Internet advertising stages a comeback

NEW YORK: Online advertising, with the help of traditional brick-and-mortar companies, is staging a comeback, industry watchers say. Traditional advertisers, such as automakers, are beginning to allocate more of their marketing budgets to the Web, helping the online ad industry take its first steps toward what analysts see as a sustainable recovery.

"It took a long time to shake out the fluff and refocus back on significant advertisers," said Jupiter Research analyst Gary Stein.

While online advertising had been known as the place for loud pitches and flashing banner ads by dot-coms -- many of which have folded -- traditional companies have recently been drawn in by more subtle approaches, such as paid search listings and savvy animated "rich media" ads.

"We are definitely looking to change the way we allocate media, giving Internet a share that is proportionate to the way we think we can get the best ROI (return on investment) from our media allocation," said Marc Fireman, global director of interactive marketing at Reebok.

US Bancorp Piper Jaffray analyst Safa Rastchy said in a recent research note he expects this year's growth in online advertising to well exceed the 15 percent range, up from prior estimates of under 10 percent.

Major Internet companies like Yahoo and America Online, whose ad businesses took a hit after dot-coms collapsed, are now trying harder to address the needs of marketers across the board -- becoming more flexible with pricing and formats and savvier with technology.

Yahoo Inc., AOL Time Warner Inc.'s America Online and Microsoft Corp.'s MSN now help advertisers with packages that drive home a marketing theme rather than sell just banner ads, which were synonymous with online advertising during the dot-com boom, industry players said.

Also fueling the comeback is the recent interest for paid search, or sponsored links, that companies such as Overture Services Inc., Google and Yahoo have helped legitimize as an advertising medium.

"A big chunk of the money is paid search, but I think equally important is the attitude," said Forrester Research analyst Jim Nail. "A year and half ago, I was hearing people say, 'Online doesn't work. Forget it. I'm not going to do it.'"

During the boom, some advertisers complained Yahoo, MSN and America Online did not listen to their needs and were more interested in pitching what they had to sell.

But that is changing. AOL, for example, has brought in people with traditional ad backgrounds and its sales force has shifted from an inventory mind-set to a pro-active approach, Stein said.

Advertisers are also beginning to look at the amount of spending they give to television and other media more closely and realizing that consumers are flocking to the Web, said Greg Stuart, CEO of Interactive Advertising Bureau.

"It's an extra advantage to use online media because even though it won't drive a campaign at the end of the day it can do a lot of things TV and print can not do," Fireman said.

MSN Chief Revenue Officer Joanne Bradford said in an interview that a lot of big brands have started to make "significant buys online," with automakers and financial services companies among the first to turn to the Web. "We are 25 percent ahead of last year (in advanced placements), which shows there is real demand," she added.

© Reuters