New Ad Models Take Flight

Introduction - By Adam Herman

Banner advertising was so last century. Email marketing, was pre-bubble too. Even the newest rage, search engine marketing, is beginning to get long-in-the-tooth in Internet time. So what are the latest advertising models, that you need to be in the know about, the next time your client says, "So what's new this year?"

To answer this question, we asked our writers to poke around the Web and to get a sneak peak at some online media plans - particularily at those budget items called "cutting-edge, testing, and miscellanous media" - to find out where the next big idea is going to come from.

What did we find? Well, lots of little things for sure, but we did uncover four bigger trends that are now emerging. New ad models that are beginning to attract attention and even real dollars. They are also generating positive marketing results. They are: social networking, local search marketing, blogging, and broadband video.

Each model is in a different stage of its evolution. Social networking is just starting to gain consumer traction, while local search is a more refined extention of an established practice. Blogging is either a fad or the Web in its purest form, broadband video is an ad platform that has been anticipated for several years.

Any, or all may eventually deliver strong revenue streams or fade away as many ad models have before them. Time will tell, of course, but read on so at your next client meeting you'll be au courant.

Social Networking: Social Networking Promises Value of Peer-to-Peer, Viral, Behavioral, Contextual, and Search - By Kate Kaye

"Suzie Q has invited you to join Suzie's personal and private community at Friendster, where you and Suzie can network with each other's friends."

Chances are you've received a message like this one, inviting you to join a networking group. Social networking sites such as Friendster are sprouting up almost as frequently as they are harvesting new members. Leveraging trust through personal interaction, this catchy media trend is enabling folks to build interest groups, spur political action, find jobs, meet sales prospects, make love connections, and maybe even connect with a cohort of a colleague who knows Warren Buffett.

While only a handful of these sites offer advertising, the promise of peer-to-peer, viral, behavioral, contextual, and search marketing is inherent in online social networks.

Social networking sites provide trusted means of communication with consumers, says Mark Pincus, Tribe Networks founder and CEO and a Tribe.net member since July 2003. With over 120,000 members, Tribe.net is striving to develop a solid marketplace for its person-to-person, lead-driven online classifieds business. The company recently partnered with CareerBuilder.com to provide job listings to members.

"There's this constant battle of advertisers trying to use shock treatment to get through to the young, urban audience," observes Pincus. "Social networks fit into that because they're another way to sort and filter that barrage."

Social networking sites fall loosely into two categories: work and play. The largest among the more recreational sites is Friendster, which has compiled a base of over 6.25 million members organically in about a year's time. Like Tribe.net, Friendster mainly serves 18-to-35-year-old hipsters who post their photos and details on relationship status and interests on profile pages.

"Their network of friends is the filter through which they do everything," explains Friendster spokesperson Lisa Kopp. The site runs standard ad placements on a cost per thousand or per-day basis for advertisers including Volvo, Toyota, and Verizon, and soon will announce new features and ad opportunities.

Sometimes referred to as "meet markets," the buddy-oriented networking space is also home to Tickle, an 18 million-strong network providing personality tests, matchmaking, and social networking. MeetUp is another that's been popularized through its facilitation of physical meetings of Democratic primary candidate supporters. Google-affiliated Orkut, MySpace, the Friend Network, Friendworks.com, and Paljunction have also entered the arena, as has America Online through its ICQ Universe.

Business networking also shows promise, as evinced by InterActiveCorp's recent acquisition of ZeroDegrees, which targets business professionals. Owned by TV mogul Barry Diller, InterActiveCorp has also snapped up Match.com and Evite. And Ryze helps organizations arrange events at physical locations and offers premium classified ad placement.

Social networking-powered search engine Eurekster is testament to the expansive quality of this new media terrain. The system personalizes search results based on past behavior of users and people in their network and features paid search listings through Overture.

"Humans are the ones who can determine what's most relevant," asserts Steven Marder, Eurekster chairman. "The trustworthiness of a friend or associate...can supersede the value of the Web."

Local Search: The Ability to Target One-Armed Paperhangers in Chicago - By Lynn Russo

The right message to the right customer at the right time - this familiar mantra is easily achievable on the Web, but not necessarily when it comes to local search, where some advertisers feel they're paying for too many "window shoppers." Yet, the potential is there. "In general, you see a doubling of an return on investment when you can target to a local level," says Chris Copeland, director of search at Outrider North America, a search placement division of The Digital Edge in New York. The Digital Edge is a unit of WPP Group's Mediaedge:cia.

Add to that comScore Network's recent finding that more than 200 million local searches were conducted in a single month, and it only confirms what media buyers and planners have long known - that advertisers need a better way to identify and reach consumers who conduct local searches.

Fortunately, search developers are listening. Google's Search by Location offers side-by-side search boxes, the first for generic keyword terms, the second for geographic modifiers. "Eventually, we'll merge the two boxes back together, once the search world is educated [on the best way to conduct a local search]," says Sukhinder Singh, Google's general manager of local search.

Google's Regional Targeting, is organized around the 210 standard U.S. DMAs, and provides information about any company that fits the requester's search criteria, regardless of whether it is a paid client or has a website. For instance, if someone is looking for pizza on Chicago's East Side, they will get a list of all the pizza parlors in Chicago, rather than just those that have purchased keywords. Google has licensed third-party data to round out its paid advertiser base and plans to add more.

Overture's local search tool, launching this quarter, will rank advertisers using a mileage radius. For instance, "if a dentist purchases the words 'dentist' and 'Norwalk, Conn.' and 'dentist' and 'Stamford, Conn.,' he might miss an opportunity, because someone searched on 'Greenwich' and he didn't bid on it," says Geoff Stephens, general manager of local search. The ability to add a mileage radius to their bid helps advertisers pick up business they might otherwise be missing. "It's simpler for the advertiser and more accurate for the viewer," Stephens says. Overture has no plans to purchase third-party data, but licensing partners can add their own elements to the search technology.

Meanwhile, experts say the Internet Yellow Pages should not be discounted. "Internet yellow pages providers have a major advantage," says James Lamberti, vice president of comScore Networks. "They are already a great source of local information, and [will conduct] their own efforts to bring their offline customers to the online space. There are also a large percentage of small businesses that currently just list in the yellow pages that will realize they can take advantage of local search. So we'll see a lot of their dollars shifting to online."

Blogging: Blogs Make a Ripple in Media Pool - By Kate Kaye

The media trend du jour, blogs are even making headlines across traditional outlets. Now evangelists have begun spreading the word about the blog ad.

In essence, a blog is a chronologically organized Web log, mainly composed of text, published using simple software. Although less than 10 percent of U.S. adult Internet users have blogs, according to a recent Pew Internet and American Life Project study, the segmentation and diversity of blog content (from navel-gazing teenage minutiae to a tech executive's practical punditry) has spawned a nascent ad medium.

"Blogs represent a way to reach influencers more than just consumers," comments filmmaker Brian Flemming. He spent $854 running ads for one week on 20 blogs to fuel buzz about his mockumentary "Nothing So Strange."

"If you've got $1,000 to spend online and want to hit a national audience, there aren't many other options other than, say, Google," asserts Henry Copeland, CEO of Blogads.com, a blog-exclusive ad network of around 100 sites. Advertisers buy sponsorships of Blogads blogs for blocks of time rather than on a cost per thousand basis. The network takes 20 percent of the revenues from the ads, which sell for prices ranging from $5 to $700 per week.

Flemming invests in Google's AdWords, which displays ads on small sites, including some blogs, but he gets better results through Blogads. The system enables him to choose the specific blogs on which his ads are placed. "With Google I have no idea what types of people are searching for what keyword," he explains.

The most trafficked blog sites tend to be political in nature, as are many of the advertisers experimenting with them. In his run for a U.S. Senate seat, U.S. Representative Joe Hoeffel has placed ads on well-traversed political blogs such as Daily KOS and Calpundit. Draft Kerry-Edwards and political journal The New Republic are among Blogad's network advertisers, along with purveyors of spam filters and blog hosting companies.

"Blog advertising is sufficiently inexpensive compared to other forms of advertising so we can do it on an experimental basis," says Jason Lefkowitz, manager of e-activism at ocean advocacy group Oceana. But regardless of cost efficiency, the often controversial and unfiltered content of blogs has kept many advertisers at bay.

Although Blogads appears to be the only blog-exclusive advertising network around, it's not the only means of attracting the opinionated and influential people reading blogs. Advertisers can run text ads on the Textads Dot Biz network, which features about 100 blog sites. Viral marketers can use Blogstakes, a sweepstakes service that gives prizes like books from humor publisher The Onion to bloggers who link to and refer winners to an advertiser's contest. And Richards Interactive, an agency that has developed blog marketing strategies for Home Depot and Dr Pepper's Raging Cow, employs a network of influential bloggers to spur word-of-Net on their blogs for advertiser clients.

Some believe blogs are bound for a legitimate place in media. "I'm worried I won't be able to afford these things in the future," confides filmmaker Flemming. "There's no doubt in my mind it's going to take off."

Broadband Video: Broadband video finds missing TV audience on the Web - By Lynn Russo

Broadband video is a TV advertiser's dream. Not only do more than 50 million Americans have broadband Internet connections, but many of broadband consumers come from that elusive 18-to-34 male audience that is slipping away from television. As a result, companies including Lexus, BMW, Coca-Cola, McDonald's, Pepsi, Coors, Sony, Warner Bros., and Procter & Gamble are finding broadband to be a valuable tool. They can use it to increase brand recognition by running TV commercials on the Web and increase reach by attracting audiences they can't find through TV. And unlike TV, broadband-video impressions are trackable.

Starcom MediaVest Group was one of the first agencies to embrace the medium last year. "We started to talk to all our clients at once and said, this is big, this is real, and we felt the timing was right," says Dan Buczaczer, vice president and media director of Chicago-based agency Starcom IP. "At the same time, we went to vendors that had a product out there, like ESPN or The FeedRoom, as well as early-stage developers like Yahoo! and MSN, and vendors that hadn't thought about it too much like Nickelodeon, to try to develop serious opportunities," he says.

ESPN via its ESPN Motion product, delivers 30 to 40 daily feeds to viewers' hard drives. More than two million active viewers watch ESPN Motion on any given day. Another early market vendor is The FeedRoom, which manages feeds for more than 150 client sites, 100 of which are ad-supported, including iVillage, Reuters, and NBC.

While the buzz is strong, early viewership numbers are light. "Right now, rich media, in general, pulls more," Buczaczer says. Jonathan Klein, CEO of The FeedRoom, notes that a Netscape video reaches "tens of millions," but admits that that's only about 20 percent of Netscape's viewing population. Meanwhile, ESPN's large active viewer base accounts for only six to seven percent of ESPN.com's current ad sales, according to vice president of ad sales Riley McDonough.

Still, viewer quality is promising. Klein says FeedRoom viewers spend three times longer on videos than on text, brand lifts are running as high as 200 percent, and click-throughs of Flash ads running along with a video are in the three percent range. Meanwhile, McDonough foresees video ads reaching one third of ESPN.com's ad revenue within a couple of years.

Carla Shelton, director of marketing for Critical Mass in New York, says that streaming video ads are "probably not more than five percent of a company's online budget right now." Yet pricing is more akin to a TV model, than today's online model and can run anywhere from 25 to 100 percent more than rich media, according to Buczaczer. The FeedRoom's CPM is $20.

Growth will come, experts say, when agencies can tap more into the TV budget and existing hurdles are overcome, such as a viewer education curve, reaching a consensus on commercial length, improvements in tracking and reporting capability, and built-in interactivity.

Yet despite broadband's increasing popularity, there is already a product on the market that is leapfrogging it altogether: Unicast's video commercial. "Streaming videos play as they load at a speed of 10 to 12 frames per second on a high-speed connection," explains Unicast's senior vice president Allie Savarino. "Broadcast videos download entirely to the browser cache file before launching and playing at 30 frames per second, which is equal to TV quality."

Where's this market headed? "It's not just going to be on your laptop," Buczaczer says. "It's going to be on your cell phone and personal digital assistant. Figuring out how to advertise is not just a broadband thing, it's a wireless thing too."

And Four Models that Crashed and Burned - By Steve Smith

As we look to the future of online ad models, it is best for this memory-challenged medium to keep in mind some of the brilliant ad models that nearly drove the young Internet to permanent infamy by 2001. They sure sounded good at the time.

Online Communities: From Tripod to GeoCities to the infamously bloated initial public offerings de tutti IPOs, theglobe.com, the virtual community idea went seriously awry here. According to the pitch, you give users free home pages, organize them into marketer-friendly categories, and then place on these millions of sites, billions of banners targeted to personal interests. The model ended up getting blasted from both the advertising and user directions. "The number one objection was the lack of editorial control," says Paul DeBraccio, who was vice president of sales and marketing at both GeoCities and Tripod and is now CEO of Interevco. "It was all free and unedited. The major advertisers were concerned with seeing an 'I hate IBM page,' the kind of thing that actually happened."

The home page builders objected to running intrusive ads, so the sales teams were limited to a few unit sizes. Then of course, there were the twenty-something owners of theglobe.com, who some media buyers suspected were wearing the emperor's new clothes. "There was never anything to this company," says Doug Weaver, president, Upstream Group. "There's an absurdity here that is almost beautiful."

Push: Along with Pets.com, the poster child of bad Web ideas is represented by PointCast, which promised to stream news to PCs along with targeted ads that "owned the desktop" by sticking with the user much longer than any banner. Except of course when the memory-resident client wasn't slowing Windows or your applications to a crawl. "It crashed everyone's computers who ran it, and the information they delivered was rather generic and not very useful for the consumer," says Cory Treffiletti, media director, Carat Interactive San Francisco. "The product was poor."

Pay-to-Surf: In the frantic chase for eyeballs, any and all eyeballs, in the late '90s, some companies tried paying consumers to surf the Web and view ads. In one of the most ambitious attempts, AllAdvantage.com paid members 50 cents for every hour its "view bar" ran on the desktop and rotated in its own ads while users browsed the Web. The company relied on a multi-level marketing model, so that anyone who referred a new member got 10 cents per hour that the newbie ran the client. With seven million sign-ups in the first few months and about two million active users at its height, the company paid consumers $32.7 million in a single quarter in 2000 but sold only enough advertising to bring in $9 million of revenue. "A big Ponzi scheme," says Weaver. Except this Ponzi scheme couldn't even make money for its owner.

Ad-Supported Access: Watch these ads and you can get online access for free, said firms like NetZero and Juno back in the day. With detailed user profiles and total control of the user's Internet spigot, these companies could beat banner invisibility by forcing their users to sit through ads before they got online. The users hated it, and these "free Internet Service Providers (ISPs)" couldn't sell enough ads to underwrite the experience anyway. When they started cutting back on usable hours and booting the least lucrative users off the system, customers got seriously pissed. "The industry learned from that," says DeBraccio. "When you pre-load ads they all have built-in options to skip. The free ISPs didn't do that and that's why they backfired."

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