Internet Advertising Starting to Happen - Horray!

SAN FRANCISCO May 16, 2004; Lisa Baertlein writing for Reuters reported that when General Electric turned a Web banner ad into a virtual doodling pad last year, it also created a minor Internet sensation.

GE's Etch-A-Sketch-like ad, featuring the tag line "All big ideas start with a sketch," allowed users to draw with a virtual felt-tip pen. The result was a sketch tool that inspired Web users to begin swapping their doodles via e-mail and spawned online galleries -- a major branding coup for GE.

Such splashy interactive campaigns, which also have come from movie studios and auto makers like Mitsubishi Motors Corp., signal the start of revival expected to lift online ad spending this year above the record set at the peak of the dot-com boom in 2000, industry participants say.

While newer paid-search advertising offered by Google and Yahoo Inc. unit Overture has stolen the spotlight with its rapid growth, traditional advertising still accounts for a heftier share of overall online marketing.

"Nothing is going to grow quite as much as search, but the traditional part of Internet advertising is definitely going to grow year-over-year," said Kevin Ryan, CEO of Internet advertising and marketing company DoubleClick.

As big companies begin following audiences to the Web from television, Yahoo and Microsoft Corp.'s MSN Internet unit have brought in experienced advertising teams who are running more sophisticated online ad campaigns.

In another sign of the times, Web search leader Google this week reversed position and said it would begin testing banner ads on Web sites that pair its ads to news and other content.

Research firm eMarketer expects U.S. online ad sales of $8.4 billion this year, up more than 15 percent from last year, and above the 2000 peak of $8.1 billion.

Revenue from Web-search advertising more than doubled to $2.3 billion in 2003. Banner ads and other types of old-school Internet advertising, down slightly, totaled $4.9 billion.

"The nonsearch component will need to grow this year to bring things up," Geoff Ramsey, chief executive of research firm eMarketer, told Reuters.

The Web still nabs a tiny percentage of overall ad dollars. This year eMarketer expects it to again take around 3 percent of the total, which is seen hitting $264 billion. "As the audiences continue to move, advertising dollars eventually catch up," said Yahoo Chief Executive Terry Semel, who predicted that his sector is poised for fast growth.

Microsoft CEO Steve Ballmer in March said he would like to see large advertisers putting 8 percent to 12 percent of their budgets toward online campaigns in 2005.

Widespread broadband adoption and better compression technology that make it possible to deliver video and other rich media ads -- those that expand, wiggle or float on screen -- are already helping spur online ad spending, analysts say.

Mike Galgon, chief strategy officer at aQuantive Inc., the parent of online advertising agency Avenue A, said many advertisers that got burned during the dot-com bubble were drawn back to the Web by key-word search ads. Those same marketers are now hungry for more, he said.

"Marketers are realizing that the Web is a great way to engage a customer in a way that you can't with a medium that is going to come, give you a message and go away," he said.

The Web also promises the ability to deliver personalized ads at the right time and in the right way, something seen as increasingly valuable as consumers take more control over how they see advertising -- from using Tivo to skip through ads on television to using software to block Internet pop-up ads.

"That will change the way people do marketing. I think the Internet will have a big advantage because you have a better ability to customize for a particular user," said Shelby Bonnie, CEO at CNET Networks Inc.