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TV Commercials Go Online, But Will Surfers Tune In?

Like it or not, television commercials are coming to your desktop.

A combination of improved technology, the proliferation of high-speed Internet connections, and the failure of other online-advertising formats is spurring advertisers to take their TV spots online.

The ads vary in style and intrusiveness. Some, much like TV ads, appear interspersed among video content that users request, like sports highlights or music videos. Others pop up without warning on top of, or in between Web pages.

This format allows advertisers to minimize their creative costs, and for some traditional advertisers, gives them an attractive way to dabble in the Web. The popularity of the ad formats is even sparking a rise in prices in some cases, a rarity in today's online-ad economy.

But can television spots work in the online environment? Web surfers have notoriously short attention spans. Advertisers also risk sparking a backlash against unexpected video and audio among online users, who are still bombarded by pop-up ads when surfing the Web.

"In the television world we've seen consumers become more and more frustrated with commercials," says Adi Kishore, an analyst with the Yankee Group. "If you're going to start providing that kind of advertising technology on the Web, it's going to result in the same response from consumers."

Powerful Supporters

The formats have some powerful supporters, including Publicis Groupe SA's Starcom MediaVest Group, the No. 1 U.S. media buyer by total spending.

"TV-like ads are going to become a significant part of the online-ad market," says Rishad Tobaccowala, executive vice president of Starcom. "They are going to bring in advertisers who normally don't think about spending online."

Mr. Tobaccowala's boss, Chief Executive Jack Klues, stirred interest in online ads when he said in a speech in May in Scottsdale, Ariz., that he would like to see his clients shift their ad dollars toward online video. He even suggested that there could be a need for an upfront market for online-video ads akin to the TV networks' prime-time fall programs, in which advertisers reserve spots months ahead of time. MediaVest clients include Bristol-Myers Squibb Co. and General Motors Corp.

Mr. Tobaccowala said Starcom already is working with some clients to shift some of their upfront ad spending to the Web.

It will be crucial for advertisers to tailor their message for the Web as they shift TV spots online, says Matt Freeman, CEO of Tribal DDB North America, an interactive ad agency in New York owned by Omnicom Group Inc. He encourages clients to think of ways to make their online campaigns entertaining, and tie in to TV ads without replicating them.

"You wouldn't put your 30-second television script on a billboard, so why put it online?" Mr. Freeman asks. "You have to make sure it's useful, entertaining, and relevant, that it has some inherent value to the person looking at it."

Allure of 'Rich Media'

For now, "rich media" ads, which include video and sound, remain a small slice on the $6 billion online ad pie. But rich media grew to 5% of online ad spending last year from 2% in 2001, according to the Interactive Advertising Bureau and PricewaterhouseCoopers, and online-ad executives say the growth has continued this year. While online advertising remains minuscule by TV standards, a June survey of marketing executives by Jupiter Research found that 64% plan to run online video ads in the next 12 months, up from 38% who reported running such ads in the previous 12 months.

"It's minute compared to television," says Mr. Tobaccowala. "But, given the trends we're seeing, it won't be minute two or three years from now."

The TV-like ads come in two formats. In one, the ads are run in a Web video format and are usually bundled with video content that users have requested. These ads generally run exactly as they appear on TV. So, for instance, ESPN.com, a leading sports sites, sells ads to run with ESPN Motion, which embeds video highlights in the site's home page. These highlights are seen only by people who have chosen to download the ESPN Motion software. (They now number 1.8 million, five months after the feature's introduction.) People generally will see one highlight clip, followed by an ad, followed by another clip.

The second type makes use of specialized Web software, including Macromedia Inc.'s Flash. These ads have to be adapted slightly -- they often have the same audio as TV ads, but less video and more animation, which can be compressed into more manageable file sizes, and they are often shortened to 10 or 15 seconds. These ads can download while users are surfing a site, and then can appear on top of the Web page, or between pages. This can mean users are hit with an unexpected blast of audio and an animated ad that blocks the desired content. The ads can be closed via a tiny "X" button in the corner, and blocked by special software.

Broadband's Role

Such formats, which also support TV-like ads created especially for the Web, have been available to online advertisers for several years, but technological advances in recent versions of Flash and other products have made it easier for developers to adapt TV commercials. It can take as little as a day, says Ted Kacandes, creative director of Glow Interactive, the New York online-ad company that reformatted HBO's "Project Greenlight" ad for the Web.

Jes Santoro, director of integrated media for EarthQuake Media, the closely held New York agency that also worked on the "Project Greenlight" ad, says his clients like the idea of keeping the same creative message online. "A lot of clients put a lot of time, effort and money into creating their traditional advertising, mainly TV, Mr. Santoro says. "Being able to very closely translate that expense into the digital space is very compelling for a lot of clients."

The spread of high-speed Internet access, known as broadband, is also enabling the developers to increase the size of these ads, because faster connections mean they can send more data to users' computers in the same time.

Closely held Unicast, which provides technology for standardized ad formats, has seen a surge of interest by TV advertisers since it began offering publishers a full-screen ad format in late April, according to senior vice president Allie Savarino.

Both Unicast and competitor Eyeblaster plan on increasing the size of these ads in the coming months, to allow for ads that take up more space on the screen and will pack in more video and animation. Both Eyeblaster (www.eyeblaster.com4) and Unicast (www.unicast.com5) are based in New York.

Dramatic Results

The results for some publishers and suppliers of the formats have been dramatic. ESPN.com has sold out its Motion ads through August to advertisers including Lexus, Warner Brothers (for the film "Matrix Reloaded") and Universal (for the films "2Fast 2Furious" and "The Hulk"), according to Riley McDonough, vice president of sales for ESPN.com. About half a million people per day see Motion ads, he says; the site is conducting research into the ads' effectiveness, according to a spokeswoman. ESPN.com is 80%-owned by Walt Disney Co., Burbank, Calif.

Advertisers pay $25 per thousand viewers, and ESPN plans to raise that price, says Mr. McDonough. ESPN.com is able to charge as much, per viewer, as ESPN's popular TV program SportsCenter because it offers a way for advertisers to reach a mass audience at work, he says. "If you don't buy it at this price, we have someone waiting on line," he says.

As a result of the ads' popularity, many publishers are racing to offer TV-like formats to their advertising clients.

MarketWatch.com Inc., for instance, sold an introductory Flash message, which greets all users of the site upon their first visit of the day, every couple of weeks when first introducing it a year and a half ago. Now, it sells the ads every day and is sold out for the next few months, says Scot McLernon, executive vice president of sales and marketing for the San Francisco business-news site.

But advertisers run the risk of sapping online users' goodwill, especially with Flash and similar formats in which ads can pop up announced and be hard to close.

"If the sites go overboard, users will definitely look for ways to eliminate them," says Nate Elliott, an associate analyst with Jupiter Research.

Posted on aef.com: July 11, 2003


Carl Bialik, The Wall Street Journal. July 8, 2003

Copyright © 2003 Dow Jones & Company, Inc.. All rights reserved.