Sometime in 1994, the Web turned into the media world's hot zone. Scores of publishers jumped online, some - The New York Times, ESPN, Playboy, Time Warner and CNN - bringing with them established brands. Others - SportsLine, HotWired, Salon, C|net, Slate - introduced fresh names, each hoping to become next century's vital media brand.
Too bad nobody was paying the bill. Across the board, content providers are struggling with their "business model". None of the little men behind the curtain really knows how to make money from all this. Alarm is mounting.
The websters have three options: charge-per-use, paid subscription, or advertising. But two already look like nonstarters. The infrastructure for per-use fees is years off. Subscriptions can work with the super-premium end of a publisher's audience, but not across the board. The bloodied folks at USA Today and AT&T would be happy to explain why: the Net's "information wants to be free" culture, and the Web's supply of redundant content (at no charge and on nearly every conceivable subject) outstrips demand.
That leaves advertising. US research firms Jupiter Communications and Forrester Research have both projected that ad spending on the Web will approach US$5 billion by 2000. This bonanza will make up more than 90% of total revenues for content-providing Web sites. Bill Bass, a senior analyst at Forrester, estimates that, by the end of the decade, advertisers will be plunking down $95 per surfer each year (that's more than they spend on radio), compared to only $5 today. Sounds great, for someday.
The bad news is that today's $5-a-surfer in advertising revenues doesn't take you very far towards that pot of gold. Bass estimates that most content providers cover no more than 20% of their costs with ad revenues. By another estimate, the Web contains more than $2 billion in potential inventory for advertisers to buy, yet total 1996 ad spending probably will not exceed $300 million. Moreover, the lion's share goes to search engines - the phone books of the Web - not to infotainment destination sites.
Unless content providers can do something brilliant immediately to boost the ad community's per-capita investment, they will bleed additional millions over the next four years, and many undercapitalised players will fold. For content providers have yet to exploit the potential of advertising to the full, and this has hurt the perceived value of their venue among marketers.
There are three steps Web publishers can take, individually or collectively, to improve their fortunes: evolve the ad banner, reclaim content from the abyss of corporate Web sites, and try something completely different - such as inviting the brand serpents to share their editorial Eden in a scaly ménage à trois. All are being tried somewhere right now. One era of Web advertising is about to end; another is about to be born.
Evolve the banner
First, let's all admit - as publishers, advertisers and benumbed surfers - that the ad banner got Web advertising off to a weak start.The HotWired Network, owned by Wired Ventures, invented this creature with the best of intentions when it launched in October 1994. Within the browser frame, we allotted roughly one-third of the real estate to our marketing partners. This seemed both fair and the most that the Web's ad-hostile early adopters would tolerate. (Since then, they've softened to the consistency of Gruyère on this issue. Sorry, PrivNet.) From then on, the banner was replicated - faster than you could say "addictive meme" - as a standard format throughout the rapidly growing Web publishing community.
The banner does some things well, such as building brand awareness and providing a uniform size around which to plan. It is the object of increasingly sophisticated targeting strategies that no other medium can match, allowing the banner to find its audience accord-ing to the target's domain, ISP, browser, platform, time of day, company, search topic, nation of origin and cookie trail. Whatever else we might attempt, rest assured that banners will be a staple of the Web for years, especially in hit-and-run zones such as search engines.
Even so, the ad banner has a size problem that has rendered it financially inadequate for publishers, and creatively difficult for advertisers. Web sites that normally run to hundreds or thousands of in-depth pages typically post banners only on the 10 or 20 most highly visited pages, and then only a few banners at a time. Thus, advertising that covers less than 5% of a Web site's total page space is expected to carry the tab for the entire enterprise.
Compare this with magazines. Most magazines devote 40-60% of total page space to advertising, yet expect to receive no more than half their operating revenues and profit from this source (the rest comes from subscriptions and newsstand sales). Even if high production and distribution costs are held aside, the typical mag would still need to devote one-fifth of its real estate to ads, or else it would shut down.
Web publishers might get away with offering less ad space if they charged relatively more for it than print and other media do. Many hoped that database-driven, microprecise ad-targeting would allow them to charge more. But it hasn't, because the targeting is not microprecise just yet. Intense competition among sites also keeps prices middling. The usual cost to reach 1,000 pairs of upscale, highly educated, mostly male eyeballs with a full-page ad in a business magazine runs between US$50-$100. On the Web, the cost can range widely, from $10 to $175, depending on extras; the average rate is around $35. Some advertisers complain that even this is too high, since they doubt whether a little banner can deliver the same emotional impact as a glossy spread or a TV spot. Don't banners more easily resemble the humble roadside billboard (ad rate: $1 to $10)? Ouch.
Now consider today's banner from another angle: as a creative space. It's a skimpy piece of acreage to work within - smaller than the top of a cereal box, and limited graphically by the need for quick downloads. Sized at 480-x-55 pixels or smaller, the typical ad banner occupies less than 10% of a 640-x-480 screen display. As the computer standard has moved to a finer-grained 832-x-624 screen, the banner looks even smaller. This might be alright if effective ad communication were simply about saying a few words, but it is actually about creating a vivid brand experience.
Such experience can be created in a banner, but only by masters of concision. The Hal Riney agency, for instance, accomplished much in little space for its client, Saturn. Its simple red and white ad reads: "No hyper salesmen. No cyber babes. No virtual stuff. A different kind of company. A different kind of car." With a few key words, the banner conveys the essence of what makes this low-key brand shine. Even if you don't click through to Saturn's Web site, you've learned something valuable about the brand.
Most other advertisers, however, flounder. Either they're vapid placeholders - "The World Inspires Us," one brand declares; "Stop. Look. Listen," counsels another - or else they very quickly veer into a cheesy hard sell, plying their readers with free gifts and discounts.
This latter ploy is pandemic now and reveals the greatest misfortune of the ad banner. Its small size has encouraged marketers to stop thinking about advertising online as a way of building their brand's image and positioning, which is the core task of advertising in other media. Instead, they view banners as crude teasers for company Web sites - much as they view shelf banners in supermarkets.
For the last year or so, banner click-through rates have fizzled. At a recent conference, Intel disclosed that, across a dozen Web locations where it advertises its site, click-through has ranged only between 1 and 6%. Retorted one discouraged attendee: "Sounds like you're bragging."
A couple of years ago, things were different. Click-through rates of 20-30% were not uncommon. Yet the problem is not that banner messages have declined in quality. It's that two years of gullible surfing to dull, ham-handed company sites have at last conditioned the public - as if by aversive electroshock therapy - not to click on banners at all. Advertisers would rather scapegoat the messengers: their ad banners. No wonder they're not pouring in more dollars. And no wonder that most ad banner money is going to search engines, instead of infotainment sites. In real advertising - intended to do serious branding - context matters greatly, and compelling infotainment sites could charge a premium. With advertisers relegating the banner to a roadside arrow, however, cheap mass reach becomes the goal, and the best delivery is by search engines.
If infotainment providers hope to compete, they must restore the belief that real advertising can be done on their sites; that it can be eye-catching, moving and somewhat complex; and that these things are worth paying more for in a targeted, interactive context.
How to begin? Publishers need to re-invent the banner in larger sizes, in different shapes and in surprising locations - as Duracell, for example, has done with its batteries ripping through background screens. Get rid of the box, add audio and animations, incorporate useful Java apps and devise more interaction with site content. Delay the ad's appearance on the page, let it pop up later, or let a rollover reveal it as a hidden Easter egg. Give it continuous presence on the site through the use of frames. Create serial messaging from banner to banner. Make us focus on the ad exclusively for a few seconds (much as the Riddler and Word sites have done by interposing ads on splash screens).
Above all, let the advertisement add value to the site experience. That equals entertainment. And revenue. With more effective creative opportunities to offer advertisers, publishers can can help advertisers realise that this isn't advertising after all. It is, in fact, a form of highly targeted direct marketing, the message-delivery costs of which per capita compare quite favourably with direct mail and other delivery vehicles.
Banner daze
The ad banner format is perhaps the biggest impediment to advertising on content sites. But it is far from the only one.Advertising on content provider sites is typically an afterthought for most companies; it is what they do with leftover funds from their own digital Taj Mahals. But you won't find much left to spend, because corporate sites tend to be colossal money pits. For example, there are more than 100,000 US company sites on the Web today that are expected to cost their owners something like $1 billion to $2 billion this year.
As marketing devices, many of these sites are as ill-conceived in their grandiosity as ad banners are in their parsimony. If it hopes to win a greater share of the proffered billions, the Web publishing community must somehow help corporations scale back.
The corporate Web building craze started in 1994, sparked by two things. First, advertisers and their agencies were whipped into a froth by Ed Artzt, then-CEO of Procter & Gamble, who delivered a much-cited and wildly overblown jeremiad on the coming digital economy and advertisers' vanishing place in it. Artzt admonished marketers to wake up, learn this digital interactive stuff and bring their own sponsored programming to the market. Until interactive TV arrived, they would practice on the Internet.
Second, the "relationship marketing" craze caught on, propelled by the popular book The One to One Future, by Don Peppers and Martha Rogers. The authors said successful marketers of the future would use databases to treat customers as individuals and build loyalty by doing nice things for them. So companies packed their Web sites with "value-added" infotainment that went beyond the narrow interests of their product category.
In their painful eagerness to reach out to the visitor, to connect with their lifestyle, to be relevant, some marketers have lost all sense of realism and proportion about the role of their brand in the customer's life. Chivas Regal, for example, figures that people drink its booze to celebrate career successes. Therefore, Chivas should be taken seriously as a career adviser: its elegant site boasts a counselling centre "loaded with all sorts of interactive features, games and workshops ... to keep you moving forward, toward that horizon we call success."
Visiting the Toyota site is like tumbling down a rabbit hole and finding Wonderland. Not satisfied that people might visit its site merely to learn about its car line, Toyota offers a home design club, a sports magazine, a women's lifestyle zone, a "man's life" companion, a travel guide and Living Arts, a section that reviews movies and books. The site covers global fashions and dude ranches, interactive comics and poker etiquette, not to mention advice on how to "get fit fast, plan a perfect garden, rate your mate, chart a financial future, swap hoop rookies, learn to talk hardware and find a path through the woods."
What could these companies - savvy marketers all - possibly be thinking? Folks might visit once, but will they linger or come back? Is this true "relationship marketing", or self-delusion? Has anyone calculated the CPM - the cost per thousand impressions - garnered by these places? Is it $300? $500? More?
Let's make one more stop, at the L'eggs Women's In.Site, which received the first Gold Clio awarded to a Web emporium. This brand of tights is determined to cling, without bagging, to every dimension of a woman's life. In essays and articles, it covers Health & Fitness, Style, Home & Family, Legal/Politics, Entertainment, Career (Chivas alert!), Personal Finance, Women's Resources and more. Nothing gets much depth, but every topic offers a discussion forum.
Visiting those forums, however, I saw a curious pattern: irrespective of the assigned topic, participants - many of them men - were talking about, well, tights. And how slinky-cozy a pair can feel on a man's legs. The deeper lesson: no matter how hard brands try to become something more, folk seek them out for what they actually are. Over recent months, companies have begun to get this point and are deconstructing their megasites to offer simpler, more effective stops for sales and service. (Check out the liposuctioned sites of AT&T, MCI and Sprint.) Now they leave the generic lifestyle infotainment to specialised content providers.
A word from our sponsor
As content moves back into content-producer's Web sites, advertisements should move into new formats. The PointCast Network "screensaver" is a harbinger. PointCast lets viewers pick news categories of interest and then slump luxuriously before a screen that treats them like couch potatoes. Likewise - and this is key - viewers needn't bother to click on cryptic banners: they have only to sit and watch.By their nature as screensavers, PointCast programs are probably less closely watched by their distracted audience than other venues. Even so, marketers find this Net medium riveting, and their demand for ad inventory has been intense. Even better, a "push world" of diverse distribution systems promises to augment ad revenue streams by allowing content providers to bill multiple sponsors for the same content in different channels.
The fruits of push, however, are still green on the tree. Meanwhile, two other approaches have ripened. The first I call a "brand module", and the second, "content cobranding". Both could boost revenues for content providers willing to step beyond ad banner conventions.
Brand modules are small Web sites - just a few pages, really - that attach to more popular infotainment sites and give viewers a brief but effective brand experience. Brand modules take into account that most people will never visit a brand's Web site, no matter how exquisite, unless they're already customers or actively shopping. How can webvertisers reach a wider audience by surprise in other locations, without limiting themselves to ad banners?
Levi Strauss & Co, for example, has developed the "I-Candy" campaign to nest within content sites oriented to male teens. It provides a series of Shockwaved modules, such as crystallising snowflakes and twisting DNA strands, designed to convey that "no two pairs of Levi's 501s are exactly alike." The digital ad agency Giant Step has produced an array of strikingly different modules for McDonalds and Kelloggs. And Modem Media has begun to set up modules for AT&T that serve as quick sign-up booths, located at other popular Web sites.
While advertisers usually create modules on their own, publishers might also cultivate a lucrative role here. Many brand modules fall short of their full potential because they are not customised to mesh thematically with the infotainment sites on which they appear and thus remain outside the site's essential experience. Content providers are in a unique position to customise these modules more effectively to their own content, for premium charges.
Content cobranding is the reverse of the brand module. Instead of adapting the commercial message to the adjacent content, it modifies the content to incorporate a brand presence, blurring the separation of ads and editorial.
Cobranding realises that visitors seldom really credit advertisers - whether they're lumped into TV commercial pods, or banks of Web ad banners - for making possible the content they've come to see. That's why brands in the 1950s and 1960s preferred to sponsor particular TV series exclusively.
By the same reasoning, if a Web publisher can somehow succeed in transferring the visitor's appreciation of content to an appreciation of a paying sponsor, then it has created much more value for advertisers - and that content is worth paying extra for.
Content cobranding is done in two ways. A handful of companies have pulled the valuable content of established publishers onto their own corporate Web sites to gain credit for serving it to customers. The Delta Airlines site, for example, seeks to ingratiate business travellers with weather updates from The Weather Channel and sports updates from SportsLine USA.
But in most cases, it is the commercial brand that takes up residence at the content site. The HotWired Network has interwoven the presence of Dockers, a line of men's casual businesswear, into its Dream Jobs site, a page that posts daily profiles of available jobs that "make you smarter and let you be yourself." These are companies, as it just so happens, that would let you wear your Dockers to work.
Yesterday's simple world of ad banners versus company Web sites will not suffice; both are merely components of a more complex model. Unfortunately, advertising agencies, who will bear much of the responsibility for creating this new model, still have their hands full in traditional channels. Without their help, Web publishers often find themselves pushed back again and again into a long narrow box of their own making. Time for a new breed of entrepreneur?
Hunter Madsen is vice president for commercial strategy at HotWired. He was formerly a senior partner at J. Walter Thompson/USA.