Come On In The Waters Fine: Big Advertisers Warmed to Online Medium in 2002

NEW YORK March 19, 2003; Riva Richmond writing for Dow Jones reporterd that heavyweight traditional advertisers, including consumer products companies and auto makers, stepped up their purchases of banner-style Internet ads in 2002, according to a new study from research firm Neilsen/NetRatings.

The emergence of these companies as bigger Web ad customers is key to achieving the online-advertising industry's expectations for a return to growth this year, following several years of dismal declines. But the study shows that, among Web-site operators, much of the benefit was reserved for the big three portals, and Yahoo Inc. in particular.

"The lion's share of the cautious optimism that's being felt through the online space is due largely to the traditional advertisers who are learning to reach critical segments who spend their time online," said Charles Buchwalter, vice president of client analytics for the firm. "That's the future of this industry."

Neilsen/NetRatings reported that the top 100 traditional advertisers bought more than 30% of all banner-type online ads in 2002, up from 15% in 2000.

AOL Time Warner Inc., the largest advertiser with a total media budget of $3.2 billion, increased the number of online ads it bought by 28%, mainly to promote the launch of AOL 8.0. The largest increase came from DaimlerChrysler AG , whose ad numbers rose 407% on the power of a large online campaign for its Dodge vehicles. Other top 10 companies with generous percentage increases were Ford Motor Co. , Walt Disney Co., Johnson & Johnson and Verizon Communications .

Buchwalter said the firm can't reliably estimate how much money these or other companies spent on online ads because such deals tend to be heavily negotiated. He said traditional advertisers are estimated to have spent only 2% to 2.5% of their ad budgets on Web ads in 2002. Some companies are now considering dedicating as much as 10% to the Internet, he said.

Advertisers like these were slow to take to the Web, despite bubble-era pundits promises the contrary. They shunned online advertising in large measure because performance metrics like "click throughs" and "impressions" were confusing and hard to compare with metrics used in other more-familiar media types, Buchwalter says.

Moreover, early banner types looked boring to media buyers accustomed to TV and a lack of standards in ad sizes stymied large campaigns.

But increasingly, those problems are getting resolved. Leading online publishers and ad agencies "have learned how to couch online media decisions using similar metrics to those of offline media," he says. And the rise in so- called rich-media ads, which include video and sound, on the heels of faster Internet connections, piqued the interest of advertisers accustomed to television.

The top three beneficiaries of all this spending by traditional advertisers are the big three portals: Yahoo, AOL's America Online unit and Microsoft Corp.'s MSN.

Yahoo managed to woo 79 of the top 100 advertisers to win a 33% share of all ads in the fourth quarter of 2002. America Online had 70 advertisers and a 10% share, while MSN had 70 advertisers and a 9% share.