m it spent in the corresponding period in 1997.
Computers to cornflakes
But the biggest change yet in this surge of cyber adverts is that it?s not all coming from computerdom. Today, makers of everything from Toyota Corollas to Kellogg?s cornflakes are hawking their wares over the Web.
Yahoo, the first Net startup to turn a profit just from advertising sales, says its mix of advertisers has gone from 85 per cent technology related in 1995 to almost 80 per cent consumer brands today. Excite, the number-two search company, has seen its proportion of non-technology advertisers grow from 38 per cent to 59 per cent in just the past six months.
The proof can be found in the list of top-20 advertisers in the first three months of this year. According to New York-based researcher Jupiter Communications, online high rollers now include General Motors, American Express, Walt Disney, Procter & Gamble, and publishers such as Dow Jones.
Why is advertising on the Net starting to click? To begin with, the sheer number of netizens prowling the Web ? some 24 million today ? is becoming too large for companies to ignore. Indeed, Forrester Research expects that number to double to 52 million by 2000, putting the Web on a fast track to coveted mass-media status.
What?s more, in the past two years, the Net has gone from being a haven for nerds and academics to a hangout for professionals, teenagers and grandmothers alike. This rich demographic shift, coupled with technology that promises to make Net adverts almost as much of a ?must see? as those on TV, have finally turned the Web into a hip place to pitch.
Toothpaste maker Mentadent got a taste of that when it recently launched a two-week test on the Internet with Pointcast, an information network based in Sunnyvale, California. But first, Pointcast sent emails to random visitors to its site asking details about their dental hygiene habits: 72 per cent said they brushed twice a day, while 33 per cent brushed at the office. Mentadent was then convinced the Pointcast audience was ripe for its pitch. The result: double the average number of people clicked on the advert for more information.
But it?s a nightmare for some netizens. While advertisers drool over their ability to target specific customers, Web surfers who preciously guard their privacy may find it unnerving and start to balk, throwing a monkey wrench into this new-found advertising machine.
Many netizens may not even know their Web habits are being monitored. Much of this is done through a technology called ?cookies?, which is like an electronic footprint that chronicles your movements on a particular Web site ? what adverts you saw and those you clicked on for further information. That data is stored in a ?cookie file? in your browser. The next time you drop by the same Web site, the server picks up your footprint and gathers more information that can then be shared with advertisers.
Privacy advocates fret about cookies, but Web site operators insist they?re not a problem since surfers can disable them simply by clicking on a browser option. Indeed, as cybernauts become more familiar with the Net, they will either get accustomed to handing out personal data or slamming the door.
That?s the attitude admeisters are banking on. netizens are opening their arms to adverts in cyberspace, although sometimes grudgingly. A Business Week/Harris poll showed that 67 per cent of those surveyed were not willing to pay users? fees to avoid online commercials. What?s more, 57 per cent said they ?somewhat agree? that Net adverts are useful sources for product data and information. On the flip side, 46 per cent also said they ?somewhat agree? that it?s easy to ignore Web adverts.
In your face
The biggest attempt yet to mirror TV can be found in a new genre called ?interstitials?. These are full-screen, in-your-face adverts that pop up either in the lag time between requesting a Web page and its appearance on the screen or, much like TV commercials, between segments of shows produced exclusively for the Web.
Take the Web site for You Don?t Know Jack. This irreverent quiz show, a favourite among CD-ROM game players, now offers its game online, where companies such as Seven Up, Hugo Boss and 20th Century Fox reach out to the site?s 150,000 players each month. There, they show 15-second adverts that run the gamut from previews of movies such as Speed 2 to an insect riding a motorcycle across your screen hawking Cuervo Gold. The cost: $14,000 for every 100,000 games played ? still a fraction of what companies pay for a slot on TV.
Today, ?in-your-face? adverts account for just 5 per cent of the pitches made online. Instead, the adverts of choice are banners, which amount to 80 per cent of all electronic plugs. Typically, banners are plastered across the top or bottom of a Web page, much like a billboard on the highway. A click on one of these adverts usually whisks the user off to the Web site of that company, where more details can be found.
No matter what their form, online adverts are being targeted at more precise audiences than in any other medium. Using keywords is one effective way of doing this. These are words surfers type in to a search engine to generate a list of sites about a particular topic.
These days, companies are paying for the rights to easy-to-remember words such as ?beer?, which instantly triggers an advert from the Miller brewing company on Yahoo?s site. IBM pays for about 200 words, including laptop, notebook and Nagano, site of the 1998 Winter Olympics. In an especially aggressive move, Big Blue once bought the word of its major rival, ?Microsoft?.
Big spend, big sell
According to Jupiter, online advertising revenues will soar in 1997 to $940m, more than triple last year?s, but still less than 1 per cent of all advertising spending this year. Jupiter predicts that by 2002, Net advertising revenues will approach $8bn ? 4.1 per cent of total advertising budgets.
Some online operators are already watching the dollars roll in. Netscape nabbed $24.1m from advertising in its most recent quarter, triple the same period a year ago. And Yahoo?s revenues of $23m in the past two quarters have surpassed its take for all of last year. So have its advertisers, which totalled 900 in its most recent quarter ? nearly nine times the number it had in early 1996. ?Whatever the growth is this year, it?ll be twice or three times that next year,? says Netscape?s Marc Andreessen.
Revenues are jumping in part because the most popular Web sites are starting to command more money per advert. In general, advertisers pay a fee for every 1,000 times their adverts are displayed, known as ?cost per thousand?. The average rate for banner adverts is $17, says Forrester Research, but search engine company Lycos charges $20 to $22 to gain access to its 15 million visitors a month. That compares sharply with advertising rates for TV, for example, which are $5 to $6 per thousand, while consumer magazines such as Cosmopolitan can command as much as $35.
Marked for tagging
Net adverts carry higher fees than TV because they can target preferred customers. ?The technology has matured so much that if you just put your postcode in once, we can tag you,? says Halsey Minor, CEO of CNET, a San Francisco interactive-media company.
CNET is doing its part to hurry the process along. On 22 September, it launched Snap Online, a consumer information service that is going head to head with America Online. Minor says Snap?s charter advertisers, such as American Express Financial Services and Visa USA, will receive a first-of-its-kind monthly statement about the ages of the people who clicked on their adverts, what part of the country they came from, and a slew of other demographic statistics they are willing to hand over. Yahoo, Excite, AOL and others are working on similar user profiles.
But key to the Net?s arrival as a hot advertsing spot is the establishment of independent measurement tools to gauge the effectiveness of adverts. Accounting giants Ernst & Young, Coopers & Lybrand and Price Waterhouse have begun auditing claims made by Web sites about their audiences and the number of impressions an advertiser gets. This month, Microsoft will begin sending its advertisers quarterly reports on all its Web sites, audited by Coopers & Lybrand. And on 9 September, the New York-based Internet Advertising Bureau issued guidelines to create standards for Internet advertising.
Internet advertising: what are the customers up to?
A recent poll conducted for Business Week by Harris on Internet Advertising revealed the following:
m 48 per cent of respondents access the Web.
m 81 per cent have not bought any products through the Web.
m 80 per cent have acknowledged adverts on sites they have visited.
m 50 per cent have clicked on advertising links.
m 41 per cent are attracted to adverts by the information they offer.
m 50 per cent claim to have never seen an ?enticing? advert.
m 19 per cent strongly consider the Web to be a valuable source of product or service information.
m 46 per cent believe that Internet advertising is easy to ignore.
m 74 per cent say they are less likely to buy from the Web than they would from television or print.
m 67 per cent would not pay user fees to support the Web if it meant avoiding online commercials.
m 1 per cent were willing to divulge personal details across the Web so that adverts could be carefully tailored to their needs.
The survey was conducted among 1,002 adults, including 345 Internet users and 280 who had seen online advertising. For full results of this poll, go to: www.businessweek.com or America Online, Keyword: BW.
No company knows the power of banner adverts better than Toyota. The car manufacturer slaps these road signs all over the Net.
For the 12 months ending in May, Toyota says 152,000 Web users typed in their name and address and requested a brochure or video about a car. Toyota later matched those names with buyers at its dealerships.
It turned out that the Web adverts led to the sale of 7,329 cars ? a remarkable 5 per cent conversion rate. ?The Internet,? says Jon Bucci, national interactive communications manager for Toyota motor sales in the US, ?is the number-one lead generator for us.?
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