a Wednesday feature

by Gary Welz

Internet Advertising III: Selling Advertising

The most critical battles in the campaign to bring advertising-supported publications to the Internet are taking place in the offices of corporate product managers and ad agency media planners and buyers.

In Manhattan skyscrapers, sales directors press the spenders of the big-time advertising dollars to buy banners. The seller's ability to pry this money loose is the real test of whether this medium will be able to sustain itself. The men and women in the trenches are struggling to define the way advertising in this new medium should be pitched and priced. They're learning what advertisers think they want, they're hearing the objections, and they're spinning their sales stories.

What Are They Selling?

Among the many questions confronting sellers is just what they are selling. The Web is a unique medium. As Peter Hagerty, Advertising Manager of Starwave explains it, the Internet has the: But just how will an advertiser use these capabilities? Anil Singh, Director of Advertising Sales for Yahoo, gave me some interesting perspectives on Web advertising models and their strategy.

Basically, Yahoo feels they get so much traffic that they can offer advertising packages tailored to suit the needs of each and every advertiser. They see Internet advertising as falling into three main categories:

(In the future Singh expects to see transaction-based packages that would be priced on a "cost-per-order" basis.)

Yahoo's insight is that they can offer an advertiser a package of things from one, two, or all three of these categories--and sometimes they do just that. For example, they might create a package for an airline that combines banners, a link to a corporate site offering special deals, and a sweepstakes that users could sign up to participate in. This defuses the debate over whether the Web is a branding medium or a direct-response medium. It can be either or both, even at the same time. And things will get even more complicated.

Advertisers are rumored to be exploring ways of "sponsoring" sites in a fashion similar to the early days of television where a single sponsor was associated exclusively with one program--like Proctor & Gamble with "The Guiding Light" or Hallmark with "The Hallmark Hall of Fame." Hagerty pointed out that this model is no longer used in television, perhaps because sponsors tried to assert too much control over content, and creative people were uncomfortable working within the constraints they imposed. This model has worked successfully in Public Television, where companies like General Motors have associated their brand with programs like "The Civil War," but in this scenario sponsors have had to completely relinquish any editorial control.

What Do Advertisers Want?

The following are some reports from the front about the demands of advertisers:

Accountability

One of the primary things advertisers expect from publishers is accurate information about the audience and its behavior. Sharon Crowe, Director of Sales for Netcast, says:
It seems that the loudest cry from the advertising community is for accountability of the individual Internet sites' audience numbers. The Internet is sold to them as a high-tech medium that is much more exact than the traditional mediums. Keeping this in mind, there is no reason why the Internet ad sites should not supply the advertiser with the audience feedback that they ask for--and do it in a timely manner.
Hagerty says that before they will commit to buying banners on ESPNet Sportszone or other Starwave properties, his prospects want audience delivery guarantees and a qualified measurement system (I/Pro is the most commonly cited).

Hagerty notes that for the last year the marketplace has been leaning toward 100% media accountability, and the direct marketing model (with no risk for the advertiser) is still the one most talked about. But is this really fair to the medium? Television and radio can't offer anything close to the Web as far as accurate measurement of audience is concerned. By touting the accountability of Web publications and raising expectations, sellers may have put themselves at a disadvantage. Many think it's better to emphasize the branding capabilities of the medium and steer clear of comparisons to direct marketing.

Education

While selling Web ads is very difficult there is an up side. Hagerty acknowledges that it's easy getting appointments because "EVERYONE wants you to educate them, regardless of whether or not they intend to buy." He goes on to say that "the fun or interesting part of selling Web ads is the exposure. Most Web ads are sold to the higher levels at the client and ad agencies."

This is a mixed blessing for most sellers. No one wants to devote a lot of energy giving a free orientation to the Web to advertisers and then have them decide to spend their money with the competition or build a site with content of their own and avoid buying banners altogether.

A Good Deal

Price, as always, is a big factor. The CPM model based on impressions or "page views" is the going standard. It ranges from a few dollars for a banner in Playboy to several hundred for the Wall Street Journal. Typically, mass market publications sell for a CPM of about $20--not far from print publications aimed at similar audiences. More highly targeted publications can demand more.

There has been an interest in "click-through"-based pricing, but most publishers are reluctant to start down that path. The fear is that the publisher will pay the consequences of an advertiser's weak creative content. Publishers that have toyed with "click-through"-based pricing schemes want creative control, but this would certainly be a hotly contested point of the negotiation.

Some publishers are folding CPM into a larger package. Christopher D. Neimeth, Director of Marketing for the New York Times Electronic Media Company, says they developed a partnership program with a group of eight advertisers including IBM, AT&T, Paramount, and others. Each paid $150,000 for 6 million impressions on the NY Times Web site and the NY Times on AOL (which works out to a $20 CPM).

The real deal maker, though, was that the company has put together a long-term research program to study how people use Web advertising, and it will share its findings with the partners. The research program was the inspiration for their registration requirement. The company is testing ways to dynamically deliver ad banners based on users' registration profiles. It wants to be able to deliver ads to people based on their particular "need state"--say the computer or movie need state.

Neimeth reports that unlike most new media ventures, they are "breaking even." He will only reveal that their budget is "fewer than eight figures."

Many companies are still not budgeting for Internet advertising, and those that do have a budget for it are allocating very small amounts of money for buying banners, especially in relation to the cost of building the sites behind them. But Hagerty is hopeful, he thinks the market is beginning to come around, and that the fourth quarter of 1996 will bring a dramatic rise in sales.

Do Advertisers Really Need Publications?

Since the beginning of commercial sites on the Web there have been a number of corporations who put content on their sites as a public service and for corporate public relations. This trend has continued, and there are several examples of sites like the Claritin Allergy Relief Zone from Schering-Plough and the Hoechst Allerdays Allergy Resource Center that provide valuable information to users. Mama's Cucina Ragu is an amusing site that draws quite an audience to itself.

These sites do get a substantial amount of traffic, but they are not really substitutes for publications. Readers will always doubt the editorial integrity of a site created by an advertiser. Furthermore, do advertisers really want to get into the publishing business? For most it's a distraction, and one they can quickly grow to view as an unnecessary burden. For that reason the most successful advertiser-created sites are services like the pollen count resource at the Allergy Relief Zone--it's always useful and it never needs refreshing.

Internet Advertising Bureau to the Rescue

The Web ad industry just took its first steps toward organization on June 21, 1996, when the Internet Advertising bureau held its first General Meeting in New York. The meeting was attended by 319 representatives of companies in the business of selling, creating, or measuring the effectiveness of Internet advertising. The purpose was to recruit members to this fledgling organization whose stated mission is "to promote the use and effectiveness of online advertising."

The nine-member steering committee includes such industry notables as Rich LeFurgy VP for Advertising and Product Management of Starwave; Linda McCutcheon, Director of Ad Sales and Marketing of Time Inc. New Media; and Steve Goldberg, Manager of Advertising Development and Strategy of Microsoft.

The mission of the IAB was explained by LeFurgy, who began by noting that on the Internet 1996 feels a lot like 1995 as far as advertising is concerned, with the same banners, same rates, and the same questions about ad measurement and efficacy. He implored his audience to join them and help the industry move beyond its present state of chaotic rate and measurement structures. "Stop the madness!" he said, urging the attendees to get together and set standards, invest in research, and focus on showing the client how the Internet serves them best--in other words, "to take back the control of the audience we create and sell."

The strategy, in response to the experiences and concerns of nearly everyone in the business, is to:

The meeting concluded with a panel discussion entitled "Growing Pains: A New Medium Comes of Age," which became a lively and sometimes rancorous debate between ad agency buyers and publishers. The arguments on both sides were familiar: Salespeople implore buyers to give the Internet a chance, and the agencies indignantly demanded that sellers learn the needs of their clients and deliver the hard evidence to prove they'd be getting a good return on their advertising dollars.

Advancing on Many Fronts and Defining Itself in the Process

There can be no doubt that advertising on the Internet is developing rapidly and generating a lot of thought, talk, and activity. It's also beginning to be a place where a lot of money changes hands. The business is trying to define itself, set standards, and become the foundation of a vibrant new mass medium. It has many of the characteristics of other media, but is not identical to any. It also has qualities that no other medium has ever had, but we aren't able to recognize them yet.

Someday we'll call a feature of the next new medium "Web-like," and everyone will know what we mean.

Past installments of Multimedia Web

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