Despite market softness that usually follows a correction, spending in U.S. online advertising has recently been forecasted to reach as high as $8.8 billion by 2002. Advertising dollars spent on
traditional outlets, including newspapers, magazines and direct media, are being reallocated to online advertising. While dot-com companies, including Ameritrade and E-Trade, have scaled back online
ad spending during the last year, traditional companies, such as General Motors, are investing heavily to establish their online ad campaigns. So what's caused online ad companies to see a temporary
dip in business? New Internet-based companies have spent much cash in short order in an attempt to quickly build brand awareness--and a number of them have failed, according to Peter Kuper, an FAC
Equities analyst. This is a case where old, established companies are investing in the new economy, said Kuper. The targeted online advertising market is beginning to heat up and companies of all
sizes are looking for a higher return on their investments. According to recent studies, about 80% of Web sites' ad inventory goes unsold. Enterprises have more cash to throw at their online
campaigns, but small to mid-sized companies are getting into the act in order gain a competitive advantage, said Kuper. "Online ad solutions are economically attractive to them and represent a
tremendous opportunity." While the summer season typically means a slowdown in consumer spending, Kuper said that online spending remained up after the holiday season and he attributed that to an
increasing number of Web users. That means more consumers to target, and it bodes well for future ad spending, he said. For now online ad spending is primarily directed at business-to-consumer
e-commerce, but it is expected to play a role in business-to-business exchanges. How can businesses make sure that they are getting the most bang for their buck? Customer profiling and analysis
tools are becoming essential to online ad campaigns and provider Engage is well positioned to cash in on this hot new area. The company provides marketing and advertising tools, such as AdKnowledge
and AdManager, which enable companies to analyze their audience and target campaigns. "Engage offers targeted marketing and is positioned to give companies more bang for their buck than general
online advertising," said Kuper. Engage has compiled a repository of 70 million anonymous consumer profiles to help businesses shape their ad strategy. If Engage deeply penetrates the small and
medium-sized company markets, which are highly fragmented, it will realize tremendous opportunities, said Kuper. While shareholders wonder when Engage stock will regain some traction, at its current
bargain price of about $12, Engage represents a good buy. Engage's nearest competitor, DoubleClick Inc., is a formidable one, with shares last trading at about $38. DoubleClick has a strong brand in
Web real estate and banners ads, for which ra
