To the list of winners in the dot-com revolution, add cable TV networks, which are riding high on the wave of advertising for Internet sites.
Web sites targeting specific audiences are finding a good match with the specialized financial, sports and lifestyle offerings of top cable TV networks, whose viewers tend to be exactly what dot-com companies want: higher-income, technology-savvy folks.
Some cable TV networks could experience spectacular revenue increases by year end if the current trend continues; so far, no one has glimpsed a slowdown in dot-com advertising.
While the average advertiser spent 29.4% of its national TV budget on cable in 1999, the average dot-com company spent 40.2% of its comparable budget on cable, according to an analysis by the Cabletelevision Advertising Bureau, based on data from Competitive Media Reporting.
Leading the list of big spenders are Ameritrade and E*Trade Securities, two fast-growing online stock brokerages.
Also among the top cable advertisers are telecommunications and computer giants AT&T Corp. and Microsoft Corp., which each advertise their Internet brands separately from their telephone services.
"We target cable channels to match up with the demographics we're looking for," says Pete Ricketts, senior VP-marketing for Ameritrade. Cable has "higher household incomes - $50,000 or above - so we're focusing on adults 35 to 55. We're probably not going to be advertising on Nickelodeon, but rather CNC or MSNBC."
Mr. Ricketts says Ameritrade will spend $200 million during its current fiscal year on all media, more than triple the amount from the year before. CAB says Ameritrade spent $51.4 million on cable advertising alone last year.
Overall, dot-com companies poured $468 million into cable advertising last year, a sharp increase from CAB'' estimated total of $96 million in 1998.
The flood of dollars from an advertising sector that didn't exist several years ago is a happy challenge for cable nets. Some say that e-commerce companies now account for 10% or more of revenues, and the boom is putting the squeeze on available ad time.
"It really has tightened up the inventory," says Ron Schneier, exec VP-sales and marketing for A&E Television Networks, which encompasses A&E, History Channel and Biography Channel.
"It's primarily scatter dollars rather than all four quarters, but we've seen [dot-com advertising revenue] continue to be strong. It ranges from the financial companies to travel to toys," Mr. Schneier says.
MTV Networks' VH1 has become a particular magnet for dot-coms such as Amazon.com, Autoweb.com, Bluenile.com and Askjeeves.com.
Dot-coms "are new advertisers on the air for everybody, and the inventory's tightening up all over," says Tom Cavallaro, senior VP-ad sales for VH1. "I think you will tend to see advertisers that were scatter advertisers in the past come to the upfront market. If you are looking for certain types of inventory and are not involved when those events are available, you may not be able to get what you'd like."
It's no accident that dot-coms are seeking out cable, given the demographic synergy.
Dot-com advertisers are "looking for people with money; they're looking for people who are dot.com users," says Jerry Dominus, VP-network sales and marketing for CAB.
"Home computer ownership is higher in the cable universe than the non-cable universe. Cable households tend to be earlier adapters to new technologies. This is a case of dot-com advertisers voting with their budgets."
Epidemic.com, a company that tags ads onto subscriber e-mails, was one of the dot-coms that spent a small fortune, $1.6 million, for a 30-second commercial airing on ABC-TV during this year's Super Bowl.
Epidemic.com CEO Kelly Wanser says the Super Bowl ad was effective in making a splash, but that the company's ongoing media strategy will rely heavily on cable to target likely subscribers.
"It looks like the cable piece of the mix is going to be half of the TV budget," says Ms. Wanser.
In addition, the ability to offer bundled cable and Internet advertising is a golden opportunity for networks such as CNN, MSNBC and ESPN that are also among the most popular Internet portals.
"We're increasingly putting those packages together," says Ed Erhardt, president of ESPN ABC Sports Customer Marketing & Sales, who estimates that e-commerce accounts for 10% of ESPN's advertising revenues.
The crush of dot-com advertising is partly fueled by the sky-high valuations investors have placed on these companies, some of which have thin revenue streams. That raises the question of what would happen to ad spending if the dot-com boom goes bust.
"We do a lot of due diligence before we accept an advertiser on the air," says Mr. Cavallaro. "We want to make sure they're ready to take the plunge. In the future, it appears to me that many of them will be standing, and some will not. We want to continue with our core business and advertisers. E-commerce is a benefit."
Stephen Keating, Advertising Age. April 10, 2000.
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