Analyst: Users Turn To Web For Information, Not Entertainment

by Ross Fadner, Sep 22, 2004, 12:00 AM

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By now, the Internet is firmly established as a primary reference and communication tool, but to what extent do people go online just for entertainment? The answer is that the vast majority of Web use is still done for practical purposes, said Safa Rashtchy, managing director and senior research analyst of Internet media and marketing for Piper Jaffray, at the IAB/MediaPost Interactive Advertising World conference in New York City this week.

Practical uses of the Web include visiting search sites, e-commerce destinations, company Web sites, e-mail, chat, or any focused behavior with a function behind it, said Rashtchy. Using the Web for "content," or entertainment, involves browsing for news, games, and lifestyle information.

So far, the Web's ability to deliver branding messages has been limited by the public's failure to embrace the Internet for entertainment, Rashtchy said.

"The Internet is still used more as a utility, like a telephone," he said, adding that people still think of the Web as almost an extension of the personal computer, which is still primarily seen as a tool. "The context of the activity determines what you can sell and how effective that message can be," Rashtchy said.

But, he added, time is on the side of entertainment. Piper Jaffray forecasts that by 2014, content and utility usage will be split 50-50. The growth of broadband will play a role as higher connection speeds will facilitate video--but mostly, Rashtchy said, the evolution will come as a result of consumers altering their perceptions of the Web.

For now, people still mainly use the Web to buy products, conduct research, or communicate. Its usefulness in direct marketing initiatives--as opposed to branding campaigns--is underscored by the IAB/PricewaterhouseCoopers "Second Quarter Internet Advertising Revenue Report," which said that search accounted for 40 percent--or approximately $1 billion--of online ad spending for the quarter.

Rashtchy said that online branding initiatives are also limited because emotional connection is the key to effective branding--and so far, online content doesn't appeal to people's emotions the way other media does.

Nevertheless, Rashtchy forecasted 25 to 30 percent growth for the year. He said the 10-year growth cycle for online ad revenue will closely mirror that of the cable industry during its boom years, reaching $15.2 billion by 2009.

He cited improved effectiveness of online ads, an easier buying process, increased awareness of the Web's cost-effectiveness, and the success of search as an efficient cost-per-acquisition tool as the key growth drivers.

Disagreeing with other industry experts, Rashtchy downplayed the importance of the migration of eyeballs from traditional to online media, consumers spending more time online, the growth of broadband vis a vis flash, and video-based advertising products. Those factors, he said, would not contribute to the online ad growth.

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