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Article on Online Advertising trends >> Advertise >> Article

Online Advertising is taking off in a big way. Here is an article on some of the interesting trends in this space.Garamchai.Com is poised to become one of the best web portals encompassing all desi (Indian) information for Indians residing in the US. We started this venture in October 1999, and are currently averaging over 50,000-85,000 unique visitors a day. The visitors to are predominantly Indians, NRIs, Indo-Americans and others based in the US and the North America interested in Indian information. We are working towards making Garamchai.Com the only web reference for all your Indian needs in the US. Advertisement rates for Banners displayed on Garamchai.Com are subjective and depend on the duration, depth of contract and all other factors. Drop us a not for the current rate-sheet based on your specific campaign or review the Advertise section

The Online Ad Surge

Brand advertising online has taken off -- and it's shaking up Madison Ave.

In the golden age of TV, they called them roadblocks. Advertisers mounted such visual barricades by placing the same spot at the same minute on the three big networks. That way, the ad would blanket the entire medium, collaring viewers whether they were tuned to Lawrence Welk, Dragnet, or Uncle Miltie. The roadblock was a simple but powerful approach -- and near impossible to pull off in today's fractured TV market.

But who said a roadblock had to be on TV? A year ago, Ford Motor Co. (F ) executives unveiled a roadblock on the Internet to promote their F-150 truck. On the day of the launch, Ford placed bold banner ads for 24 hours on the three leading portals -- AOL (TWX ), MSN (MSFT ), and Yahoo! (YHOO ). Some 50 million Web surfers saw Ford's banner. And millions of them clicked on it, pouring onto Ford's Web site at a rate that reached 3,000 per second. The company says the traffic led to a 6% jump in sales over the first three months of the campaign. Naturally, more Internet roadblocks have followed, most recently with the Oct. 25 launch of the F-500 sedan. Says Rich Stoddart, Ford's marketing communications manager: "We've proved we can leverage the Web for the mass market."

Ford and everyone else. Advertisers are seeing that the top few Web properties now reach true mass audiences. Each of the three biggest portals attracts 70% of the Americans online to its properties monthly, according to comScore Networks, a traffic-tracking organization. Demand for this prime real estate is so strong that there isn't enough to go around, and prices to advertise are soaring. A year ago, media buyers could land discounted space on the home pages of major portals for between $100,000 and $180,000 per 24 hours, say buyers. Now, the cost is reaching $300,000. Forget about discounts. If advertisers are lucky enough to land the space, they often must agree to spend an equal amount elsewhere on the portal. Facing this traffic jam at the top sites, advertisers are jostling for spots throughout the Net. "A few years ago, it was kids with green hair selling ads," says Gary Stein, an analyst at Jupiter Research. "Now Internet ads are mainstream, and part of every company's media buy."

Why the change? The Internet is growing up. Broadband connections now reach more than half of American households, including the lion's share of the prosperous ones. Although the Internet still takes in only 4.3% of U.S. advertising revenue, surveys indicate that it accounts for 14% of America's media time. And that's not including those who are Web-surfing at work -- a major audience for advertisers. Smitten by the growing reach and power of the Net, blue-chip advertisers are stretching far beyond the cramped text ads on search engines that have turned Google Inc. (GOOG ) into a global sensation. Now advertisers are packing online ads with music and color video, just like those on TV. They're looking to the Web to build brands.

The result is a surge in growth that's extending from Madison Ave. to the West Coast campuses of Yahoo! and MSN. While the overall ad industry grows at a respectable 7.7% a year, Internet ads are galloping ahead at a 28.8% clip. New York consulting firm eMarketer predicts online advertising will reach $9.3 billion this year -- $5.4 billion of it in brand ads. "It's a great time to be alive in this industry," enthuses David J. Moore, chief executive of 24/7 Real Media Inc., an ad agency.

For anyone who recalls the soaring expectations that preceded the Net advertising crash earlier in the decade, even a touch of euphoria is grounds for serious heebie-jeebies. Last time around, many of the most enthusiastic advertisers -- the cash-happy dot-coms themselves -- dropped dead. From 2000 to 2002, Internet advertising plummeted 25%. But something is decidedly different this time. Since the bust, the industry has pieced together the technology -- from video delivery to customer tracking -- to make good on the shining predictions of the boom. The Net is winning over mainstream advertisers with its computational precision. It delivers hard, quantifiable results measured in clicks and sales -- down to the penny. In the process, it's turning advertising from an art into a science.

Does this mean the Internet is going to vacuum up the world's advertising dollars? No, but it'll angle for its fair share. Some of the Net's market grab will come from easy pickings, such as Yellow Pages and direct-response mail -- fields where Internet search delivers unmatched efficiency. Brand advertising, meanwhile, will probably come straight from the hide of TV, billboards, and print media. Ford, in line with other auto makers, has moved 10% of its ad budget online, and the number is on the rise. Joanne Bradford, MSN's chief media revenue officer, expects other industries to follow suit, with online accounting for 8% to 12% of the advertising outlay by decade's end. Within two years, online advertising is projected to reach $13.8 billion, motoring past the slower-growing magazine industry, according to Kagan Research LLC in Monterey, Calif.

Tangle of Complexity
The importance of Internet advertising extends far beyond the numbers. Now that advertisers have their hands on a tool that measures an ad's effectiveness, they're starting to press other media for similar accountability. It's a process sure to cause disruptions. Take TV. For decades, Nielsen Media Research has been providing reports on how many customers watch a specific program. But in a nation full of TiVo Inc. (TIVO ) zappers and channel surfers, how many are actually seeing the ads? Nielsen is now rolling out technology that measures precise minute-by-minute data in local markets. And it's also working with TiVo to survey ad viewership among TiVo users. These steps bring TV a step closer to Internet-style accountability. But if the results show that viewers are skipping ads, TV's economics could take a beating. "It starts to shift the playing field," says Douglas McCormick, CEO of iVillage Inc. (IVIL ) and a former cable-TV exec. "Internet [costs per thousand viewers] are going to start looking a lot more attractive."

In fact, the Net is helping break down walls that traditionally divide different media. More and more, publishers are delivering selected customers to advertisers, and reaching customers across a host of media, including the Net. Instead of appearing in a certain show or time slot, their ads are coupled with subject areas, such as health or sports. ABC News, for example, delivers subject-specific ads to TV, the Net, and cell phones. Advertisers want "to reach consumers, wherever they are," says Alan Ives, vice-president for sales at ABC Interactive.

This new world of advertising is bubbling with innovations, many of them blending advertising with content or other goodies., for one, urges the public to download a free weather bar that links up to a host of advertisers, from Scotts, the lawn-care company, to American Express. And on Nov. 9, and J.P. Morgan Chase (JPM ) announced a venture to produce short films on the Amazon site. Customers who use an Amazon Visa card to buy items advertised in the movies will get a 5% discount.

All of this innovation creates a tangle of complexity -- and simplifying it represents a growing challenge for the industry. While ad agencies can snap up 30-second spots on Monday Night Football, the Internet offers almost infinite options. First, advertisers have to pick from a fast-growing number of formats, from skyscrapers that crawl up a page to rollovers -- ads that expand as the mouse runs across them. Then they have to figure out on which of the thousands of commercial sites to run the ad. And they must decide whether to orchestrate the campaign to hit people with different ads at work and at home -- or maybe arrange a succession of ads, so that a customer's first viewing introduces a product, and the second provides details. "The complexity can be a barrier," says Yahoo's chief sales officer, Wenda Harris Millard. She says Yahoo offered 700 different ad forms when she arrived three years ago. It's down to a fraction of that now, but it remains a lot more complicated than old-fashioned TV or magazine buys.

Here the big players have an outsize advantage. They can sell Internet ads as part of a bigger package. CNN, for example, sold pricey sponsorships for Election Day coverage to companies, such as Samsung and DHL. The condition? Sponsors had to advertise on TV and the Web. While CNN's TV coverage was swamped by rival Fox News, the exposure on the Web page more than made up for it. Over that 24-hour period, bested the competition with a dizzying 650 million visits.

Already, advertisers are busy linking their Net promotions to offline campaigns, from newspapers to TV. In the most recent Super Bowl, for example, Mitsubishi Motors bought a 30-second ad. It enticed viewers to visit its Web site to see what happened when a Mitsubishi Galant faced off against a Toyota (TM ) Camry in a crash test. In the following six hours, some 11 million people visited the site. Many of them provided their e-mail addresses, watched the 50-second video, and clicked the tires in the car company's virtual lot. Such visits are critical, especially for the auto industry. Why? Studies show that shoppers, punching away at search engines, spend an average of five hours researching cars online before setting foot in a showroom.

"Toe in the Water"
It was the success of search-based advertising that breathed life back into the industry following the dot-com collapse. Led by Overture Services -- now a unit of Yahoo -- and later by Google, the search engines delivered a breakthrough innovation. They interpreted the key words typed in by customers as requests for products and services. And they auctioned the rights to place text ads alongside search results to any company or individual that was interested. The offer has been irresistible: Advertisers paid their bid, be it a penny or a dollar, only when a customer clicked on their ad. Paid search grew from a mere cipher in 1999 into a $3.9 billion business, according to eMarketer. "Search became a way for marketers of all stripes to dip their toe in the water," says Ted Meisel, president of Yahoo's Overture Division.

The question is whether the search industry will continue to pace the growth of Internet advertising. eMarketer predicts that growth of such search ads in the U.S. could slow from 55% this year to 19% in 2005. This poses little problem for Yahoo, a powerhouse in both arenas. But Google risks missing out on growth in brand ads. The reason? Advertisers and agencies traditionally separate the direct-marketing teams, which feed into search, from the creative and brand teams that oversee display ads. For now, Google is attempting to bridge the gap by developing ads with images and pictures to accompany search results.

The rush toward display advertising online is similar to the rise of cable TV a generation ago. Until the early 1980s, advertisers saw cable mostly as a direct-marketing tool for niche products, from miraculous vegetable choppers to belly-busting exercise machines, all of them accompanied by a prominent 1-800 number. But in 1982 an advertising executive named Ted Bates proposed a so-called 5% solution. He noted that with half of America's homes cabled, the industry was reaching the scale of a mass market. Advertisers would see substantial gains, he predicted, if they shifted just a nickel from every budgeted dollar to cable from the networks. It paid off. Cable stormed into brand advertising -- and is positioned to overtake the broadcast networks within two years, according to eMarketer.

Now Net publishers and ad agencies are pushing their own 10% solution. And they have the ammo to make their appeal. Recent case studies by the industry's trade group, the Interactive Advertising Bureau, showed that while TV spreads the word, the Net can drive home the particulars. One case covered Universal Studios' 2002 DVD release of ET, the Extraterrestrial. The studio spent 94% of the budget on TV, nearly 6% on banner ads, and less than 1% on animated ads that floated at the top of Web pages. The result? While most viewers learned of the offering on TV, the animated ads reinforced a key message. Among pure TV viewers, 39.4% learned that the DVD contained never-before-seen footage. But of those who saw TV and the animated ad, the number rose to 48.1%. The study's conclusion: Universal would have fared better by reducing TV by about a quarter and lifting the animated component to 25%. Universal declines to comment on the study.

Video is the latest rage in Net advertising. It represents 11% of online spending, says Jupiter Research. And advertisers are budgeting for more. Take brokerage TD Waterhouse Group. In addition to search and banner ads, the company is running 30-second online videos with Law & Order's Sam Waterston. This will contribute to a 42% hike in the company's Internet spending in the next year, says Senior Vice-President Stuart Rubinstein. "Full-motion video is the perfect vehicle,"he says.

Tight Squeeze
The biggest trouble with online video is a shortage of slots for it. While demand grows, much of it is focused on the Net's biggest sites, the home pages of the major portals, along with their finance, sports, e-mail, and auto sites. It adds up to perhaps two dozen pages, all of them run by the giants of the Web. While smaller targeted sites reach niche audiences, most of the crush for branding campaigns is for megasites -- and many advertisers get crowded out. "We called MSN to run some video for Adidas," says Sarah Fay, president of Carat Interactive Inc., a Boston media buyer. "They gave us one day in November, and it was on a weekend." The squeeze is so severe that advertisers in the hottest segments of the market -- autos, finance, and entertainment -- are gobbling up prime video slots months in advance. Within a year or two, industry insiders expect this buying to evolve into an Internet version of the TV industry's annual up-front sales.

The portals are taking advantage of the hot video market to funnel advertisers toward thousands of their less-trafficked pages. Increasingly, they're bundling prime spots into package deals, which include more obscure placements -- on pages for foreign-language studies or artisanal cheesemaking. MSN is even offering advertisers who venture into these digital hinterlands a hand in developing new and innovative advertisements. MSN's Bradford says varied locations have different uses. The home page serves a message to 20 million users a day, while placements in back pages reach niche audiences, sometimes numbering only in the tens of thousands.

Advertisers have plenty of room for video on their own home pages. And much of their ad effort, on and offline, is focused on getting Web surfers to drop by. Many TV watchers these days sit close enough to a computer to type in a Web address or "Google" a site without moving from the couch. During golf's U.S. Open in June, TaylorMade-Adidas Golf ran TV ads promoting its new R7 driver. Traffic on the site jumped 22% in the hour after each ad, says Jason Woodmansee, the company's director of global eMarketing. Once visitors came to the site, they not only clicked through videos showing the club in action but also located nearby stores and signed up for e-mails. That way, the company used the Net to turn a broad TV audience into a vast collection of individual relationships.

But how to reach customers with just the right message? Increasingly, advertisers are tracking them down. With a technology called behavioral targeting, a Who's Who of publishers, from to, use systems that quietly map the click path of registered visitors to their site or network. These programs do not accumulate personal data on the user. But using digital cookies dropped into each visitor's browser, they focus on behavior. For example, the system knows which site an anonymous Web surfer comes from. It also keeps tabs on how much time that reader spends looking at a particular article, and which ads he or she clicks on. Instead of asking consumers loads of questions about themselves, says Eric Christensen, general manager of Belo Interactive in Dallas, "we can now infer from their behavior on the site. That has been a big change in the last year."

Publishers follow their customers gingerly, knowing they run the risk of inciting a privacy backlash. Web surfers, under siege from spam and torrents of pop-up ads, are primed to fend off bothersome ads. And previous attempts to track customers have run into legal tangles. Aggressive consumer profiling by DoubleClick, a once high-flying Net ad company, sparked a lawsuit four years ago by 10 state attorneys including New York's Eliot Spitzer. DoubleClick, which set out to build databases combining personal info with Web-surfing habits, retreated on its plans and settled the lawsuit. It failed to recover its market leadership, though, and now is up for sale.

But while DoubleClick fades, scores of companies are storming into the growing world of online advertising. They range from tech outfits that create new forms of banners and skyscrapers to advertising startups that tie together vast networks of publishers, from fishing sites to political blogs. "Net advertising is only nine years old, and everybody's just now getting started," says Gurbaksh Chahal, CEO of BlueLithium, a San Jose (Calif.) advertising company. Those who manage to climb atop the Internet's advertising wave are in for a wild ride.

By Stephen Baker [From Business Week ]







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