Ads Dont Add Up
By Mindy Charski
While computer and communications companies, financial service firms and online travel agents continue to see an online upside, other industries are trying to figure out which way the electronic currents will run next.
Its hard to look at those struggling to survive on Internet advertising and believe the online medium will ever become a serious way to reach consumers. But believe it, analysts say. Even as dot-com revenue started to dry up, overall revenue from Internet advertising surpassed the $2 billion mark for the first six months of this year, giving a boost to information service sites. And market watchers say traditional advertisers are going to lead the sector out of its current gloom and doom.
But it may take a while.
Merrill Lynch analyst Henry Blodget says the hangover that has resulted from the pure-play "dot-com advertising binge" could last for months. The problem is that traditional advertisers arent moving dollars online fast enough to offset the loss of dot-com dollars, Blodget says in an October research report. However, he predicts that by the end of 2001, pure plays will account for only 38 percent of online spending, while traditional advertisers will account for 62 percent.
"Its impossible for mainstream advertisers not to see a lot of people [online] and salivate over the potential to communicate with them more effectively than they can with other media," says Unicast Communications Chairman and CEO Richard Hopple, whose company develops ads, called superstitials, that resemble television commercials. About 78 percent of those using superstitials are traditional advertisers.
Large brick-and-mortar companies have been particularly reluctant to throw big dollars into a medium they cant quite understand. A survey conducted by the Association of National Advertisers found the No. 1 barrier to online advertising is the lack of proof of return on investment; the inability to reliably measure an audience is another.
Miller Brewing is among those diving in, nonetheless. And some of the Internets big content companies stand to benefit.
Miller now sponsors SportsLine.coms fantasy football league, which had previously been a fee-based service. "I think theyve taken a solid step to better understand the interactivity of the Internet," says Mark Mariani, president of sales and marketing at SportsLine. "This is the prototype of what wed like to do moving forward." Today, traditional companies make up 70 percent of SportsLines advertising roster.
The Coca-Cola Co. is among the many advertisers hooking up with America Online. The move to market its brands through AOL is the beverage companys first worldwide interactive marketing initiative. AdZone Interactive estimates that Coca-Cola spent only $89,356 on Net advertising from January to September. Chief rival PepsiCo has spent more than $9.4 million, according to AdZone.
Content providers can only hope theyll still have enough fizz when traditional advertising dollars really come to the medium.