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Corporate marketing executives boost funds for Internet ads
[December 11, 2005]

Corporate marketing executives boost funds for Internet ads

(Record, The (Hackensack, NJ) (KRT)) Dec. 11--Holmdel-based Vonage spends $20 million a month on Internet ads, double the dollars from a year ago.

Google is on track to pull in more than $3 billion this year in online ad revenue, up from $55 million four years ago.

And more than half of U.S. marketers say they've boosted their Internet ad budgets this year, many by more than 25 percent.

These are heady days for the Internet advertising world, with big spending companies such as Vonage opening their pockets to pay skyrocketing rates for prime space.

Marketing executives and ad agencies are more willing than ever to spend millions on floating banners, flashing pop-ups, and video ads, hoping to catch the eye of the swarm of Internet surfers.

This year, for the first time, U.S. Internet ad spending is expected to top the $10 billion mark, reaching $12.9 billion, according to eMarketer, a firm that tracks Internet advertising. That's nearly double the amount spent on online ads five years ago.

Driven in part by the rise of high-speed Internet connections in the U.S., companies are racing each other to get their brands in front of an ever-expanding Web audience.

Online advertising remains a small market compared with so-called traditional media -- television, newspapers and magazines.

As a percentage of all ad dollars, advertisers still spend most of their cash in traditional places -- about 95 percent, according to TNS Media Intelligence, a firm that tracks online advertising.

Only 5.4 percent of ad dollars went online in the first quarter of this year.

But ad execs say there's a juggernaut on the horizon.

"The numbers are inarguable," says Fred Rubin, head of iDeutsch, a division of ad powerhouse Deutsch Inc.

Rubin and other ad executives who advise their clients on where best to spend their advertising budget salivate over facts like these.

In January, 103.8 million Americans had broadband access at home -- by August, the number was 120.8 million, according to Nielsen/NetRatings. Overall, that's 42 percent of the population with a high-speed connection, a figure that analysts believe will continue to grow.

Seventy million of us go online daily, a 37 percent jump from four years ago, according to a Pew Center study.

This online growth spurt has changed the way advertisers think.

"The Internet now is absolutely part of any advertising media marketing plan," said Ron Gianettino, president of Gianettino & Meredith, a Short Hills ad agency. "The Web is traditional today because it's a mandatory requirement that you consider it as part of your plan."

This hasn't always been the case.

In the early days of the Internet, ads were sparse, and those that did appear were amateurish. And without high-speed broadband connections, ads were sometimes viewed as an annoyance, slowing down Web page viewing.

Perhaps most important, advertisers hadn't figured out how to measure their ads' success.

Nowadays, when Vonage places an ad on CNN's Web site, it can track a consumer who sees it there, clicks on it, and comes to Vonage's site for a look-see.

Ultimately, says Vonage spokesman Mitchell Slepian, they measure an ad's effectiveness by how many of those people sign up for Vonage, a service that's essentially sold over the Internet (the company sends phone calls over the Web and requires a high-speed connection.)

In the past, companies with products that couldn't be sold over the Internet were concerned about investing ad dollars.

"Clicking on an ad for Budweiser wasn't going to sell any beer," Rubin said.

But advertising pros have figured out ways to gauge this kind of ad, measuring how many people who saw a car ad online ended up in the lot kicking tires.

Rubin won't reveal how he's measuring this trend, but he and other ad agencies are deciphering our online behavior, giving advertisers key information about an ad's effectiveness.

Some companies compile panels of as many as 1,000 consumers, track their Internet use for a month, and follow up with questions on what they bought, said Harry Wang, analyst with Parks Associates and author of a report released Thursday on Internet advertising. "This way you get some idea of what they purchased and what types of ads they viewed," Wang said.

A large part of what's driving the online ad boom is so-called paid search, led by Google and Yahoo, who dominate the market with 90 percent of all dollars flowing to those two companies, according to eMarketer.

Google, which allows no advertising on its home page, makes its money by selling companies the ability to have their name and Web address -- no pictures -- discreetly displayed when a user enters a search term (if you type in washing machine, you'll get on the top of the page). Companies pay Google whenever a user clicks on their link.

Although paid search accounts for most of the ad dollars spent on the Web, it's the creative possibilities of the display ads that have the ad industry excited.

Rubin likens it to drive-time radio -- you can buy ad space on a Web site and have your ads appear just before lunch every day, or right at dinner time.

And if you don't like the results, you can change, almost immediately.

"You can try stuff," said Caroline Finch, Vonage's marketing director. "If we buy a placement that doesn't work for us, if it doesn't perform, we're out of it."

That flexibility extends to ad preparation too.

For some TV and cable ads, advertisers are required to submit the ad content as much as two months ahead of time, said Wang. Yahoo and other Web sites tell advertisers to submit the ad four days ahead of its scheduled appearance, he said.

Advertisers are changing how they use the Web, said Valla Vakili, creative director at Yahoo.

He cited a recent Mitsubishi Eclipse ad that let users drive a little car around their computer screen.

"They're willing to do many things now which in the past we didn't see as much," Vakili said.

Some of the big portals such as Yahoo have advertisers beating down the door to get on the prime real estate, that is, the home page. MSN recently admitted to a backlog of companies waiting to place ads on its front page, something akin to a billboard shortage.

Yahoo wouldn't say if it had a backlog, but it did agree the home page has become a coveted spot.

"The front page has a marquee position in terms of audience size," Vakili said. But, other Yahoo main pages -- games, finance, etc -- are also attractive to advertisers, he said.

As for how online ad prices are faring, some reports indicate they are on the rise. MSN told The Wall Street Journal it charges up to $1 million for a 24-hour ad spot on its main home page. That's up from $25,000 to $50,000 four years ago, the company said.

In its October earnings call, Yahoo executives said ad prices rose in the "double digits."

Local advertising is said to be growing. And video ads are expected to spread.

Wang said he's confident big advertisers will move into cyber landscapes, populating online video games with brand names.

He predicts, for example, that we'll see tiny virtual billboards with familiar brands alongside virtual highways in car racing games.

"In-game advertising," said Wang, "it's going to be the next hot thing."

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