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Jewish World Review March 19, 2001 / 24 Adar, 5761

Terry Lefton

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Consumer Reports


A crisis of confidence in online advertising

http://www.jewishworldreview.com -- PRECISE and interactive, the Web was supposed to have been the greatest medium yet for advertisers. So why have the grand hopes gone up in smoke?

Blame the marketing folks, who never were convinced.

Ted Sann remembers the first time he went on the Internet, back in 1996. He was helping his 12-year-old daughter do research for a school paper. Yes, the AOL interface was clumsy and slow, but it occurred to Sann that this online thing could be a powerful way to deliver advertising.

And he knew a thing or two about pitching products. Sann was (and still is) co-CEO and chief creative officer of BBDO, one of the stalwarts of Madison Avenue. His agency creates more Super Bowl spots than anyone else; clients include FedEx, Pepsi and Visa. But for Sann, steeped as he was in television, here was something fresh and intriguing.

In the five years since Sann first logged on to the Internet, customers have flocked to the medium. Thousands of companies have been founded, and billions of dollars have been spent marketing them - much of that on the Web itself. Indeed, it's been the tide of advertising dollars - that powerful swell that over the years launched and supported newspapers, magazines, radio and, most of all, television - that's presumed to be one of the primary forces behind the growth and development of the Internet.

This was supposed to be the greatest advertising medium ever: uniquely interactive and capable of targeting consumers with devastating precision. And more than any other medium, this was the one that would realize the ultimate marketer's dream: It would serve up young people just as they were making buying decisions they'd stick with for life.

So why is Ted Sann, one of the big dogs on Madison Avenue, now backing away from online advertising?

It is, in short, a crisis of confidence.

Boosters of Internet advertising give a host of reasons why the medium is experiencing fits and starts: There's a general ad recession. Thousands of dot-coms failed, taking with them their oversized ad budgets. The first Internet advertising vehicle, banner ads, floundered as click-through rates sank close to zero. These things take a long time, goes the mantra. Just wait for broadband. We're only in the first inning.

Maybe so, but much of mainline corporate America hasn't even bought a ticket to the game. With the dot-coms in smithereens, these deep-pocketed traditional advertisers were expected to step in and pick up the slack. Their 50-year-old love affair with television had to be fading. People are zapping ads with TiVo, interactive TV is invading more and more homes, viewership has been dwindling on television networks for 20 years. And kids are flocking to the Web.

But many advertisers aren't budging. In the third quarter of 2000, the last period for which information is available, Internet ad revenue sank 6.5 percent, or $138 million, to just under $2 billion. This trend undermines the hoariest conventional wisdom in the business: Advertising always follows eyeballs. If you build a medium that attracts people, the thinking goes, advertisers will come. That hasn't happened. About 12 percent of media consumption is on the Internet, yet it accounts for 3 percent or less of overall U.S. ad dollars.

The folks who might actually buy advertising online remain largely unconverted. Traditional advertisers, it turns out, were sold the Web on the basis of fear, convinced that if they didn't jump on the bandwagon, they would go the way of all dinosaurs. They were told that not only was it the greatest thing since sliced bread, but it was sliced bread - and it would replace traditional advertising.

These extravagant promises are not easily forgotten - or forgiven.

"The pendulum swung too far one way," says Mark Lazarus, who sells TV and Internet advertising as president of Turner Sports, "and now it's swinging too far the other way." Clients tell Lazarus that the Web may be in the future, but they say it is now they're worried about.

"I'm convinced this is a dynamic new medium," says Rishad Tobaccowala, president of the new-media division of Starcom, one of the country's largest media-buying agencies. "But I'm still spending a lot of time convincing clients that this is not going the way of CB radio."

In fact, some say, the Internet's much-touted interactivity is what makes it a crummy ad medium. "You're not sitting on a couch with a beer saying, 'Entertain me!' You are on a mission," says marketing consultant Scott Bedbury, who's held top marketing positions at brand icons Nike and Starbucks. "Banner ads and pop-ups get in the way."

So, as the world waits for broadband and various forms of "rich media" that promise to make Internet ads akin to TV commercials, many of the marketers holding the purse strings on big campaigns remain unconvinced.

The skepticism about online advertising comes as corporate ad budgets dwindle because of the faltering economy. That double whammy has pushed many marketers to rely on their own sites rather than pay others.

Terry Lefton writes for The Industry Standard. Comment by clicking here.

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