The advertising world is scrambling for new ways to pull dollars out of Web sites.
It is early summer 1996. Representatives from the digital publishing universe of e-zines, online services, interactive marketing agencies, and forward-thinking advertising companies huddle in Manhattan's McGraw-Hill building, the bastion of the mainstream print world. Players from such companies as Starwave Corp., Time Inc. New Media, Infoseek, CNET, The Microsoft Network, and Juno Online are here to temporarily put aside their fierce rivalries and form the Internet Advertising Bureau (IAB). Their mission: bring a unified voice to a chaotic new industry.
But in the midst of this lofty goal-setting, the advertisers - the people who write the checks that sustain many a Web site - make it clear they want a new role in the brave new world of the Internet. No longer are they content to simply paste their ads on a cracker-sized piece of Web real estate. And forget about trying to attract attention through gimmicky multicolored onscreen eyeballs that blink when you click them. Instead, advertisers want to work hand in hand with publishers to coproduce the material that packs Web pages. In essence, they want to abolish the Web as we know it.
The formation of the IAB is just the latest sign that forces are trying to turn the once-eclectic Web into the ultimate 24-hour marketing machine. WebTrack, a New York agency that keeps tabs on advertising dollars, says Web ad spending in the second quarter of 1996 was about US$43 million, a 347 percent increase over the fourth quarter of 1995. And the smell of more money hangs heavy in the air. While Web advertising has increased sharply during the past year, it's only a tiny fraction of the $60 billion spent on ads in traditional media last year, according to Competitive Media Reporting, a tracking service in New York.
But flashy banner ads, which are meant to entice surfers to click through to a company's homepage and buy some loot, just aren't going to satisfy that shortfall. Banner ads are tired, boring, and too much like junk mail - pricey junk mail at that. Although these ads may cost as much as $10,000 a month, researchers have discovered that for every 100 visitors who take note of an advertising banner, only 3 to 13 actually open it.
"The banner finds people who want to be found," says Mike McMahon, director of interactive marketing at the San Francisco office of Anderson & Lembke. McMahon spends between $4 million and $6 million a year buying banner placement for Microsoft, the Web's top advertiser. He sees many kinds of banners becoming obsolete, as regular Web travelers bookmark favorite sites and ignore banner links.
Hunter Madsen, who was a senior partner at the J. Walter Thompson/USA advertising agency before joining HotWired as vice president of commercial strategy, says that banners are useful but limited (see "Reclaim the Deadzone," page 206). "Those who are disgruntled about banners misunderstand their value," Madsen says. "Web publishers and ad agencies expect them to do more than they can and base unrealistic projections on that."
Procter & Gamble, which budgeted $8 million for Web ads in 1996, turned the banner model on its ear last summer by telling ad agencies that the company would pay based on the click-through rate only. If other marketers follow suit, ad agency insiders worry that the banner trade may wither.
Some experts see banners eventually being limited exclusively to "high-interest products" such as cars and computer goods. A marketing executive who sells online ads admits privately - and anonymously - that "banners really work only for a product you already want to know about. They can never help toothbrush.com get you to its site."
__ What's next?__
Enter sponsorships, where independent online publishers cozy up to a few major advertising sugar daddies and forge a content-and-design partnership. Sponsorships are not cheap, typically costing $20,000 to $50,000 a month. But advertisers consider the cost a whole lot cheaper than creating a glitzy corporate homepage to attract new shoppers; homepages can instead be used simply to assist existing customers. Symbiotically, publishers who accept sponsorships can concentrate on the business at hand - providing compelling content - without tending to the business of drumming up ads for jeans or spaghetti sauce.
But if banners are boring, sponsorships can be specious. For those who like their content independent and provocative, the new hybrid of news and salesmanship can be unnerving. Nike, for instance, entered the Web in the summer of 1996 by wrapping its trademark swirl around a service providing information about Olympians sponsored by the footwear baron.
Nike is hardly alone. Earlier this year, Bristol-Myers Squibb unveiled its Women's Link site, complete with beauty tips, celebrity interviews, and technology guides. Chivas Regal recently launched its Career Toolbox, a splashy site that dispenses advice on job hunting and starting a business.
Another egregious example of the fuzzy line between objective journalism and good-time advertising is Parent Soup, a free information and entertainment Web site developed by iVillage in New York. The site is designed for busy, tech-savvy parents and is backed by America Online as well as a slew of other corporate sponsors: Hewlett-Packard, Toyota, Polaroid, MGM/UA, and Starbucks. Together these sponsors paid about $1 million and had to sign on for at least six months - a huge commitment by Web ad standards. Instead of banners, sponsors are encouraged to put parent-focused marketing information on a "minisite" embedded into Parent Soup. iVillage assigns a special staff to help write and edit text, fine-tune artwork, and coordinate promotions on the minisite, making sure the content is aimed specifically at parents.
Polaroid, for instance, offers tips about how Mom and Dad can boost their kids' self-esteem using instant photos. Every Friday, the MGM/UA-sponsored entertainment area highlights a family movie and gives away videos. The site includes two lists of top kiddie videos: one gives info on videos from various movie studios, the other only MGM videos.
Longtime journalist Chris Barr, editor in chief at CNET, believes such sites can be duplicitous and misleading. "Advertising must be clearly marked, or else you're compromising the content. There may be short-term benefits, but in the long term you really hurt the publication."
Alan McAdams, professor of managerial economics at Cornell University, says that if advertising masquerades as objective content it can damage the believability of the entire Web. "How are users going to get information that isn't tainted by advertisers' hype?" he asks. "Look at the Olympics, an event that was so heavily commercialized the atmosphere around it was fouled."
Welcome to the new world, say advertisers. "Maybe the world has matured so that we understand the reality of the media and don't pretend that we have to separate church and state and remove advertising from editorial," argues Robert Levitan, iVillage cofounder and senior vice president of market development.
But what Levitan calls a "conversation" is far from authentic content. It serves as another form of advertising - an "advertorial," as print magazines call it. For sites like Parent Soup, the pseudo-public service and advice aspects function as the ad's hook, much like glitzy graphics that spark interest in a TV commercial. Get used to it.
"The public understands that we need sponsors, and we want to bring them to our audience in a useful way," Levitan explains. "We aren't crossing any line. We're creating a whole new line."
__ There goes the neighborhood__
Marty Levin, a former senior vice president and creative director at J. Walter Thompson/USA, is director of sponsored programming for the revamped Microsoft Network. Levin sees a different model for sponsorships, which he euphemistically calls "direct content affiliation." In his vision, Web entertainment programming will be a way to encourage people to find new consumer information as well as reach for their credit cards.
He offers a hypothetical example. "Think about the Hallmark shows on TV: I watch a family drama interspersed with a handful of 30-second commercials for Hallmark cards. On the Web Hallmark show, I can go beyond that. I can enjoy the show and then sign up to get email reminders of when it is time to send a card to my family and friends."
Another method is to use "ad modules" on the sponsored site, Levin says. These modules are similar to the minisites on Parent Soup in that an advertiser lifts sections from its homepage and adapts them to a content site. MSN, which is hustling both banners and sponsored programming on its revamped Web service, launched its first independent entertainment program this summer. A 52-week darkly comedic cyberseries called 475 Madison Ave., it was sponsored by Advil and Dimetapp, among others.
Advertisers also want to know about the age, income, and interests of individual users. This allows them to make "the perfect offer" to promising customers. One way to hone their attack is through DoubleClick, a New York advertising network that serves both Web sites and advertisers looking to reach Web walkers. How does it work? Let's say the last time you went online you clicked on pages about travel, surfboards, and Hawaii. The sites alert DoubleClick's software, which notes that those packets of data went to your Internet address. The software begins to build a profile of your characteristics, including email address, location, and consumer interests. After DoubleClick's software has scanned your profile and gathered enough clues to guess that you might be interested in a Pacific cruise, it instantly uploads a customized ad - all within milliseconds of your signing on.
Since March 1996, DoubleClick has identified the cruising preferences of some 10 million Web surfers and is adding around 100,000 every day. It currently works with more than 55 sites, including those of General Electric, USA Today, and Intuit. DoubleClick also has deals with more than 100 advertisers, such as IBM, Bank of America, and Nissan.
Another tactic is to reward Web walkers with special discount coupons, sweepstakes drawings, free software, cheap T-shirts - just like the old media. Kids .com, for instance, is filled with children's games, stories, and product information. Kids.com gives a child prizes for providing basic information about their family, household size, hobbies, and buying habits. Like many sites, Kids.com doesn't fully disclose how the information is used.
This has sparked some heated privacy debates. "Readers have a right to be informed about the privacy consequences of an online transaction before entering into one," insists Lori Fena, executive director of the Electronic Frontier Foundation. To address these concerns, the group, along with others, plans to create a system that rates the privacy of a site.
Some Web ad reps insist the privacy problem is overblown, saying consumers are already accustomed to credit card companies, for instance, sharing information about their customers' buying habits. Kevin O'Connor, chief executive of DoubleClick, says that only a minority of diehard Web users stringently maintains their privacy. O'Connor believes that tracking helps users by making sure they don't see the same ad over and over. It also matches ads to users, preventing exposure to a lot of indiscriminate advertising, which, O'Connor says, is an improvement over radio and TV.
Adds Levin: "The first 10 million people on the Web were very sensitive. But the second 10 million - people like my mother - enjoy targeted ad campaigns" as long as they can choose to answer questions and "get something valuable in return."
Another Web ad mutation is the "microsite," a hybrid of a corporate Web page and a sponsorship. A microsite feels like the content page to which it is linked. It also returns users there after a visit.
The e-zine Word helped Altoids breath mints build such a site, a targeted 15- to 20-page microsite that tries to blend the personality of the product with the idiosyncratic tone of Word. The Altoids microsite was codeveloped by Word technical and design staff and is connected to the zine with a banner. Word editor Marisa Bowe says she offers ideas to sponsors but stays away from creating any ad copy. Bowe says the line between content and advertising on Word is clear and adds that attempts by other sites to blend the two are "BS."
But this line is blurring, if it hasn't begun to disappear completely. Every day, new marketing devices that blend the concepts of banners, TV commercials, and sponsorship programs are being foisted on the Web. It doesn't take a great leap of imagination to see the Web transforming from a country hamlet into store-studded, billboard-blanketed suburbia, a place where chain outlets replace neighborhood hangouts and big brands are invited to plaster their logos on nearly anything that moves.
