Online ad rivals bond to weather the storm

CIOL Bureau
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Reshma Kapadia


NEW YORK: Tough times have turned fierce rivals into compatriots as the

online advertising industry grapples with ways to lure traditional advertisers

to the Internet at a time most advertisers are cutting spending.

An air of consensus floated over the Jupiter Media Metrix Online Advertising

forum here this week, with executives trying to contend with a sharp decline in

advertising spending amid the economic slowdown and dot-com shakeout. The notion

for the industry (for near-term survival) is to pull together. Too many (of us)

have been focused on a slice of the pie," Shelby Bonnie, chief executive of

CNET Networks Inc., said at the forum.

"The bigger issue is the size of the pie, such as what percentage is

going to print, radio and TV. It's an overall size of the pie issue. That's what

has held us back," he said.


One such area is agreement - after years of wariness - that the Web can be a

branding vehicle. "A down market focuses minds around critical

issues," said Scott Moore, publisher of Microsoft Corp.'s Slate magazine.

He added that the reality is that companies all need to work together to

succeed, or none of the players will.

Bonnie said the last nine months have seen the industry pull together to

create new ad units and models that cater more to the needs of advertisers, with

publishers becoming more flexible in placement of ads to get the shrinking

amount of ad dollars circulating.

Industry executives also agreed that inclusion of more interactivity within

ads was likely a recipe for success. Among recent advertising efforts that drew

applause from industry executives for demonstrating the potential of online

advertising was Ford Motor Co.'s advertising on Yahoo Inc. that used virtual

birds that flew away, directing visitors to the recently redesigned Ford

Outfitters Web site.


Another campaign that drew applause was the campaign by, which

has attracted directors Ang Lee and Guy Ritchie. Industry executives said they

needed to band together to come up with standards to make it easier for

advertisers to use the Web.

They also agreed that measuring click-throughs - online viewers clicking

their computer mouses on ads - is not the best measurement for how well an ad

has worked. But there is still widespread debate over what pricing models to


In the last year, advertisers have been demanding pricing based on

performance. They have had the upper hand as publishers contend with the ad

slump. But some publishers said they were not willing to move toward such models

based on click-per-action. Currently, most advertisers use the CPM model, which

bases pricing on clicks per thousand impressions or images.


Moore likened the model to asking Saks Fifth Avenue for a high-profile

counter and telling the retailer it would get a percentage of the returns from

the sale of products the advertiser decided to stock at the counter. "You

(as the publisher) take all the risk. Maybe I have a lousy product or pricing,

and I give you a percentage of what I sell," Moore said.

Other publishers argued that such pricing models based on action also do not

take into account when a Web surfer reacts to an ad at a later date - such as

walking into a store because of an ad or going back to the Web site a week


Some, like Google ad sales vice president Tim Armstrong, argued that it would

be better to base pricing on reach and frequency of ads rather than impressions.


As companies curtail spending, many are looking to online publishers to help

them with the creative - often to the chagrin of agencies, who feel this is

their territory, Armstrong said.

"We have added a creative group to work with agencies and clients. It

has to be a partnership between the client, agency and publisher," he said.

(C) Reuters Limited 2001.