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Internet advertising is entering a new era

GREATER METROPLEX -- Several years ago, the Internet brought a new era to the advertising world.

Today, the soft economy is bringing a new era to Internet advertising.

Faced with clients upset over poor responses to their online campaigns, agencies are dreaming up new ways of getting and keeping surfers' attention. And the owners of Web sites where they place their ads are increasingly willing to flash them in people's faces, often using methods that would have been considered overly intrusive just 18 months ago.

"A lot of it is prompted by the nature of the Internet as an advertising medium," says Pete Lerma, director for Click Here, the interactive marketing arm of Dallas advertising agency The Richards Group. "Performance is so trackable, clients expect accountability from agencies and publishers."

Changes in the advertising industry began about a year ago, when the economy started to slump and the advertising market entered what some consider its worst recession in years.

During the first few years of the Internet's mainstream popularity, most advertising was done via so-called banners -- strips that ran across the top of Web sites. In those days, when the Internet was still new to most people, click-through rates -- the number of times surfers click on ads to be linked to related content -- were relatively high, often reaching 3%, or about the same return rate as direct mail.

But with each passing year, click-through rates declined. They now average about 0.3%, so for every 1,000 times an ad flashes there are just three instances where users click on it. Many surfers simply don't look at the space where a banner is placed.

As a result of the decline in click-through rates, when the economy slowed advertisers weren't willing to pay for flashing an ad 1,000 times, as was the usual practice. They would pay only for performance -- the number of customers an ad brought in.

Change clearly was needed to avoid forcing Web sites like Yahoo! to charge for their content.

"The industry realized that if it didn't get its act together, it would make itself obsolete," says James Hering, senior vice president and director of interactive marketing at Dallas-based Temerlin McClain.

One of the first steps came from a trade group, the Internet Advertising Bureau. It established industry guidelines for about 25 standard sizes and shapes of ads. The goal was to streamline the process and make it easier for advertisers to know what they were getting.

The results haven't been a total success. Hering estimates there are still around 3,000 ad sizes in use. The ad industry has "done a terrible job of making things too complicated -- to where only the extremely brave of heart work in online marketing, because it's so difficult to get a campaign out the door," he says.

Nonetheless, users are starting to see some new sizes on a more regular basis. According to Jupiter Media Metrix, a New York research firm, large ad sizes grew from 4% of impressions in April 2001 to 9% in January. Among the big ad types are "skyscrapers" -- long and skinny, running along one side of the Web page -- and "squares" and "rectangles" -- oversized boxes that usually are placed in the middle of the page, so surfers must look at them as they scroll down the page.

Banners remain the dominant ad type, accounting for about half of all impressions during each month of the past year, according to Jupiter.

All of this is coming at the expense of small formats, such as "buttons" and "bars," which saw their share decline from 46% to 38% over the April-to-January period. Even so, small-format ads grew during that period, with the number of impressions going from 20.6 billion to 23.7 billion even as their market share fell.

Web sites are also using more pop-up ads and are paying certain search engines to place them high in the results of searches. New concepts are making the scene, including the delayed pop-up, which appears on a user's screen after a delay, or after the user has closed his or her browser.

Beyond changing the size of ads and their placement on a page, ad agencies are working harder to flash spots only to viewers who might be interested in them. The hope is users will be more tolerant. "If they're visiting a destination site -- such as a travel section of a newspaper -- and you provide them with a message in line with the content, it won't be as annoying or aggravating," says Steve Minichini, the New York-based vice president of media services at imc2, a Dallas ad shop.

Advertisers also want to gather more data on their prospective customers. In addition to compiling demographic data, like age and household income, advertisers will examine what offers for a given product or service a person has looked at and which ones they did or did not act upon, Minichini says. That, too, helps in targeting spots to the right people.

Minichini believes this is the future of online advertising. The more surfers choose to "opt in" to certain marketing initiatives and provide data about themselves, such as their likes and dislikes, "the more personal advertisers will make the message," he says.

Hering says Temerlin McClain recently did an experiment with The New York Times on a new concept called a "surround session."

Visitors to the newspaper's online travel section were exposed only to ads from American Airlines, a Temerlin client, over a certain number of impressions as they surfed the site. "Plus, we can sequentially deliver our ad message, so the impressions build upon themselves," Hering says.

But some in the industry believe exposing users to too many ads from one company can backfire. Lerma of Click Here says the agency puts frequency caps in its campaigns, which limit how many times a user is exposed to a particular ad. The goal is to prevent the spots from becoming annoying.

At the same time, surfers must recognize that for content to continue to be free, they must endure some advertising. Only a few sites, such as Hoovers.com and The Wall Street Journal's online edition, have managed to make subscription-based models work.

All of these innovations are still relatively new, and much experimentation is going on. Which means more changes will come over the next few years.

"This medium has a grand old history of five years," says Hering. "We're still figuring it out."


Jeff Bounds, Dallas Business Journal April 12, 2001

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