No matter where visitors turned in the exhibit hall at last month's National Association of Broadcasters (NAB) convention, it seemed there was some vendor hawking The Next Big Thing in streaming media or e-commerce solutions.

But the solution that wasn't on sale was the one that answered the question on the mind of every station executive in the room: "How do I make a profit on this stuff?"

"I don't think anyone has it figured out yet," says Tim McCarthy, general manager of WABC Radio New York, which has the largest audience of any traditional broadcaster streaming on the web. "The upside for incremental revenue is huge, but in terms of nailing three, five hundred thousand in revenue, we're not even close."

McCarthy shouldn't complain too much. His station, which is streamed by RealBroadcast Networks, is a rarity in the world of Internet radio; its web site is actually in the black, making a $250,000 annual operating profit (if you don't count the technology investment, which McCarthy won't talk about). But that's a drop in the bucket in the New York market.

Is anybody else making money? "Nope," says radio industry consultant Fred Jacobs. "Everybody's flailing around trying to find a way to make it work."

And it's not just traditional broadcasters who are trying to turn red ink into black.

"If I could sell 100 per cent of my inventory this minute, we'd be profitable," says Eric Paulson, the new chairman of NetRadio Corporation, which owns five of the ten most listened-to web channels according to the latest Arbitron ratings. And how close are they? "We're nowhere close."

Subhead: Investing in potential

What has everyone excited is the medium's potential ability to target streaming audio ads to each individual listener. Companies like the Coollink Broadcast Network, which provides turnkey web solutions to terrestrial broadcasters, insert streaming ads based on demographic data captured during an opt-in registration process.

"What we're doing in layman's terms is providing interactive rich media over the computer which creates the highest return on investment for the advertiser and the most relevant content to the end user," says Coollink President & CEO Grant Wynn.

That translates to mean ads targeted to the specific age, gender and zip code of the visitor. Some broadcasters would argue that is what radio has always done.

"We are narrowcasting to a much tighter stream," counters NetRadio's Paulson. "If Mercedes wants to advertise their new under-30 C-Class car, we can reach the audience that wants it. We're not going to waste one nickel on somebody who's looking for a Chevy pickup. No terrestrial broadcaster can say that."

As with banner ads, the technology exists to capture a far higher level of information about the visitor -- or, in this case, the listener -- and insert ads specifically targeted to that individual. But no one is rushing to try it.

"Targetability should not be the first issue because we have not reached critical mass," argues Bo Overlock, managing director of RadioWave.com, which operates music channels in partnership with MSN, Rollingstone.com and other sites.

"If an ad agency asks me to target at that level they are asking me to slice a small piece of the piece even smaller. To target like that now I'm going to be shooting something to two people in Cincinnati and eight people in Miami."

And therein lies the heart of the challenge facing anyone trying to make money in Internet radio right now -- small audiences scattered across the face of the earth.

"When you look at the number of people who are listening and how far flung they are, you have to ask, 'what do you do with that?'" observes Terry Gillingham, GM of KPIG, the first traditional broadcaster to stream its signal. Though it is only a 2,800 watt station in a little town outside Santa Cruz, CA, KPIG has the tenth largest audience of any web channel. "I've got one person in Scotland listening, is my advertiser interested in reaching that person?"

Web streaming evangelists have a ready answer to that.

"The model works in the aggregate," argues Ron Rivlin, VP of Hiwire, Inc., which handles ad insertion duties for Christian Pirate Radio and several other webcasters. "If a local station wants to do this on their own, it's not going to work. But in the aggregate, take all those audiences all over the world [and sell that] and it gets impressive."

Subhead: Cutting through the hype?

But it all gets back to potential. The potential to narrowcast a Cincinnati car dealer's ad out to select listeners in Cincinnati while doing the same for his counterpart in Albuquerque; the potential to band together enough stations and channels around the world to launch a precision strike on a highly targeted consumer group and make it worthwhile for the advertiser.

"We've got it down to where we know the cookies that are on the chamber music channel versus the maestro channel," brags Paulson of NetRadio, which releases a new player next month that it says will capture an even greater detail of preferences.

The problem is critical mass. Talk to a half dozen companies in the web streaming business and you are likely to keep hearing the same thing: We've got loads of clients signed up, we just can't talk about it yet.

"I had a friend at the NAB who spent most of his time just going around to all these companies trying to figure out if any of them could actually do what they claimed they could do," reports Tom Taylor, editor of the radio industry newsletter M Street Daily. "He heard a lot of hype and very few specifics."

One of those companies was Feed The Monster Media, a web content provider and developer which touted itself as "the leading Internet solutions provider to major-market radio stations."

On Friday, after a week in which the seven sites it had built for CBS/Infinity intermittently went dark, management issued a statement announcing that it had suspended operations "due to its continuing cash shortfall."

That's exactly the kind of thing that makes McCarthy of WABC nervous.

"It's almost like going into a dark room with your hands in the air," says the New York GM, whose current web revenues come from banners and other sources, not streaming audio ads. "You know it's the right room, but you're not sure how fast you should walk yet."

Next week: Is the ad industry buying web radio?

---

--------------------

Oct. 23, 2000

HEAD: Will the ad industry buy streaming radio?

By: Lawrence Pintak

For the big boys of the advertising industry, web radio is still small potatoes.

"We don't know if anyone's listening. We still don't know how we should be measuring because it's such a small audience," says Mitch Oscar, senior VP and director of media futures at Universal McCann, a leading ad agency.

The struggle over how to track web radio audience is reflected in Arbitron's shift last summer from counting heads to tallying what it calls Aggregate Tuning Hours (ATH).

"I'm not sure what that means," says Terry Gillingham, GM of KPIG-FM, a small broadcaster in Monterey, CA that is number 10 in the Arbitron webcaster rankings, and was averaging 70,000 to 80,000 visitors a month under the old measurement system. "What do we say when we have 100,000 listening hours? Who sets the benchmark for what you pay for those hours."

The advertising industry is asking the same thing.

" Anyone who says to you they have the formula is lying -- I don't think they know enough yet," says Oscar.

Thirty-three million people logged onto streamed content last July, according to the Nielsen Netratings, but specifics on what they sampled are difficult to come by.

Eight firms currently provide some form of audience measurement tracking. But none of the approaches yet offer the level of detail ad agencies seek. Neilsen, Media Matrix, NetValue and PC Data monitor panels of from 6,000 (NetValue) to 120,000 (PC Data) users through usage reports from media players, but none has yet released its data, and critics say, each has major drawbacks.

Arbitron, which is one of only two companies currently issuing reports, plans to begin providing demographic details in January.

The streamers insist their technology relegates the ratings system to e-history.

"Everything is sold on impressions, and we keep serving up those ads until we hit the numbers, so they are guaranteed delivery," says Ron Rivlin of Hiwire, Inc., which handles ads for traditional and web-only streamers.

"The question is when are the advertiser and the advertising agencies begin to believe the numbers and the power of narrowcasting and channel that money out of traditional broadcasting?" asks Eric Paulson, chairman of NetRadio Corporation, which has five of the top ten channels.

Broadband access -- only 8% of Americans have broadband at home -- remains the biggest roadblock to the success of streaming media, and the biggest reason for advertising industry skepticism. That and recent history.

"We are rolling out a first time advertising vehicle to an industry that has a bad taste in its mouth about banner ads," says Bo Overstock, managing director of Radiowave.com, whose Ispot technology offers clickthrough banner ads with audio. "We have to go back to the ad agencies and convince them of those new vehicle's effectiveness."

If Oscar of Universal McCann is any indication, they are unlikely to find a warm reception: "We're still a long way away in terms of measurement, and since so little is spent on national radio, I don't think it's a priority except to the people selling it.

Of the $17 billion spent on radio and TV, only $750 thousand of that is the national spend and the rest is all local," Oscar continues. "Radio has always been wonderfully local, that's been its strength. Web radio changes those dynamics."

That's because the moment a local broadcaster starts streaming its signal it becomes a global broadcaster.

And if Madison Avenue's skepticism isn't enough to give traditional broadcasters cold feet about making an investment in the Internet, there's the Catch-22 of web radio -- the more people who listen, the more it costs the webcaster.

"In radio, you create a station, you buy a transmitter, you build a tower and you broadcast," says consultant Jacobs. "And once you've paid down the debt it really doesn't cost anything. The whole streaming audio model is a completely different game because the more people you have listening, the more bandwidth you need and the more it costs."

There's also the issue of raw speed. "One of the problems with streaming is that the more audience you get, the longer it takes to stream," says Tim McCarthy, General Manager of WABC, the top-rated terrestrial broadcaster currently streaming. "I was listening to a ballgame on the web the other day and looked up and the TV and realized we were running at a seven minute delay."

All of which is why many broadcasters are taking a wait and see attitude. If you don't live in New York or Boston, for example, you won't be able to listen to CBS' powerhouse news/talk stations in those markets on the web. CBS President Mitch Karmazin has ordered a complete ban on streaming until he can figure out how to make money on it.

"Streaming for the sake of streaming is not good programming," agrees WABC's McCathy. "You're taking the chance of diluting your audience."

Even for those who are on the web, revenues from streaming audio ads remain purely theoretical. The streams of most traditional broadcasters simply carry the ads that are being run on the air, and relatively few even add a web surcharge.

"We truly believe there is going to come a time when it is going to be profitable," says Randy Palmer, VP of Clear Channel Communications, which is currently streaming only 58 of its 1,111 stations. "We're basically testing what kind of response we're going to get [and] building an infrastructure for when we believe it will be profitable to roll out to the other stations."

That's a luxury the webcasters don't have.

"E-commerce strategy is not make or break for broadcasters," says Jacobs. "They can build slowly unlike the audio streaming companies doing nothing but audio -- they're going to be in a world of hurt."

---

Oct. 29, 2000

Media Morph: Radio and the Web Merge at Dallas Rocker

By Lawrence Pintak

It sounds like a radio station. It markets itself like a radio station. So is Merge933.net a radio station?

Yes, but...

"We try to blur the line between radio station and web site," says mid-day DJ and multi-media director Jeff K. "We are one tool listeners can use not only in their cars but at home."

Most radio stations these days have web sites. But this Dallas FM station is one of a handful across the country that are moving toward an actual convergence of traditional radio and the web. Not only does merge933.net use a URL in its name, but it also gives the web operation the emphasis and resources that make it an integral part of the operation.

The patter of the station's DJs is laced with references to the web site.

"If I'm about to do a break on Pearl Jam, we go out on the net and find an article about them and post it on the site," explains K -- who uses only the initial. "Then I say, 'Hey, you can read more about them right now on merge933.net.'"

No DJ is an island

But K does not surf alone. Most of the web work is done by his alter-ego, who functions as what the station calls a "web jammer." Every DJ at Merge933.net has one. Essentially Internet producers, web jammers sit in the same studio with the jock in front of a console of their own, constantly searching the web for new material and links that tie in with the music and chatter of the radio program. They also interact in real time with the online audience.

"They're like your Internet concierge," says Dan Bennett, the station's general manager. "Whatever the audience wants -- info on songs played, good places to go to dinner, what concerts are coming up -- they can email and there's a real live body to come back to them via the Internet within ten minutes."

Ten minutes? Bennett admits many are skeptical.

"I told that to an advertiser one day and she turned around and emailed the web jammer saying, 'You're station sucks. You don't play enough Britney Spears.'

"I thought, 'Oh my God, we're dead.' A few minutes later, the web jammer wrote back saying, 'Sorry you feel that way, but here's a couple of great Britney Spears sites you might want to check out.'"

That interaction with the listener comes at a price.

"You've got an extra body in the studio at all times that you have to pay for and I haven't seen too many companies that want to do that," says Bennett. "But down the road, we think it will pay for itself by strengthening the bond between the radio station and the listener."

Radio you can see

Parent Susquehanna Broadcasting has been so pleased with progress toward achieving that goal that it is launching similar experiments in San Francisco and Atlanta. Other station groups are also moving in that direction.

At WRIF Detroit and its Internet twin, IRIF, the station's shock-jocks are using the web's cutting-edge technologies to offer, among other things, online strip shows by female visitors competing to be the station's "web girl of the month."

Visitors to the merge933.net web site won't find nudity, but they are offered a fairly broad array of content, organized into four categories that reflect the station's music mix. Along with the usual concert listings, contests and links, there are mp3 downloads, articles, interactive polls.

"Everything that comes out of the mouth of the on-air person ties back to the web," Bennett explains.

And there's the critical advantage Merge933.net and others like it have over the huge universe of web-only radio stations.

"Radio can do something no other media can -- it can drive people to a web site by saying over and over, 'Go to our web site,'" says Tom Taylor, editor of the M Street Daily, a radio industry newsletter. "That's a business model a lot of people are watching closely."

But, those involved emphasize, that is a long-term business model. For the moment, revenues on the Merge933.net site are minimal. No web-only ads are being inserted. But one area Bennett and others in the industry believe has potential is a function that allows the station to add visuals to radio ads.

TV ads on the radio

On-air programming is streamed on the site through a window that appears on the left side of the screen. As cuts are played, the CD cover and other appropriate images are shown in the window using Ispot technology provided by RadioWave, Inc., a company in which Susquehanna has become an equity partner.

More interesting from a revenue standpoint is the fact that the station can offer the same service to advertisers. Merge933.net can lay images over each ad. It's not TV, but -- the theory goes -- it does draw more attention to the spot. The station is asking an additional 10 percent for the service.

"A large majority of our customers have not done it yet, but we do have people experimenting with it," Bennett says hopefully. "We're in the midst of trying to make sure we have the pricing correct."

Some in the radio industry question the very concept of streaming radio, arguing that the perceived benefits do not even come close to outweighing the dangers of fragmenting the audience. Bennett doesn't buy that.

"Every statistic we see is that the web still continues to grow in terms of usage," he says. "What we're looking for is not a fight with the Internet, but for how it can embrace radio."

"Right now it is still a small percentage of people listening to radio on the Internet, but every year it grows more and more and we want to be there from the very beginning," says program director Strong. And, he adds, sounding reminiscent of a radio evangelist: "We want to help the audience touch the station in ways they have never done before."

###

Nov. 6, 2000

Super Heroes Plug Super Technology

By Lawrence Pintak

It's a bird. It's a plane. No, it's a telecommunications PR campaign.

The world of WAP, voice recognition and Internet infrastructure may seem a strange place for superheroes, but six animated crime fighters are at least saving the world from yet another white paper on technology convergence.

"There's so much clutter out there, so many white papers," says Bob McWade, who came up with this so-far novel use of rich media. "The question is, how do you get a very serious and sober message about telecom convergence out there in a way that people will actually hear, see, digest and internalize?"

The answer, he decided, was the TeleBusters.

"I called my 12-year old son one day and asked him, 'what was that thing that all the Power Rangers merge into?'" he recalls.

The answer: The Megazord, which McWade maintains, "is like telecom convergence -- each element is more powerful when it works together."

Ok, it's a stretch. But remember the alternative.

The animated cartoons, produced on behalf of clients, are being embedded in interactive newsletters, which have the added advantage of allowing McWade's oddly-named PR company, TheJelly, to track metrix on viewers and viral distribution.

The concept is the latest example of how increased access to broadband -- and availability of autosensing technologies that determine whether an email program can handle rich media -- are opening up new advertising and marketing opportunities.

Newsletters with an Attitude

"Newsletters are evolving into more interactive vehicles," says Jeff Mesnik, vice president of IMakeNews, which provided the interactive newsletter platform in which the TeleBusters were embedded. "We can deliver the newsletter to the email box and then we draw you into the web page."

It's just the latest example of how the marketing communications industry is employing rich media on behalf of its clients -- whether streaming video, animation, flash or audio. These days, just about every PR, marketing communications or ad agency has a subsidiary, a division, or a couple of kids in a back room developing rich media-enhanced pages.

"Rich media is the future," says Adam Brown, director of eKetchum, the PR giant's new media arm. "It has such a dramatic effect visually and esthetically."

"Almost every website we have developed in the past year has some rich media component, especially flash and other vector-based animations," he adds.

With flash plug-in penetration rates now above 90 percent, animation is a readily available tool. But, Brown is quick to warn, it also has a downside.

"Just because you can do something, doesn't mean you should," he says, echoing a common concern. "When we do use rich media, we make sure it's the most prudent use -- not just wasting viewers' bandwidth."

Hold the Kryptonite

The TeleBusters certainly aren't the first animated action figures on the Web. There's Breakup Girl, handing out advice to the lovelorn on Oxygen.com and superman on Entertaindom.com, but they're probably the first to get paid for saving man (or woman) kind.

"With the high concentration of creativity in PR, I'm surprised there aren't more things like this," says Mark Newman, managing editor of PRCentral.com, an industry website. "Everybody wants to be cutting edge, but it's so hard to do."

The idea is that each episode illustrates a different use of telecommunications technology -- each, of course, commissioned by a telecom company offering that particular product.

This isn't the first time McWade has used cartoon characters. He previously created a film noire send-up Sam Stone, Internet Private Investigator, and inserted her into still pictures on behalf of a human resources client. The difference this time is the availability of rich media to give the cartoon life.

"We're not aware of anyone else using brand animation like this to actually characterize the benefits of products," he says.

OK, so they're fighting for profits instead of truth, justice and the American way, but you have to give the TeleBusters credit, they're way more interesting than yet another flash-enhanced training program or animated product demo.

There's Faxxie who, thanks to a freak toner accident, can fax herself anywhere in the cosmos. He-Mail, a New Economy Hulk able to process thousands of e-mail messages at once. The telepathic Dr. Cell, who uses cellular brain waves. And on it goes, a superhero for each sector of the telecom marketplace.

In episode one, produced for a wireless messaging provider, the TeleBusters save the world by helping a MacDonald's-munching president send a message from his car when his cell phone battery goes dead. The script was written by a moonlighting Gartner Group analyst and illustrated by a couple of Silicon Valley artists.

McWade's plan is for them to tackle a host of other telecom challenges -- all, of course, on behalf of paying clients. And like the good marketer that he is, McWade talks of T-shirts, action figures, even -- dare he say it? -- a full length TeleBusters feature.

Perhaps someday we can all watch it on our personal communications devices.

---

Nov. 22, 2000

Attack of the Killer Audio Ads

By Lawrence Pintak

The music blared from the desktop computer; a pounding, head-banger beat that reverberated through the sedate corporate office. Annoyed co-workers quickly demanded that the offender turn down his CD.

But this was no CD and it was certainly not being played by choice. The source of this relentless assault on the ears was an audio banner ad that had, quite literally, come out of nowhere when the visitor logged onto a content site. And it wouldn't shut up.

Even as the offended offender struggled to turn down the volume setting on his control panel, the banner -- with its pounding music and hyperactive voiceover -- streamed in an endless loop.

Welcome to the latest method for breaking through the advertising noise -- or, in this case, creating it.

"If it's coming at you like that, there's no doubt it's going to break through and have an impact on the visitor. The question is whether the response it generates is the one you want," says Nigel Hollis, executive vice president of Web researcher Millward Brown Interactive.

The banner in question was produced using host-initiated instant streaming technology. Translation: The second the visitor's browser loads the page, the audio begins to stream. Therein, many in the industry believe, lies the problem.

"If you start pushing sound at people, it's an instant way to turn them off," argues Brad Epstein, executive creative director at i-traffic, the online marketing services arm of Agency.com. "Most A-level sites won't let you do that because they're afraid people are going to immediately go someplace else."

Never Lose Control

That fear of offending visitors is one reason many sites require an opt-in component to audio ads, allowing visitors to make the decision whether to listen -- and when to turn them off.

"It's no great value to force audio upon a user if they don't want it," says Jon Louis, CEO of MessageBay, which offers java technology for streaming audio banners. "I've been on sites where I close the browser and the audio still keeps playing."

There is no dispute that audio-enhanced banners increase the level of attention. The issue is what -- if any -- level of control should be left in the hands of the audience. Epstein believes in caution.

"The whole thing about the Internet is control in the hands of the user -- permission marketing," he says. "I give you permission to talk to me but if you start abusing that, hey, I'm outta here."

In the BA campaign introducing a new flatbed seat in business class, Epstein used a 468x60 banner with the message: "Rip Van Winkle." And in smaller letters, the words, "Click to hear it without leaving this page." The ad, produced with technology provided by Audiobase, achieved a 2.2% clickthrough rate, that's 13 times higher than the best-performing traditional horizontal banner in the campaign. He believes that giving visitors the option of when to turn on and when to turn off the ad were critical to success.

"The opt-in may be lower key, but it's more likely to be accepted positively," agrees Hollis of Millward Brown. "If you're just driving traffic and don't give a damn about your brand, that's one thing. But if you're trying to build your brand you want to attract people, not anger them."

Louis says that an added advantage of audio ads is that they can add to, not just mimic, what is one the screen.

"You can have today's specials, promotions involving a discount with a password to qualify -- but they shouldn't be too long, seven to 10 seconds tops," he explains, adding that it is a good idea for them to automatically link to the advertiser's website.

"We figure that this won't be obtrusive since, if they're listening to the whole ad, they probably won't mind if another ad opens up."

If You Sing It, Will They Come?

Which raises another issue. Given the overall dismal track record of clickthroughs, will visitors click to hear audio?

"The simple fact of adding audio to banners has been shown to increase clickthroughs by up to 7 percent," says Louis. "For banner ads, it's absolutely required that the user be in control of starting and stopping, but for other types of campaigns the requirement shouldn't be so stringent."

Email is one such technology. Just as HTML emails are becoming commonplace, ad-makers believe, embedded audio ads are likely to also find acceptance. Still, there are groundrules.

"If my email starts shouting at me before I click on something," says Epstein, who has produced audio email ads, "they better say something very good and relevant in the first four seconds or they're out of there."

But even on the Web, Louis believes, the barriers around user-control are slowly crumbling: "People are coming to reluctantly accept the fact that they have to sit through an audio-video presentation."

In other words, when it comes to Web advertising, one day soon there truly will be no escape.

###

Nov. 22, 2000 (special)

Caching In On the Election

Talk about robbing Peter to pay Paul … err, Sam.

In hyping it’s election night “Live Interactive Television experience on the Internet,” ABC’s promotions department told viewers watching TV coverage anchored by Peter Jennings to ignore the commercials so they could take part in an online contest.

It was just one example of the sometimes-schizophrenic relationship between television and the Web that has emerged in the drama of America’s first true e-lection.

“During commercial breaks, answer bonus questions related to the elections broadcast and American political history,” a page on ABCNews.com instructed on election eve, promising that visitors would be able to “interact live with Peter Jennings … like never before.”

In the end, viewers certainly ended up interacting like never before, but in ways the marketing whiz behind the contrived promo – or the rest of us -- could not have imagined.

With traffic to online news sites hitting record levels on election day, then shattering those records as the tumultuous week raced on, Web advertisers hit pay dirt in a medium many still view with suspicion.

“One thing that holds true on the Internet is that as traffic increases, so do the benefits to advertisers,” says Marc Ryan, director of media research at AdRelevance. “That’s one of the things that makes the Internet unique – a banner is something that is delivered only when someone is there to watch it,”

And there were plenty of people there. All of the major news sites saw huge surges in visitors, particularly when Americans went to work the morning after, eager to stay in touch with the drama in Florida. CNN.com logged 4 million unique visitors the day following the election, with MSNBC on its heels at 3.5 million, according to Jupiter Media Metrix

At Least Advertisers Won’t Demand a Recount

The news staffs of the web operations, traditionally second-class citizens at the networks, were ecstatic; many advertisers were even happier.

“Back in March, we sold an election 2000 sponsorship that was integrated online and on-air,” says Robert Romano, manager of ad sales at CNN. “The five advertisers that bought it get exclusive sponsorship of the election coverage, so they are very happy.”

Since most banner advertisers are buying impressions, the dramatic traffic increase is likely to produce a sizable revenue bump for Internet news sites.

“No doubt there’ll be a spike in ad revenues and impressions on the news sites,” says Ryan of AdRelevance, which releases a weekly report Friday that tracks exactly that for last week.

“This is like having a Superbowl with 30 quarters in terms of getting all our good customers on the air,” crows one network ad sales exec who – for obvious reasons – didn’t want to be named.

But it’s not just the sites that are benefiting from the crisis, some advertisers are getting serious bang for their buck.

“People who have invested in sponsorships that don’t rotate are really benefiting from an increased audience that we wouldn’t have anticipated,” explains MSN sales manager Michael Siegenthaler, who sells packages both on MSNBC and MSN’s political site, Slate.com.

Many sites are also reporting a sudden surge in ad enquiries, something not all dot-coms are positioned to take advantage of.

“A lot of these guys can’t respond as quickly as the on-air guys can, maybe it’s because of the technology of getting the banner ads together,” Romano speculates.

All the News that Eventually Fits

But it hasn’t been the ads alone that have been affected by technology. Error messages, interminable loading delays and frozen video have all been served up right along with the news. Still, the longer the crisis goes on, some experts believe, the more Americans will become used to turning to the web for their daily fix on the world.

“Traffic to Napster went through the roof when it announced it would close and that produced a lot of interest and traffic to other streaming media sites and the industry benefited overall,” recalls Ryan of AdRelevance. “The same will happen here, providing opportunities for other sites to earn ad revenue.”

That may be true of the CNN’s of the world, but the specialty elections sites still have to get out of the shadow of the big boys. Politics.com is an example of that. In the midst of the most dramatic election in modern history, the site announced it would soon pull the plug. Despite reporting up to 7 million hits a day last week, the homepage banner space contains not a paying advertiser, but rather the somewhat desperate message: “Impressions. Eyeballs. Click-throughs. We deliver. Advertise now.”

But no one is. “How can a political site possibly compete with CNN, NBC and ABC?” Politics.com chairman Howard Baer plaintively asked on election eve.

The shot-in-the-arm couldn’t have come at a better time for the Internet. The collapse of Internet ad stocks last week and warnings of an “e-marketing meltdown” seemed to spell grim times ahead.

The question is, once the fisticuffs in Florida are over and the country finally has a president, what does the Web do for an encore?

Those who argue there is no turning back should be reminded of CNN, which rode the Gulf War to record audiences only to watch in dismay as viewers fled once the crisis was over.

Tuesday, November 28, 2000

Head: Attack of the Killer Audio Ads: Part II

By Lawrence Pintak

"Lawrence," said the voiceover on an animated Disney ad for costumes, "you can make Halloween happen by magic."

In an age when perfect strangers know what brand underpants I wear, I am long past the stage where I am surprised that Web marketers know either my name or the fact that I have children.

But when that pitch comes from a young woman apparently living in my email box, it does stand out from the crowd.

Say hello to the latest step in the inexorable evolution of interactive advertising: ads that call out to you by name. It used to be that junk mail just took up space in your mailbox. Now it talks to you.

"Suddenly I'm getting a message personalized just to me, and that gets my attention," says Brad Epstein, executive creative director at Agency.com's i-traffic unit, who is currently building a campaign that uses personalization technology provided by Dynamics Direct. "Especially when it starts with, 'Hey Brad.'"

"A lot of people are repurposing TV commercials and stuffing them into [email] boxes," says Roberta Berrent, Dynamics Direct's marketing director VP. "Our technology links up customer information with rich media assets."

You're One In A Million, Kid

Spots distributed by Dynamics Direct reach into the advertiser's database in real-time and extract not only the target's first name, but everything else needed to personalize the ad as tightly as possible.

"If you send out a million emails, a million customers each get a message specially constructed for them based on what the advertiser knows about them," Berrent says. "That includes different names, different product offers, different video, different graphics."

Dynamics Direct is one of a number of companies experimenting with Internet personalization technologies, both for email and web sites. MessageBay is soon to go live with voiceanimations.com, which will allow the user to lip-synch his/her own voice with an animated puppet. It can then be sent via email or posted on the user's own site.

"What this allows people to do is have a talking person on their site acting as a guide," says MessageBay CEO Jon Louis. "They can revise what the avatar is saying anytime they wish -- just click and record."

But At What Cost?

"We think there is a great deal of potential for rich email and the like," says Jupiter analyst Marissa Gluck. "But there are a couple of inhibitors to greater acceptance in the advertising industry."

Not least of these is cost. Rich media is a lot more expensive to produce than html or text.

"Response rates for html and text are high enough that there's very little incentive to use rich email when html is good enough and already very efficient," Gluck argues.

Not surprisingly, Dynamics Direct CEO Russ says that just isn’t so. He claims clients like Disney and American Express are finding that response rates are doubling and tripling with personalized audio messages.

"The whole economic model is based on the fact that the incremental increase in response over text or html will more than pay for the cost of production and deployment of rich media," he insists. "It's doing so in spades."

Gluck also points to the logistics of addressing by name every recipient of a personalized email. Because, yes, somebody does have to actually say all those names. But the folks who produce personalized messages claim it's no big deal.

Remember the woman who shouted at me from my email client? They locked her in a studio and had her repeat thousands of names, mine among them, each with various inflections.

"If they put somebody in a booth and have them record 3,000 names, they're covering 75 percent of the population," says Epstein of I-traffic.

Infected With the Technology Bug

But do people want emails that shout out to them the moment they are opened?

"There's a good side and a bad side to personalized email," admits David Sokolic, marketing VP for Gizmoz, which plans to use the technology in its "smart envelopes," folders that contain rich media advertisements. "The good is that it's addressed directly to the user and proven by far to be the most effective form of online advertising. The big danger is that we'll see response rates fall off just as we did for banner ads."

And there are, inevitably, techno-glitches. Despite vendors' protestations that the technology does not require broadband, numerous examples of personalized rich media emails sent to this reporter's 40-something-k connection by various companies failed to deploy. And, when I clicked on one while offline, it froze the system and required a reboot.

"It's the same old problem we had with rich media and banners," says Gluck of Jupiter, which predicts only one-third of U.S. households will have broadband by 2005. "That is probably why there's more potential in the b-to-b space."

Dynamics Direct's Gillam doesn't buy those limited horizons: "We see this as a $10 billion industry in the next four years [as] the Internet, interactive TV and broadband all come together."

Gizmoz's Sokolic isn't quoting numbers, but he thinks his company will be left standing even after the public overdoses on email pitches, since once the emailed "gizmo" is downloaded onto the desktop, it continuously updates itself with new products and special offers, eliminating the need for an ongoing barrage of email.

"We believe many users are getting fed up with all the email that they're getting," he explains. "That's why we like to say we're a 'viral marketing solution' -- a way to infect the user."

Which is sure to make an ad-wary public feel a whole lot better.

###

Dec. 5, 2000

Not Ready For Prime Time? Streaming Video Ads Face Hurdles

By Lawrence Pintak

"It's the future of the Internet," a top executive of DoubleClick evangelized at a Silicon Valley conference on Web publishing last autumn. "Forget banners. This will change everything."

She was talking about the Internet's version of a television commercial: rich media ads that contain video or animation. A year later, Web "commercials" are still in their infancy.

"It's not a leap of faith to think streaming audio works. The streaming video part, unfortunately, is way behind where we would expect it to be," says Jon Mandel, managing director of MediaCom, a unit of Grey Advertising.

Mandel is no Internet Luddite. He serves on the board of the new Streaming Media Advertising Advisory Council (SMAAC), which is helping to shape standards online, and heads a company that handles interactive duties for such advertising powerhouses as P&G and Sprint.

"Everyone wants to be first," he observes. "But if you're too early, does anybody know you're in the room?"

To be sure, streaming video advertisements are out there. Just click on streaming sites like Real.com or eYada.com and you'll probably encounter them. But even those doyens of rich media see streaming video advertising as the future -- while audio owns the present.

"On the video side, the experience is horrible if you don't have some sort of broadband," says David Bialek, vice president for sales at eYada.com, and another SMAAC board member. "It's got to be a faster connection than 56k."

It's the Wires, Stupid

Speed. Every conversation about streaming video advertising eventually comes back to that issue.

"Streaming video is not going to hit critical mass until penetration of broadband in consumer markets gets to a higher level," observes David Halprin, senior analyst at eMarketer, a research firm. "Once it does, then it will be a watershed event in Internet advertising -- the kind of creativity that is brought to TV commercials will start to show up."

Paul Kagan & Associates projects that broadband penetration will reach about 30 million households by 2005. But Halprin believes those and similar estimates may already be outdated.

The Baby Bells, he argues, have finally realized that broadband is the "Holy Grail of sticky operations" that will help them keep customers. They are now rolling out DSL at a much more rapid pace than analysts had expected.

"That is why the outlook for broadband is a lot more positive than it was several years ago," Halprin says.

"The Internet hit 30 percent penetration around 1997-98 and ad revenues started really hitting big in the 40 to 50 percent penetration area," he notes. "Maybe that's the turning point for streaming video."

When that happens, the appetite will certainly be there.

"People are looking for new ways to engage their audience and captivate it, and rich media is certainly a dynamic platform," says Scott Gordon, vice president of marketing at SeeItFirst, a company that adds interactivity to streaming media.

But cost remains a big hurdle -- streaming video ads, like TV commercials themselves, are expensive to produce. And then there's the relatively low level of understanding of streaming media in general among both advertisers and ad agencies.

"It's just much easier to get an advertiser to give creative for audio because most advertisers already have audio creative" that can be adapted to the Web, says Bialek.

Islands In the Stream

Only a few hundred of the top-tier sites are currently equipped to handle streaming video. And even if they were, Bialek and others ask, why would you want to put a streaming video advertisement on a site that contains static content?

"It's like throwing a TV commercial on a playground, it just doesn't belong there," he argues.

That may sound self-serving, but on streaming sites like eYada.com and Real.com video ads are generally embedded in programs that have already required the visitor to open a video viewer.

"So in a situation like that," says Bialek, "it makes all the sense in the world, because they are already engaged."

And even on those sites, where visitors are more frequently logging on for the music, video ads don't always make sense.

"On streaming media sites people are more likely to minimize the browser, so we're going to lose some of the audience who won't see the video," he adds.

There are relatively few sites offering streaming video advertisements in part because of the high cost to the streamers. For each visitor who logs onto a streaming feed, there is an additional cost to the site -- not that many are logging on. A recent Arbitron report found that of more than 2,000 people with broadband access, only 41 had ever streamed video. And of a similar number of users with only dial up access, the number was 24 who had ever streamed video and just four people had streamed video in the previous week.

"Selling advertising against a 100k stream is a pretty expensive proposition," maintains Grant Wynn, president and CEO of Coollink Broadcast Network, an audio and video streamer. "Make no mistake, we have the ability to stream at 300k but the ability to make money off selling advertising at that bandwidth is extremely limited."

"It's one of those sad chicken and egg things," says MediaCom's Mandel. "They can't produce the programs without advertising and you need the programming to get the advertising."

Avoiding the Internet's Betamax

SMAAC is working to overcome another critical issue when it comes to streaming video and audio -- a lack of standards. The concern is that without careful planning, the industry could easily find itself in a VHS vs. Betamax situation.

Still, most industry insiders are convinced the widespread acceptance of streaming video ads is inevitable.

"You already see the increasing number of TV channels directing people to websites for simultaneous interaction," says Halprin of eMarketer. "With streaming video, Web advertising will have a close interaction with interactive TV and Web-TV hybrid media forms that will be emerging with increasing frequency at the same time as broadband is developing."

"Given what's happened with advertising in general on the Web, it's the next wave," agrees Mike Cole, executive vice president of marketing at ITV, which builds streaming media platforms. "It drives traffic, it engages viewers and most clients we talk to have video in their plans."

But just when those plans can be implemented remains the big question. As MediaCom's Mandel puts it: "At the end of the day, it comes down to a bunch of guys stringing wires."

Next Week: Serving up stitials: Is Flash an antidote to the narrowband blues?

###

Dec. 19, 2000

How Brands Measure Up

New Tools Track Online Advertiser Awareness

By Lawrence Pintak

What happens if an ad is served up and nobody clicks? That's the $64 million question in Internet advertising these days.

Unlike the proverbial tree falling in the woods, advertisers know somebody saw the ad; what the industry hasn't been able to tell them is, what effect did it have? Until now.

"Historically, what we've been reporting to advertisers is what impressions did they get on what sites, how many click-throughs and what did they have to pay for it," says David Moore, CEO of 24/7 Media, one of the largest interactive ad agencies. "Now we can go back not only with those metrics, but we can say, 'The ad had an impact on three percent of the folks who saw it and a certain percent of those are now more inclined to buy it."

What has changed is the arrival of brand measurement technologies in the past few months that allow research companies to track in real time viewer response to Internet ads -- and serve up the results to ad agencies and their clients almost immediately.

As Moore's colleague, 24/7 Research Director Risa Goldberg puts it: "Click throughs are out and brand awareness is in."

Better than a Click

The goal these days is to evaluate Internet advertising in the same way as advertising in other media.

"People aren't going to click on a banner ad and buy airline tickets on impulse, but when you're ready to make a trip, it's at that point that brand awareness kicks in," says Nick Nyhan, president of Dynamic Logic, one of several companies offering brand awareness surveys. "Did that ad seed a positive impression that will come to fruition at a later date? That's what this system is designed to track."

Here's how the technology works: After a visitor has seen a particular banner -- whether once or a predetermined number of times -- a window pops up asking him or her to take part in a brief survey. How brief, depends on the company. It can take anywhere from three minutes to a half hour, with questions aimed at determining how the ad has impacted on the viewer's impression of the brand. The size of the sample varies widely, from the 300 polled by IPSOS-ASI to as many as 1,000 in some of Dynamic Logic's quantitative surveys. All the research firms split those numbers between individuals exposed to the ad and a control group that has not seen it.

"What we find is that, like all advertising, there is a pretty broad range of effect, from ads that break through to those that don't even get noticed," says Nigel Hollis of Millward Brown Interactive, another firm offering the tool.

Do-It-Yourself Brand Measurement

Each company providing online brand measurement has its own approach with various levels of hand-holding and analysis by researchers, but all offer highly-automated versions in which advertisers or their agencies can access a template with a set of pre-determined questions, add a few of their own, and launch the survey.

"It allows you to peel the onion to see who's most interested in your product," says Hugh Duffy, 24/7's director of product development, who has used the technology for packaged goods clients like P&G.

"We can slice by how many times someone was exposed and how recently, by demographics, by which creatives they saw," confirms Dynamic Logic's Nyhan. "We can compare people who saw only one ad versus those who saw others, people who are big users of the category, the list is endless."

Eventually, he adds, "we'll be slicing to see how much more lift does rich media give you versus sponsorship, or streaming versus just an animated gif -- what's the incremental value and is it worth the money?"

A survey conducted for Rolling Stone by Millward Brown in November, for example, provided data on the following questions about an ad for RollingStone.com: "Did people remember the brand advertised? Did the ad raise that brand's awareness? Did the ad change perceptions of the brand? Did the ad increase consideration of the brand? Did the ad reach the right consumers?"

The study found that brand-linked ad awareness of RollingStone.com increased by 9.7 percent, which Millward Brown called "statistically significant."

Changes on The Fly

But even if it wasn't, the fact that the data is immediately posted online in secure sites means advertisers can evaluate the effectiveness of a campaign in real time, and make changes as needed.

But Hollis, who compares the brand measurement technology to supermarket scanners, warns that advertisers need to keep the results in context.

"When packaged goods companies first started getting scanner data they made dramatic changes in inventory based on the initial data, and it was often disastrous," he recalls. "Those clients still use scanner sales data, but they analyze it in a longer term manner along with other attitudinal data."

And he adds, the frequency caps that currently limit ad exposures to as few as one-per-customer, need to be reevaluated.

"That frequency cap is a huge burden to the industry and it's really click-through-based," he says. "In a branding world you might be looking for a frequency of five or more times because you know that's where the sweet spot is."

There's one sweet spot every Internet advertising agency knows the location of -- it's the budgets of the traditional advertisers who spend hundreds of millions on television and print.

With dot-com funny money a distant memory, agencies like 24/7 see brand measurement technology as a key to attracting bricks-and-mortar advertisers still leery about the value of the Internet.

"Our game is going to be demonstrating with facts which are now supported by research that our medium can do a better job of branding and selling products than anyone else," says 24/7's Moore. "And when we do that, the money will really flow."

###

Dec. 26, 2000

Who's Counting? Ratings Data is Beginning to Stream In

By Lawrence Pintak

Television has the Nielsen's. Radio has the Arbitron's. The Internet has -- well, what exactly is the Web equivalent of the broadcast ratings systems?

Online, too, these two research firms have been the bellwethers of the net economy. Nielsen releases weekly rankings for the top 25 sites with the most traffic, the top 10 advertisers, and provides lists of the top ten ad banners viewed at work and at home. Arbitron keeps an eye on the numbers for streaming radio stations. Another major player in Web rankings is Jupiter's Media Metrix, which cranks out a monthly list of the top 50 web sites and, like the others, provides specialized data to its clients.

But in recent months, several new firms have emerged to challenge -- or supplement -- the franchise of these ratings giants.

The newest is netScore, a product that goes live in January.

"We will capture every site visited, every page seen and every product purchase for every one of our 1.3 million-plus active members," says Magid Abraham, president and CEO of comScore Networks.

The system allows advertisers to slice and dice the Internet audience on more than 10,000 sites in a number of different ways, tracking, for example, users at home, at school, at the office. The company claims metrics will include the number of unique visitors, percent reach, average number of page hits and average length of a session.

Other demographics, including age, size of household, income and education will be captured for about 1,000 sites.

It is the lack of such demographic details that agency executives say have largely kept away traditional brick and mortar advertisers.

"We definitely know what computer is displaying which ad, but what we're lacking to a certain extent is being able to track actual demographics," says 24/7 Media CEO David Moore. "Only when we get that will we able to compare apples and apples when talking to advertisers used to traditional media tracking."

A company called Word of Net rates websites not on the basis of traffic, but on their overall visibility on the Net.

"Instead of focusing on advertising, we're looking at some of the other traffic drivers," explains the company's founder, Allan Rentz. "Traffic is fine for what it does -- provides a benchmark for rates -- but the trouble with traffic numbers is that there's no actionable aspect to them."

In other words, while traffic figures talk to the advertisers, Word of Net's data helps the site itself understand how it is getting that traffic in the first place and what it can do to improve its positioning.

Much of that is done through a detailed analysis of search engines, which an Anderson Consulting study recently found drive far more traffic than advertising.

"We track all the points of presence the web site maintains on the Web and that the customer can use to find it," says Rentz.

At its most basic, the company's Visibility Index tells sites where they stand versus the competition. A tool on Wordofnet.com allows visitors to do a simple search to establish their site's overall ranking. A search for Internet.com, for example, gave it a "visibility score" of 413, a figure about double the "average visibility", putting it in the middle of nine comparable "news & media" sites, with cnn.com at a high of 754. Actual paying clients receive detailed information on who shows up on keyword searches, in which directories they and up to 50 competitors are included, and lists of potential partners and new competitors.

"People use us as a compliment to traffic numbers and as a justification for online expenditures," says Rentz.

But can't anyone access such information simply by logging on to the search engines?

"You could sit at a computer for hours and bounce every key word you can think of off the search engines and you wouldn't begin to cover the territory we do," Rentz claims.

All of these sites cover the Internet universe. But another firm is trying to carve out a spot in the niche dominated until now by Arbitron.

Launched in August, Measurecast, Inc. recently issued its first weekly tracking numbers for web broadcasters. The company claims to be the only third-party firm providing audience measurement demographics within 24 hours.

"There are other service providers that process some data as to how many people are listening," says Measurecast CEO Ed Hardy, referring to Web broadcasters themselves. "But having a provider offer its own data is like the fox watching the hen house."

The company expects to have a panel of 50,000 opt-in streamies within the next few weeks, with plans to double that in 2001.

"We will be able to track any kind of listening -- cars, radios, cell phones," Hardy says. "As long as it's fed over a streaming server, we'll be able to track it."

Since advertisers are using the information to compare streaming Web buys versus traditional radio, Measurecast's reports are in much the same format as broadcast ratings, though still not as detailed. That doesn't seem to matter.

"People are so hungry for data on streaming," says Hardy, "that it’s exciting for them to get anything they can get their teeth into."

###

Jan. 9, 2001

Comparing Apples & Oranges

The Fruit Salad of Advertising Measurement

By Lawrence Pintak

You have just spent $100,000 on an Internet advertising campaign. Your boss expects results. And you have them -- two nice detailed reports. The only problem is, they say very different things.

Welcome to the world of Web advertising measurement.

"If you are an advertiser and you are serving to a host of sites and you get back numbers different from what was sent out -- sometimes by 20 to 40 percent -- you don't have any idea what has just happened to your money," says Doug Knopper, vice president of sales and research at the Internet ad agency Doubleclick.

This Alice-through-the-looking-glass scenario is the result of an absence of agreement in the industry in just when an ad has been "seen."

"Did the visitor see it when the ad was loaded, when the page was loaded, or when the browser made the call for the ad?" asks Knopper, whose company serves 65 billion ads a year. "Each criteria has a technical reason for serving on that. If you then multiply that by the number of different companies serving ads, it's exponential in how many differences there can be in counting methodologies."

The problem comes from the fact that both the site on which the ad is being served and the company serving up the ad -- either the advertising agency or third-party company -- each generates a report tracking impressions. But unless they are both using the same tracking system -- such as Doubleclick's DART technology -- there are inevitably differences, sometimes huge.

An Industry Screwed

"You can't do business if a pound is not a pound on everybody's scale, it's pretty fundamental" says Jim Spaeth, president of the Advertising Research Foundation, who has helped head up the industry's effort to bring together competing measurement firms to find a common standard. "Despite their individual interests, the greatest common interest is a common measurement system and they're all screwed until that happens."

But given that the various industry players are heavily invested in their own technologies, the challenge of finding common ground is huge.

"Every company seems to have very unique methodologies for tracking what's happening with online advertising," says Charlie Buckwalter, an analyst at Jupiter's AdRelevance. "This is a very complex problem and there's no one way to do it right."

So complex that it took the industry's so-called FAST committee -- an alliance of advertising buyers and sellers -- a year and a half just to agree that the basic measurement would be, as ARF's Spaeth puts it, "how many eyeballs on the media."

Counting the Ways to Count

There are a plethora of subtle variations in how the ad measurement technologies track ads, but even the major differences can seem overwhelming.

At it's most basic is the divide between server-based technologies -- used by networks like Doubleclick, Engage and 24/7 Media -- and those that employ human panels, such as Nielsen/NetRatings and Jupiter's Media Metrix. Differences include ability to pick up an ad when it is served out of a proxy server, deeper levels of granularity on ads served beyond a site's main pages, detailed demographics, and on goes the list.

"They each have their strengths and weaknesses, but there can be tremendous differences in counts," says Spaeth. "That's disconcerting."

Doubleclick, for example, has a team of 35 people who spend their lives trying to sort through those counting discrepancies.

"Sometimes, it takes days or weeks to figure out because it's so complex," report's Knopper, who reports that at a recent meeting, the agency's top clients said the elimination of those conflicting numbers was among their top priorities for the coming year.

It's also a prime goal of the Digital Marketing and Commerce Coalition, a newly-formed group that brings together the Association of National Advertisers, the Internet Advertising Bureau, the AAAA, ARF and the Director Marketing Association. The coalition grew out of the FAST committee, which was formed when advertising's 800-pound gorilla, Proctor & Gamble, told the Internet ad industry it had better develop some standards, or else.

"It was kind of like being called into the principle's office and told, 'You've got to make this work or we're pulling out,'" Spaeth recalls.

Along with the basic rule-of-thumb for ad measurement, the committee developed standards for ad units and online privacy.

The new coalition's task remains largely the same: Provide a comfort level for all those brand managers considering allocating part of their budgets to the Web.

"If you're going to move your money from a trusted medium to a new medium, it's a career risk and brand managers are asking for proof this is a smart move," says Spaeth, who serves on the coalition.

But at least one analyst believes that the drive for a solution to the counting conundrum on Internet time is unrealistic.

"It is a very big statement on the information industry that there's hardly any patience these days," says Buckwalter of AdRelevance, who argues that the rapid development of technology in a fiercely entrepreneurial environment makes it unrealistic to expect industry standards to be developed overnight.

"Eighteen months ago clickthroughs were routinely regarded as the right way to see how effective an ad was," he points out. "Then everybody said the banner was dead. Now clickthroughs are dead but the banner is very much alive in a dynamic new market.

"This industry is growing and maturing and as it does, there's going to be an acceptance and understanding that certain approaches work better than others."

###

Jan. 15, 2001

In Your Face Email

Computer-manipulated Models Provide "Human-like" Experience

By Lawrence Pintak

Hal, the renegade computer in 2001: A Space Odyssey may not become reality this year, but his poor cousins will soon be coming to an in-box near you.

The same technology that allows live, virtual medical operations to be conducted from thousands of miles away has now been adapted to produce the 21st century's equivalent of the singing telegram.

These rich emails, called "facemail," use computer-manipulated images of real models to read your email to the recipient.

"It's clever and cool and will probably appeal to people under 34 initially," says Jonathan Jackson, senior analyst at eMarketer, a Web research firm. "I'm just trying to find out how viable it is."

Introduced last month by LifeFX, a Massachusetts-based company, the system was adapted from technology developed in New Zealand to create lifelike virtual organs for use with robotic instruments in long-distance surgery.

"When you're piercing digital flesh that represents an eyeball, it has to be believable," says Bill Clausen, chief marketing officer for LifeFX.

Anyone who receives a facemail is unlikely to ever submit to remote-controlled surgery.

"It's a hoot," as eMarketer's Jackson says. But believable, it is not.

No matter the content of the message, the floating, disembodied heads of the avatars, or "stand-in virtual people" as the company calls them, are hard to take seriously.

At this point, there are a half-dozen faces from which the email's author can choose. Each belongs to a real model. The men and women were put in a studio and asked to make facial expressions meant to represent a range of emotions, from pleasure to anger. The sender of the email can prompt these expressions by inserting the appropriate symbols in the body of the text.

The company's first task is to find some models who can act. The expressions are, at best, jarring, and at worst, absurd. One model looks like she is impersonating the Bride of Frankenstein when she expresses anger, and as for shock, let's just say it seems something untoward is going on outside camera range.

The computer-generated voices, meanwhile, make 2001's Hal sound like a Shakespearean actor by comparison. So basic is the mechanical monotone that even the word "facemail" comes out "fas-uh-mail".

The amateur-hour acting and B-movie computer delivery is particularly puzzling given the entertainment industry firepower driving the company. Chairman Michael Rosenblatt was founder of the powerful Atlantic Entertainment Group. CEO Lucille Salhany is the former head of two U.S. television networks, Fox and UPN.

But then the goal is far more than novelty email. LifeFX is one of a number of companies trying to produce the solution to the customer relationship management problems bedeviling many dot-coms.

In short, LifeFX wants its virtual people to be your virtual friends.

"Our greeter on a site can begin a relationship with you -- bond with you -- to guide you through the user experience," says LifeFx's Clausen.

The company also hopes its avatars will act as fronts for customer care operators, offering a visual stand-in, instead of just a disembodied voice.

"It allows the brand to put forward its best face," says Clausen. And for the customer, "it allows a sense of validation from something human or humanlike."

"Humanlike isn't necessarily a quality I'm looking for," observes Gartner Group analyst Maurene Grey, who also warns that an in-box full of facemail may not be everyone's idea of how to start the day.

"When is it going to be too much?" she asks of the various forms of rich email surfacing recently. "On one end is the annoyance factor and on the other end is, 'Gee, this is kinda cool.' You have to strike a balance."

The next generation of facemail will include the users' own voice. Eventually, it will also include his or her face. But there are also some technical hurdles that need to be overcome.

The first time a user receives a facemail, s/he must log onto the LifeFX site and download the driver. When eMarketer's Jackson received a message from the LifeFX PR people, the company firewall prevented him from downloading the driver. And when this reporter facemailed Gartner's Grey, she sent back this response: "Holy cow! The download is 7 MB. That's huge for a plug-in, especially over a dial-up."

In fact, it took this reporter about 20 minutes to complete the transfer over a non-broadband home connection. Grey says that could be fatal for an email marketer.

"That's a major inhibitor that's going to be very unattractive to the average consumer," she says. "If I'm asking them to go through a heck of a lot of work right away, I've turned them off."

Still, with the email marketing business expected to hit $4.6 billion by 2003, according to eMarketer, companies like LifeFx and rival text-based CRM solutions -- such as the smiliarly-named Facetime instant messaging system, and Alife Ventures, which employs cartoon character avatars in text-based bots -- will be locked in battle to be the solution that strikes the best balance between usability and sex appeal.

For the moment, facemail seems have a lock on the latter.

"Think how terrific this is going to be for all those lonely hearts trying to find each other," says LifeFX's Clausen.

Indeed. To say nothing of the Internet's real moneymaker, the porn industry: "It would be a natural," says Clausen, who adds quickly, "but I don't want to talk about it."

---

Jan. 25, 2001

Wireless Advertising on Trial

Harnessing the potential that toppled a president

By Lawrence Pintak

Wireless communications have produced a revolution.

No, this isn’t another breathless report about gee-whiz products. We’re talking politics here. A real revolution. As in overthrowing a president.

It happened recently in the Philippines. Opponents of embattled President Joseph Estrada sent out text messages to hundreds of thousands of hand phones saying that if a million people gathered at the so-called “People’s Power” monument in central Manila, the army would force the president to resign.

They did, and the Philippines now has a new president.

“This modern communication is doing him a lot of harm,” The New York Times quoted one opposition senator as saying during the crisis.

Talk about viral marketing.

Political subterfuge is not on the agenda of this week’s first-ever general meeting of the Wireless Advertising Association (WAA). But what industry experts gathered in San Francisco are focusing on is how to turn that kind of potent marketing potential into real advertising dollars.

The industry, explains WAA Chairman Tim DePriest, is “beyond concepts” but providers are just “coming out of a long process of trying to organize themselves in terms of what they do with wireless content and only now freeing up some time to think about advertising.

“For all intents and purposes,” he adds, “until wireless operators get involved in delivering ads to their subscribers, the numbers [of users] are always going to be small.”

The Catch-22 is price. As long as the costs of wireless content is high, relatively few consumers will buy in. But without users, advertisers will remain scarce.

If it is Free, They Will Come

Will consumers accept ads coming at them through yet another medium? You bet – if it means the service is free. That’s the conclusion of the latest wave of wireless advertising trials.

Separate trials by wireless marketers SkyGo and WindWire found that a majority of consumers prefer an advertising-driven model for wireless services.

“What [the studies] are basically saying is that consumers in the U.S. are more than willing to exchange a little freedom in return for not having to pay for services,” explains Rachel McCauley, a senior analyst at the Kelsey Group, a research firm that is helping to evaluate the SkyGo trial, currently underway in Boulder, Co.

The studies are part of the industry’s effort to move from cutting edge concept to business reality.

Make no mistake. Wireless advertisements are currently being delivered. But it’s all pretty basic.

“For the state of the U.S. market, everything is still predominantly text-based,” says Howard Schwartz, CEO of ShareSpan, a company that provides wireless messaging for some 200 corporate clients. “On the bottom of the message there is an ad inserted – things like ‘Go to Mercedes.com’ – that’s how we keep the service free.”

The WAP protocol used in both the SkyGo and WindWire trials enables a slightly more sophisticated approach, allowing the use of basic graphics, audio and other enhancements, like interactive quizzes and polls, and functions that allow users to click-to-buy and click-to-visit the advertiser’s WAP site.

“We found that the advertising that is the most interactive is the kind that in this medium really seem to engage people,” reports Perry Ellison, SkyGo’s vice president of strategic alliances.

Early data from the study, which runs through the end of January and involves 1,000 consumers and about 50 advertisers, found that 60 percent of respondents said that ads delivered to their phones were valuable, and 65 percent actually used their phones to proactively visit WAP sites.

WindWire’s national trial, involving two million ad impressions, came up with a similar result.

“The overwhelming majority of consumers we surveyed responded favorably to wireless advertising by indicating their preference for free, ad-sponsored wireless content,” says David Wilson, the company’s executive vice president.

And while it shouldn’t be a huge surprise that consumers would rather put up with ads – most of which they are not even required to look at – rather than fork out money to pay for wireless services, wireless advertising evangelists argue that the opt-in nature of the medium means increased receptivity.

Getting Personal

“The important thing to keep in mind with wireless devices, is that advertising is going to be tailored,” says the Kelsey Group’s McCauley. “Users are going to pick their personalization features. It’s more of a captive audience and more of an interested audience at the same time.”

In fact, the SkyGo study has found that while participants were required to receive at least three ads a day, many chose to surf all the other ads on the system.

Still, any advertiser seriously evaluating the medium must wade through a vast amount of hype.

“Posturing Dominates Wireless Advertising Landscape,” was the headline on a Jupiter Research study of the industry last year that found the low number of interactive devices, fragmented market, small screens, lack of color and low bandwidth were all major impediments to immediate widespread adoption.

“In the short term, the real value of mobile advertising lies in the press and the research and development it can generate,” was the blistering conclusion.

But if WAA members gathered in San Francisco have anything to do with it, it won’t be long before that potential starts yielding hard cash. Industry observers predict that by mid-year, wireless advertising impressions will begin to ramp up to what DePriest calls “somewhat of a meaningful level.”

And who knows, the next time there’s a revolution, maybe you, too, will get a wireless invitation.

Next week: If you thought counting eyeballs on the Web was hard, try wireless

---

Jan. 31, 2001

Advertising's Next Tower of eBabel

Wireless makes Web tracking look like a piece of cake

By Lawrence Pintak

It's a bit like the SETI program. You send out a signal, but you may never know if anyone ever received it.

That may work for researchers searching for intelligent life in the universe, but for advertisers eyeing wireless, it's far less attractive. Yet it's precisely the situation for anyone considering advertising via wireless.

"There are only certain things you can measure at this point because of the sophistication of the devices," says Tim DePriest, president of the Wireless Advertising Association, which held its first general meeting last week in San Francisco.

Closing the loop is one of the big challenges of wireless advertising. Internet clickthroughs leave an electronic trail that makes it easy to track whether an exposure was converted to a sale. Not so with wireless.

"We do have a record of whether someone called an 800 number" as a result of a wireless advertisement on a cell phone, DePriest says, "but what we can’t track is what happened once someone is talking to a customer service rep. The merchant can, but for the advertiser there's no closer loop to tie those two together."

But even before advertisers face that challenge, there is the even more basic issue of getting eyeballs on the devices, much less the ads.

Wireless providers and advertisers are spending a good deal of their time -- and money -- reaching out to what remains a very potential audience.

Just how embryonic wireless advertising is can be seen in Advertising.com's AdBroadcast program. Initially, participants were paid 50 cents for every advertisement that they viewed in full. That program has been replaced by one more in keeping with Internet promotions designed to ramp up traffic. Now, instead of being paid for each ad viewed, users get another entry in a weekly give-away of one million dollars in cash.

Getting Wired Without Wires

The big potential with wireless advertising lies in one-on-one targeting customized to precisely the needs of the user. That allows a host of direct promotions that reach out to the individual where and when the ad will be most effective.

One wireless experiment that has gotten plenty of press is a Starbucks promotion in which customers who had opted-in were paged and offered discounts whenever they were near a Starbucks outlet. Wireless fans say this is the future of the medium.

"The idea is that they're going to get the feet on the street because they're aiming at the eyeballs that are interested," says Rachel MacAulay of the Kelsey Group, a research firm.

Jupiter Research was not quite so enthusiastic in a report last year: "Although this situation sounds ideal, wireless advertising is so limited at this time that the reality is nowhere near this imaginary world."

A trial by wireless marketer SkyGo currently underway in Boulder, Co. has reported significant success with wireless coupons. But a big hurdle to widespread adoption of the technique is the fact that few retailers are currently equipped with scanners capable of reading wireless devices.

And You Thought Counting Internet Eyeballs Was Hard

Like Internet advertising providers, the wireless industry must also find ways to standardize everything from ad formats to metrics captured and reported.

"We've had to figure out with the software what can we gather, how much is required, and what do we absolutely have to report to advertisers," says SkyGo's Ellison.

The industry can determine when an ad is received by a phone or PDA, and while there are metrics on "tap-throughs" from PDAs, phone clickthroughs cannot be tracked. And because there is no return loop on a one-way pager, advertisers often do not even know whether their message was received on those devices.

Privacy and the irritation factor of unwanted ads are other issues wireless advertisers face. SkyGo used a double opt-in system, in which consumers told them what kind of ads they wanted to see and what time of day they wanted them delivered.

These are some of the issues that have kept the big money from diving into wireless.

"Unlike on the Internet, where you had Ford and General Motors and companies like that throwing money at pilots, here you have a couple of large advertisers, but more so the Internet companies playing with this," says DePriest.'

Proctor & Gamble and J.C. Penney were among the participants in the SkyGo trial, but local Colorado companies also played a big part in the test.

"We think that ultimately local advertisers will be an important part of wireless advertising," says SkyGo's Ellison.

For the moment, regular wireless advertisers include a hodgepodge of companies, from gift registries to music sites to Jiffyloob. The thread that holds them all together is the fact that their products lend themselves to quick response and the use of coupons.

As for the nightmare scenario of your cell phone ringing incessantly with marketing pitches and your PDA jammed up with ads, DePriest says that won't happen.

"The horror stories run far and deep, but few are based on reality," he insists. "Because of the personal aspect of the devices, there's little chance anyone will have luck spamming more than once."

But one times the universe of potential spammers, is still a lot of spam.

---

Feb. 7, 2001

Wanted: Models That Can Turn a Profit

Content providers seek a path out of the red

By Lawrence Pintak

Where's the money? As advertisers hit the brakes in the face of recession worries, that question is being asked across the Internet. But nowhere more so than among streaming media sites, where higher costs and low broadband penetration team up to make profits elusive.

Can advertising alone power the industry? The answer depends on who you ask.

"Yes, it is reasonable to expect that advertising will support [streaming media] as it has supported other media before," says Dan Russell, director of national advertising sales at RealNetworks.

"I don't see that happening anytime soon," counters Malcolm McClaughlin, a streaming media analyst at the research firm IDC. "Advertising will obviously be a component, but I think more of what you're going to see is the cable television type model."

That model involves subscription fees for content like music and video. And while Russell has high hopes for advertising, he too believes streaming media companies should not box themselves in: "Companies that aren't evaluating additional ways to monetize their streaming really don't understand the power and opportunities behind streaming media."

RealNetworks itself is a classic example of that. While the company's 2000 profits were hard hit by the advertising and technology slump, its new subscriber-based GoldPass service has signed up 150,000 paying customers in its first five months of operation. The $9.95 a month service provides premium audo and video content, as well as software and other products.

"The incredibly rapid adoption of RealPlayer GoldPass opens up a new and extremely important business model for RealNetworks and our partners," Richard Cohen, senior vice president, Consumer Division, RealNetworks, Inc. said in a press release hyping the service.

While the Wall Street Journal, with more than 500,000 subscribers, has been the sole Internet subscription success story, IDC's McClaughlin and others believe a paid model has strong potential for streaming sites.

"You're starting to see this with music," says McClaughlin. "Content aggregators like Napster and MP3 are moving toward a portal model that allows them to charge graduated fees. Once they get enough really good content in place people will start to pay for this stuff."

The catch lies in the timeline.

"I'm not certain streaming will give you any revenues directly -- not today, not with the kind of quality we have," says Gartner analyst Sujata Ramnarayan. "If you look at content sites that came up to deliver movies, they didn't have good movies to begin with.

"Just because you have content and streaming, doesn't mean you can make it," she adds.

Even RealNetwork's Russell admits that the ability to support video streaming sites with advertising remains far down the road.

"We see people spending between two and three minutes per video clip, 15 to 20 minutes per session, and when you're talking about that limited viewing, it's difficult to build substantial advertising," he says.

The potential now, he believes, lies with Internet radio.

"Internet radio today has the opportunity to be 100 percent advertising supported, provided the content is appropriate and compelling and has the ability to bring people back," he says.

Up until now, "content has been lacking. Now we're starting to see compelling content and that's bringing unbelievable numbers," he adds, pointing to RealNetwork's deals with the NBA and Hollywood.

Russell says advertiser interest in the right kinds of content is so high that his company sold out its inventory last year and began doing deals with other content providers to rep their inventory in order to satisfy clients.

But then there's less of that inventory on Internet radio than on its terrestrial cousins.

"Streaming audio advertising has matured to a large degree, but compared to what happens in terrestrial radio, there's a lot less of it," explains IDC's McClaughlin. "Up to about four minutes an hour, compared to 12. And on terrestrial stations they'll hit you with a big block of ads at the same time as all the other stations, that doesn't work online."

The substantially higher cost of streaming versus static content sites adds substantially to the challenges of climbing out of the red.

"It is expensive today, there's no doubt," says Gartner's Ramnarayan. "That's something that needs to be addressed."

Most expensive of all is live streaming.

"There is a difference technically in how the actual content is being served to multiple users in a live event," explains Randall Luo, streaming media product manager at Akamai. "It's a more involved process and has a different pricing structure."

That one reason many Internet broadcasters are moving toward a caching system that is variously being called "simulive" or "pseudo-streaming." It looks and feels live, but it's not.

"It gets stored on your hard drive but you can start paying back that downloaded file even though the entire file hasn't been downloaded yet," explains Bryan Ma, a technology analyst at IDC. The advantages include better quality and less bandwidth.

At the moment, technology providers like Akamai are also shielding their customers from the real wildcard of live streaming, the fact that higher traffic should mean higher costs.

"That's why we have a megabytes-delivered model to charge our customers," explains Akamai's Luo. "If we were to price on users we would have very high costs incurred by our customers.

"It's not like you cap at 5,000 people and if you go to 5,001 it's a whole new cost structure," he continues. "It's priced on the amount delivered."

But even those numbers are substantially higher than cached content, which is why most content providers opt for on-demand systems.

"Live means you have to build an infrastructure that can handle the maximum number of viewers you expect," says RealNetwork's Russell. "On-demand allows you as a host to estimate and build out a system to match the audience you build over time."

At the moment, RealNetworks estimates, 70 percent of streamed content is on-demand, and 30 percent is live.

"There's not going to be that much live streaming for a while," predicts Gartner's Ramnarayan. "It's usually done by Victoria's Secret or someone like that as a publicity stunt rather than something people are actually going to pay for."

Then again, beautiful models in sexy underwear may be exactly the business model that works.

Feb. 14, 2001

Virtual Valentine

Advertisers tap new technology for an old cause

By Lawrence Pintak

It's pretty sad when you have to send yourself a virtual flower for Valentine's Day. It's even sadder when it dies within minutes of arriving.

But if you think that's sad, how about being so desperate to see a box of Valentine's chocolates that you spend five minutes downloading a 3D Godiva ad only to have your browser crash?

And still, I logged back on and tried again until I got it. How sad is that?

Ok, my social life isn't as bad as it sounds (my wife did give me a Valentine's kiss). I tenaciously battled technology to gather my loveless goodies in order to write this story. Which raises the obvious question, why would anyone else do it?

"When it first came about, I asked myself the same question," admits Chris Johnston, vice president of product marketing for the Viewpoint Corp., which created the Godiva ad. "I kinda thought it was goofy, you don't need to move a box around and see it in 3D to know what chocolate looks like."

The Godiva ad and FTD's virtual flower, which resides on your desktop, are two of the more high profile attempts to use rich media to break out of the crowd of product marketers battling for a piece of what Gartner Research estimates will be $2 billion in Valentine's related spending this year. Examples range from Lycos' Singapore portal, where virtual hearts cascade over the screen (each offering a link to a Singapore Telcom wireless love messages promo) to MSN, where Godiva is peddling its calorie-rich wares.

Another mouth to feed

The FTD flower, which can be emailed to a friend in lieu of the real thing, is a virtual takeoff on the Tamagouchi craze of a few years back, requiring regular watering, exposure to virtual sunlight, and even pollination or it wilts and dies.

My five-year old finds it fascinating. Some professionals are less impressed.

"The animation is rudimentary, it's almost lame," concludes eMarketer analyst Jonathan Jackson. "That flower is not going to do anything for anybody. If you really want people to use it, you have to make it customizable, add names, make it personal."

The fact that his system crashed the first time he tried to download it only added to Johnston's cynicism.

"For the life of me, I can't imagine why you'd be downloading the flower if someone sent it to you," he says. "It has to be a real good friend before you would go through that."

Johnston and others also wonder about the relative subtlety of the marketing message. While there is a small FTD logo under the flowerpot, the only link to the FTD site is a message that opened on Valentine's morning, reminding the user of the holiday and offering a clickthrough to the site if they wanted to buy flowers.

"There was a heightened measure of concern about the piss-off factor," explains Bill Klavon, director of production for TribalDDB, which created the ad. "The challenge was to put the brand in front of the end user in a way that's not obtrusive yet is pleasant and an ongoing reminder of who they are."

Viral love

The ad was also designed to play off DDB's tradition of emphasizing the value of word-of-mouth.

"You're not going to send real flowers to 25 different people, but you're likely to send this link," adds Klayon. "The exponential reach is tremendous."

Since going live, the ad has logged 50,000 downloads.

"This is an example that marketers industrywide are trying to find new ways to non-intrusively put their brand out there on a day to day basis," Klayon says.

Adds TribalDDB's Associate Creative Director Robin Kurzer, "You're going to continue to see more things that are migrating off the traditional web, that frees us of that tether. Things that will live outside the desktop, on your cellphone, on your Palm, on your refrigerator."

"Utility, portability, entertainment and brand mobility is what this represents the start of," says Klayon.

The Godiva ad is likewise meant as a first step in a technology that won't begin to hit its stride until later this year.

"Would I wait five or ten minutes to download an ad?" asks Viewpoint's Johnston. "I don't have a great answer for that. For the most part, the general audience wouldn't. Even with increased access to broadband, we're not going to hit critical mass for a while, that's why it's not the way we're going."

The system created by Viewpoint is an active x control that combines IPIX Panorama, Quicktime VR, vector graphics, video and other elements into a relatively seamless package.

"So all of this stuff can live together in a single environment, blended with each other to eliminate the need for multiple players," Johnston explains.

Viewpoint sees its consumer future in deals with Adobe and AOL to integrate the technology into their software, eliminating the need for arduous downloads.

Applications include remote training, post-sales support and a variety of other b-to-b uses. The company is also developing a system combining video and java scripts that, for example, would allow an instructor or student to trigger applets illustrating particular aspects of a piece of equipment in the midst of a video presentation.

But that's the future, for now there's that box of virtual chocolate just waiting to be downloaded by those with nothing better to do this Valentine's Day.

---

Feb. 21, 2001

"You Love Me, You Really Love Me!

Survey finds ad agencies growing interested in streaming media

By Lawrence Pintak

Streaming media companies can expect more advertising dollars from more advertising agencies this year. That's the conclusion of a new Yankee Group survey of 100 ad agencies.

Sixty-five percent of agencies responding said they are likely to recommend that their clients buy streaming media advertising in the next 12 months, and more than half expect to increase their streaming media spend.

"That's the biggest piece of news. One of the things we were curious to find out about was when advertising dollars would begin streaming into this marketplace," says Ed Hardy, CEO of Measurecast, a third-party audience tracking firm that commissioned the study.

"There's an awful lot of awareness and excitement but translating that into an actual buy is probably one of the biggest challenges," adds the Yankee Group's Laura Mitrovich.

Skepticism still runs deep at many agencies and executives say the rosy spending forecasts contained in the report need to be taken in context.

"Most advertising agencies are probably spending one or two percent of their online budgets on streaming media, so if I'm working from that base, it's pretty hard to go down," says Adam Gerber, vice president of direct media strategy at The Digital Edge, an integrated media agency. "From an advertising perspective, we're three to five years away from streamed media being any kind of substantial portion of the general online marketplace."

Changing the diapers

Gerber uses the word "infancy" to describe the state of the streaming advertising market. It's a word echoed by many of his colleagues.

"Streaming media advertising is still in its infancy," agrees Kane Mosteller, president of Boston's BlackSheep Marketing. "We've got a lot further to go in terms of capabilities and finding the lowest common denominator to make the medium work to its fullest potential."

That lowest common denominator involves the conflicting -- and ever-changing -- technologies that drive the streaming industry, from RealPlayer and Windows Media Player in their various incarnations to the new kids on the block.

"I have companies in here pitching new technologies every day," says Mark Stephens, director of media services at digital marketing agency Lot21. "There's a gold rush to have video on the net just because it makes it much more broadcast-like, and I've seen some really interesting applications and some gratuitous use where it just doesn't make sense."

Mosteller says the tech war to win the hearts and minds of the ad industry puts pressure on consumers.

"We're asking the audience to do an awful lot on their end just to see an ad," he observes. "Most people don't download shareware or freeware until they have to. We need streaming media to get to a point just like television: You just sit there and watch it."

Back to basics

But on the up-side, agency executives say, is the increasing understanding among clients that advertising is not just about clickthroughs.

"In the beginning, we noticed really high clickthrough rates for streaming media, but as we used it more and more, clickthrough rates began declining," says Jason Kuperman, director of interactive strategy at Chiat Day. "We've come to realize that we're communicating so much information in rich media that chlickthroughs aren't as needed.

"It brings us full circle in that we're back to the original model of advertising -- brand exposure," he continues, "but the targeting aspect is far greater -- being able to tell how long someone has looked at it, who it's been forwarded to."

Not surprisingly, the Yankee Group survey confirmed that seven out of ten respondents viewed detailed demographic data as crucial to getting clients to buy streaming media advertising.

"Certain clients are much more comfortable with the dramatic and emotionally provoking influence of rich media -- goals that are similar to the advertising they are used to seeing in other media," says Kuperman. "When a client appreciates the value of rich media beyond accountability, then accountability is a bonus layer to them they can really enjoy."

The price of excitement

The potential "drama" of rich media also has many ad industry creative types excited, but sobered at the same time, as they recognize that just slapping existing radio and TV spots onto the web usually doesn't work. Problems include everything from wide shots getting lost on the tiny screen, to conflicts over actors' fees, to the difference in how the call to action should be structured in an interactive medium.

"Internet providers need to help agencies that specialize in more traditional media make their spots adaptable and applicable to the interactive space," says Stephens of Lot21.

Measurecast's Hardy says that need for education was driven home by the fact that over half those surveyed by the Yankee Group said streaming media advertising is too expensive.

"That was an eye-opener," he observes. "Especially when you consider that in any nascent-stage business, the best opportunity cost-wise is to invest early. It's more evidence that we -- and the [Internet] broadcasters themselves need to get out there and educate."

"The biggest concern is definitely evangelizing the benefits of the industry and showing ad agencies, 'Here's a great new advertising medium and you need to learn about it so you can teach your clients," says the Yankee Group's Mitrovich.

Measurecast's Hardy is optimistic that can be done, but he's also not running to the bank quite yet.

"The results are all positive things in terms of dollars starting to move into the space," he says. "It does accelerate things a bit in my mind, but I certainly don't think it means streaming advertising is going to grow exponentially faster than we thought."

###

---

Feb. 28, 2001

When Bigger is Better

Rich media advertisers welcome new industry standards

By Lawrence Pintak

On the Internet, 2001 is shaping up to be the year of the intrusive advertisement, and no one could be happier than fans of rich media advertising.

"Brand is going to be key this year and that means more streaming, more real estate and more interactivity," predicts Mark Stephens, director of media services at digital marketing agency Lot21.

This week's unveiling of a new set of ad guidelines by the Internet Advertising Bureau (IAB) underscores the changing online landscape. Huge new advertising turf is being carved out far beyond the largely discredited 392 x 72 banner.

"Skyscrapers" measuring 120 x 600, rectangles as large as 240 x 400, and 250 x 250 pop-ups now mean ads are moving deep into the turf once reserved for content. And more turf means more room for creativity.

"Everybody recognizes that a big component of 2001 and beyond is a move into a more evolved form of advertising," says Maggie Boyer, vice president of media at digital marketer Avenue A. "Previous years were about direct marketing methods. We are going to start to see the advent of the ability to brand online, and that goes hand-in-hand with this expansion of creative opportunities."

"We're going to spend a lot more on larger units," agrees Stephens of Lot21. "You're going to see a lot more pop-ups and within that you'll see usage of streaming from both a flash aspect and superstitials."

It's big and it's headed this way

But the IAB's new guidelines are not the only game in town. Various major sites have been experimenting with their own larger ad spaces, from CNET's 300 x300 rectangle to Internet.com's 360 x 300s, both of which wrap content around highly interactive ads. Ironically, the copy on a recent ad on CNET read: "It's big and it's headed this way."

But some Web advertising gurus are thinking outside even those boxes.

"We're not confined to traditional shapes and sizes," insists Mark Mursky, media director at the New York office of TribalDDB. "There are going to be more units that are irregular, that come at you from different areas. It's not always going to be fixed. It may be more engrained in the content."

The move toward larger advertising real estate is being driven by Web publishers who have watched the cpms on banners plunge even as overall advertising spending has dramatically dropped and new investment has dried up.

"What's happening is the publishers need to find another way to monetize their space. One way is new models -- bigger advertising models," explains Laurent Flores, CEO of advertising research company Ipsos-ASI.

And in the process, old concerns about being too "instrusive" are being set aside.

They'll just have to get used to it

"Everyone always says it's about the user experience, but there's a tradeoff," says LOT21's Stephens. "It's about finding what users are willing to tolerate, but it's also about understanding that one or two emails from users does not merit shutting [the ad] down, versus a few hundred emails, then you'd better listen."

"As clients are demanding that their ads be the most impactful, levels of intrusiveness are becoming more acceptable," adds Mursky of TribalDDB. "At the same time, it's a delicate relationship that we have with our customer and if we start offending them, the negative effects could be huge."

"We're always concerned about how intrusive the ads are," agrees Jason Kuperman, director of interactive strategy at TBWA/Chiat/Day. "But if advertisers are interested in these new ad sizes because they find them closer to what they're used to offline, sites may respond."

Besides, say others, concerns about annoying the consumer are nothing new.

"Since the beginning of promotion that has always been a concern," says Kane Mosteller, president of Boston's BlackSheep Marketing. "The billboards got bigger, now there are bus wraps. As long as you make the message relevant to the audience, people are going to accept it as the price of content."

It's not just about the size

For Flores of Ipsos-ASI, it all comes down to the quality of the ad -- whether a new "skyscraper" or a plain old banner: "It's not surprising people don't pay attention to what we put online, because it's crap," he says. "Everything sucks."

That, many industry experts say, is where rich media comes into play. The idea is not just to make the ad bigger, but to use that space to make it entertaining.

"Advertisers will be real cognizant of the fact that, yeah, this could be more intrusive," says Boyer of Avenue A. "But I would lay money on the fact that an ad unit that contains some audio or video is a lot more engaging than a standard banner."

Flores argues that while the bigger ad models open huge potential for interactivity, it is still up to the ad agencies to maximize their creative potential -- or else.

"If this thing is boring and not interesting the first thing you are going to do is close the window and move on to something else and you will lose the power of these ad models," he warns.

Flores and others also point out that just as the shift from banners to rectangles that dominate the page requires a new creative approach, the parallel shift from direct marketing to branding also demands a new strategy.

"These rich media tools have the chance to help people fully investigate a new offer, but don't fall into the trap of many direct marketing campaigns," he advises. "Tease me and then within this rich media content deploy the techniques for me to learning more about it -- the entry point is very different from offering coupons upfront."

And while the IAB's guidelines for new ad units provide a benchmark, the fact that major players from New York Times Digital to Disney have their own dimensions means the potential for an ongoing advertising Tower of Babel remains real.

"The lynchpin for success is that publishers need to band together to ensure they are all offering similar ad units and all accepting the same formats," insists Avenue A's Boyer. "If they all take divergent paths then you can end up in a position where you're an advertiser who spends $30,000 to create a flash ad for one site and you can't run it anywhere else.

"And that won't be good for anyone."

---

March 7, 2001

Return of the Dinosaurs

Traditional ad agencies are back in the online loop

By Lawrence Pintak

Open up an Internet trade magazine at any point in recent years, and the odds were you'd find advertising industry news dominated the "hot" new interactive shops.

To hear these brash young Web marketing mavens tell it, the "traditional" ad agencies were dinosaurs frozen in the Ice Age of the "Old Economy."

Well guess what? Those dinosaurs are back, thawed out in the dot com meltdown of 2000 that has changed the online landscape. And the big boys are looking to have the upstarts for lunch.

"The agencies are waking up from their slumber," says Peter Naylor, vice president of ad sales at Terra Lycos.

"In the early days, the agencies did not understand the real value of the Internet as a marketing medium and they were slow to adapt to it," agrees Murray Gaylord, vice president of brand marketing at Yahoo. "There is no question that now they are starting to get it."

In fact, if industry coverage was to be believed, the traditional agencies were so out of it that many advertisers considered them irrelevant -- doing mega-deals directly with Web publishers.

Was it true? Yes, but. A big part of the reason for the end run lies in the fact that the biggest chunk of online advertising dollars was coming from other dot coms.

"The more traditional shops were not quick to sign up the dot coms, who did their media buying in-house, and that's where that perception comes from," says Naylor.

The Old End Run

Richy Glassberg, chairman and CEO of Phase2Media, says part of the blame also lies with the publishers themselves: "There were a lot of people who were leaders in the space who weren't media people, so they went directly to the clients. Now that people aren't getting by on stupid dot com dollars, they're going back to the agencies."

Glassberg also questions just how many dollars ever actually changed hands between Web publishers and advertisers: "They would do a deal and issue a press release but a lot of it never got bought. It was just because the client needed to be seen to be doing a multi-million dollar deal."

"Deals being done through the agencies weren't of the magnitude of the deals that were being done directly by the publishers and were getting the ink," says Kevin Wassong, founder of digital@jwt, the interactive arm of J. Walter Thompson.

But even those at the biggest agencies are willing to admit the large firms had their own baggage to sort out.

"Agencies were probably perceived as another layer, and rightfully so," Wassong confirms. "Agencies were also perceived as being a barrier, and rightfully so. Agencies three years ago were perceived as 'not getting it,' and rightfully so. However, agencies have changed dramatically."

But that is not all that has changed.

Has their time come (again)?

A confluence of factors have made the big agencies a force to be reckoned with on the Web: Internet penetration has reached critical mass, measurement tools have ushered in the era of online branding, and the agencies now have their own interactive expertise in place. All of which means their big "traditional" clients are ready to take the plunge. And with the demise of the dot coms, those big traditional advertisers are where the real money now lies.

"Web publishers realize that we are the people who control the major budgets of the large brand advertisers and so they are more aggressive in coming and talking to us," says David Jacobson, an Interactive Strategist at TBWA\Chiat\Day.

Yahoo's Gaylord, a former chief operating officer of the Ad Council, confirms as much.

"We understood well over a year ago that the real long-term opportunity for the Internet is going to come from traditional advertisers because the bulk of spending has been from traditional advertisers," he says.

Over the past year, Yahoo has dramatically stepped up its efforts to court the big ad agencies, but that warming relationship is also changing the nature of "Internet time."

"Working with agencies is very different than working with advertisers directly," Gaylord says. "The whole planning process takes longer."

One reason is the broad strategic focus on overall branding that the big agencies bring to table, as well as the emphasis on the Internet as just one element of the overall marketing mix.

"As keepers of the brand, it makes a lot of sense for the publishers to deal with the agencies because that's what we've been hired to do in the first place," says TBWA/Chiat/Day Interactive Strategist Joseph Jaffe. "We are able to present the plan in a shape and a form of most utility to the client's brand."

That, the publishers insist, suits them just fine.

"We want to be seen as full service advertising solution providers rather than just banner salesmen," says Naylor of Terra Lycos. "Web advertising deserves a place in every major shop right alongside TV. It's just another line item on a media plan that needs to be considered."

Next week: Changing relationships

---

March 14, 2001

The Era of the Big Boys?

One-stop shopping offers simplicity in confused landscape

By Lawrence Pintak

When Compaq recently awarded a major account to FCB San Francisco, one key reason was the agency's interactive capabilities.

"FCB was told by their client how thrilled they were that their interactive team was total involved in the pitch," recalls Murray Gaylord, vice president of branding at Yahoo, which is now working with the agency on the campaign.

To some observers, the fact that a major "traditional" ad agency was winning business based on its Internet expertise is a sign that the age of the boutiques may soon be replaced by a return to the era of the big boys.

"What goes around, comes around," says Richy Glassberg, chairman and CEO of Phase2Media, a firm that specializes in digital media buying. "The reason clients hire agencies is they want an equal partnership between planners and buyers."

That partnership, Glassberg and others argue, has been skewed in recent years by the new, and fluid, relationships between specialized ad and technology boutiques, clients and sites themselves.

Add to that mix the plethora of Web builders, marketers, media buyers and ad servers that seem to compete as much as they compliment.

Confusion in the marketplace

"There is a tremendous amount of overlap," says Kevin Wassong, a founder of digital@jwt, the interactive arm of J. Walter Thompson. "You think you're confused about what they do, they're confused about what they do. It's not a black and white scenario, but that is starting to become a lighter shade of grey."

Wassong may have a vested interest in painting a bewildering picture of the boutiques with which he competes, but one need only compare the companies' own slogans to get a sense of the potential for confusion.

"From banner ads to sponsorships to targeted e-mail, we plan, run, and optimize marketing campaigns in all digital platforms," says Avenue A.

"Razorfish thinks digitally," that firm's home page announces. "From Web to Wireless and Broadband, our focus is clear -- help businesses capitalize on digitial opportunities."

Beyond Interactive boasts that "we use targeted media, revolutionary technology and insightful creative to achieve valuable and measurable results every step of the way. We are a unique combination of strategy and creativity."

But dig beneath the marketing materials and would-be advertisers will often find the core strengths among such firms are very different. Which sometimes requires advertisers to hire a stable of agencies.

"A big client may have a branding agency that sets the brand strategy, a direct marketing agency and there may be another interactive shop that they get creative from," explains Tom Sperry, president of digital marketing technologies at Avenue A. "And this medium is one that requires a lot of analysis and measurement, so we see people coming to third parties like ours for metrics solutions."

That has some clients looking for a little order in the chaos.

"They don't want to have to be the referee between their traditional agency and their Internet agency. They want a seamless relationship," observes Murray Gaylord, vice president of brand marketing at Yahoo. "We're seeing that more and more."

Which is good news for the big boys.

"It's a very young industry and everyone is trying to figure out the best way to make things work," Gaylord adds. "All the different types of interactive agencies and Web companies had to confuse things, but like the entire dot com industry there's a healthy shakeout inevitable."

When bad news is good news

Shakeout. Consolidation. Two words heard frequently in the Internet space these days. Words that holds a world of potential for traditional advertising agencies.

The big shops have made huge strides toward putting their virtual ducks in order, positioning themselves to take on the pure play Internet boutiques that have captured much of the ink -- and some of the money -- in recent years.

"The traditional agencies are really starting to wake up and say, 'the medium is here to stay,'" Sperry observes.

Even before dot com dollars started drying up and overall advertising spending slowed, big agencies were buying up small interactive shops and bringing them under their wing, or cherry-picking top talent to build their own internal abilities. The predators clearly needed the expertise of the I-firms, but, some industry experts believe, it's not all a one-way street.

"The interactive shops need the expertise of the big agencies," argues Peter Naylor, vice president of ad sales at Terra Lycos. "The interactive shops may be great in the space but they may not be able to run a business."

From a client perspective, some argue, a return to the big agencies makes sense at a time when there is a renewed focus on branding.

"[The interactive firms] thought they came up with a whole new kind of agency," says David Jacobson, an Interactive Strategist at TBWA\Chiat\Day. "Everyone tried to do it all and we're seeing everyone cutting back now and realizing that branding hasn't changed that much. We just have a few new tools."

Define "expert"

Nor surprisingly, the Web specialists say it all comes down to whether the big boys actually know how to use those tools.

"Over time, they can do very well, but they're way behind the curve," insists Avenue A's Sperry. "We have a few year lead on these guys, but they're going to need to focus if they are going to be successful."

Sperry says, for example, the difference between his agency and the traditional firms, comes down to using the complex metrics the Web has the ability to deliver.

That is precisely the difference, counters Joseph Jaffe, another interactive strategist at TBWA/Chiat/Day. "I don't rely on metrics like a drunk would lean on a lamp post. It comes back to leadership, and leadership by definition comes down to intuition and guts and drawing on past successes and failures."

And, he adds, it also comes down to long-term partnerships, not just brief consulting relationships.

"It's an absolutely win-win situation when the relationship involves two partners walking through this new landscape," Jaffe says. "Sometimes proceeding one step at a time and sometimes moving at an exponentially more rapid pace."

###

March 21, 2001

Beyond the Hype

The challenge of finding "solutions" that actually work

By Lawrence Pintak

The ideas are often brilliant; the potential huge. But advertisers and ad agencies evaluating new online "solutions" too often find that the marketing pitch outshines the technology.

"A lot of the time, the hype machine gets into play and they'll be telling you how great the product is and then you get a sample and the thing will hose up," says TribalDDB Director of Technology Clifford Lopez, who evaluates vendor products for the interactive advertising agency.

Agency executives like Lopez -- and Internet reporters -- are bombarded with new products every day. Separating the digital wheat from the chaff can be a full-time job. And there is plenty of chaff.

"Every day we have a new vendor proposing a new format of rich media or email," says Jason Kuperman, director of interactive marketing at TBWA/Chiat/Day. "The danger is these products might not provide the ideal user experience in the long run."

Three of the "groundbreaking" new "solutions" that arrived in this reporter's in-box in the past week failed to deploy, variously producing error pages, interminable downloads that never ended, or completely freezing the system.

"There's a lot of stuff that comes to our doors that isn't ready for primetime," says Lopez of TribalDDB. "If it's a new technology that's less than six months old, we tend to be pretty skeptical. We tend not to adopt something that's the latest buzzword."

Even products that are already out in the marketplace can present problems. The endless variations in browsers, email clients, bandwidth and the like can mean that even a product that performs impressively on one computer can crash on another.

For advertising agencies, ever mindful of their clients' relationship with the consumer, "solutions" that get in the way can prove disastrous.

"It may sound hokey, but you don't get a second chance," says Jonathan Jackson, an analyst with the research firm e-Marketer. "That initial impression has a huge impact on customer loyalty."

"Some of these things need to become more standardized and streamlined before we can reliably use them," says Mark Stephens, director of media services at Lot21, a digital marketing agency. "Our greatest challenge is not in building or buying solutions, but in implementing them effectively."

An email chat product developed by Multicity.com is an example of the challenges faced by agency technology gurus as they decide which third-party solutions to deploy on behalf of their clients.

The company claims 500,000 web sites are using its In-the-Box chat room, message board and online polling technologies. The products have been praised by PC Magazine and Yahoo! Internet Life. The company that is serving ads to the community, 24/7 Media, claims Multicity.com is getting a better than 1 percent clickthrough rate.

One of the most unique aspects of Multicity is a function by which anyone -- for free -- can create a chat room that lives not on a web site, but in their email client. They can then email the chat room to as many friends as they would like, and those friends can send it on to their friends.

"The In-the-Box technology becomes an acquisition and marketing tool for the company [employing it]," explains Alain Hanash, CEO of Multicity.com. "The viral marketing aspect comes into play when you send it to 100,000 users and they send to others and the user base grows to 500,000."

If you can get it to work, that is. This reporter couldn't. Instead of creating a chat room, I was plunged into a digital version of Groundhog Day, in which the system kept generating the same email that asked me to click on the same link that required a set of actions that once more generated the same email -- none of which actually created a chat room.

"You must have done something wrong," Hanash suggested during a telephone interview. He kindly created and emailed one to me as we spoke. It never arrived.

Another, sent by one of his colleagues a short time later, arrived, but the chat room wouldn't deploy.

Within an hour, Multicity's PR person had the chief of technology on the phone with me. He couldn't get the system to work, either.

Eventually, they decided that a "recent upgrade" must have "created a few bugs."

"Thank you for alerting us to this problem," they declared. They promised to get back to me within a few days, once the bugs were exterminated. That was in February.

There ensued a series of emails from the PR person over the next few weeks, each setting a new deadline by which time they were sure the problems would be resolved.

"Our chief product testing programmer has informed me that all the bugs you experienced should be completely fixed by early next week," PR manager James DuBeau said in an email on March 8^th. "I will send you an update on
Wednesday of next week (March 14)."

That date came and went. It wasn't until March 19 -- a full month after the initial contact with the company's top executives -- that an email arrived saying that while the chat function was finally fixed, there were still problems with the online polling feature.

"According to our CTO, we are tentatively expecting to have this final
problem resolved by March 26," DuBeau explained. "I will contact you as soon as I can confirm that this problem has been resolved. I'm sorry again for the long delay in fixing these problems."

One month, when a media product review was at stake. Imagine the hapless consumer.

e-Marketer's Jackson, who specializes in evaluating email technology, also recently tried to create a Multicity.com chat room of his own. Did it work?

"No, of course not," replied Jackson.

Told about the experience, one ad agency executive, who asked not to be identified, said he wasn't surprised.

"They came in here to try to sell us on it, and they couldn't even get it to work on their own laptop," he recalls.

"If somebody comes in saying we have this crazy new thing, it's not unusual that they can't get the technology to work in their own sales presentation," reports Karim Sanjabi, CEO of Freestyle Interactive.

"They'll often say, 'It's a new version, there must be some bugs,' or 'I haven't played with this version before,'" adds Lopez. "Or, if it's on our system, they'll say, 'Oh, you don't have the right system configuration,' or 'it's not a hot enough box.'"

That doesn't always go down very well with the agency jury.

"I don't want to see a lab experiment, I want to see real life," Lopez observes. "And I want to see something that is going to work on anybody's system."

Jackson, who regularly sees technologies that are being hyped ahead of their time, has become cynical about overblown promises.

"Why are they being hyped? Either to drive up the stock price or keep the VC's happy," he says. "And typically before a major show there's this rush to the altar."

As for Multicity.com, the problems this reporter encountered certainly did not affect other aspects of the service, such as the much-publicized multiple language capability that provides real-time translations between eight languages.

Upon entering a Spanish-language chat room, we were greeted with a warm, "Shalom to which they have entered."

And over in one of the Italian-language chat rooms, a participant typed:

"Sole salutatutti."

Which naturally translated as: "Sun salutatutti."

---

March 28, 2001

Rich Emailers See Opportunity in Advertising Adversity

But do the solutions measure up?

By Lawrence Pintak

It has been, in a word, disaster. The current downturn in ad spending has agencies, publishers and the folks who serve them scrambling for cover. Layoffs have become a daily occurrence. There is much bleeding from the bottom line.

But one group of marketers sees opportunity in adversity.

"Advertisers and clients are going to be looking for the most cost-effective ways to build a customer base and email has been proved to do that," says Shannon Carter, executive vice president at Talkway Communications, which provides a video optimization technology for rich emails.

According to Web research firm eMarketer, email marketers will spend more than $2 billion this year, just under 10 percent of total online advertising dollars. But with ad spending in a tailspin, some industry experts believe that email's piece of the action will grow even larger -- and richer.

"The downturn in the economy could actually work in the favor of marketers if they're smart about it and they use those tools that best maximize the marketing skills they have," argues Chris Donaldson, a co-founder of Radical Communication, which produces RadicalMail, a popular rich email solution.

The rich get richer

The increased use of rich media in email has bolstered the medium's ability to deliver everything from dynamic video to complete shopping solutions right in the email client. Forrester Research predicts that in five years, 50% of all communications with come in the form of rich media.

But therein lies the rub.

There are few among us who have been spared the annoyance of growing old while waiting for a rich email to download, or, worse, watching our system freeze the moment it deployed.

Most of the people who make advertising spending decisions have had the same experience -- one they don't want to share with their customers.

"The majority of the time the end-user isn't going to sit around and wait for this to download," Donaldson acknowledges. "It all comes down to download time and making the end-user's experience as fruitful as possible."

Sniffing out sales

To achieve that, RadicalMail and many of the other leading products employ a "sniffer" technology that ferrets out key information about the end-user in the instant before the download: Is the customer on broadband or a dial-up connection? Is his email client java- or html-enabled? What operating system is the computer using? The email server then serves up the most appropriate kind of message, either a rich email in a variety of compression sizes, or a text message with a link to the rich content.

"The key is delivering to your audience that media which is most appropriate to their email environment," says Donaldson. "It's not a broadband play, we're trying to reach consumers of all bandwidth speeds."

Still, no one claims they are actually getting to all the eyeballs yet.

RadicalMail reports a 30 percent open rate. Another well-known email solution provider, Mindarrow, says 22 percent of those who receive its ebrochures are able to view them.

But those numbers look a lot better when put in the context of consumer response: Where banner ads generally garner a clickthrough rate of less than half a percent, RadicalMail claims a response rate of 20 percent and a forward rate of 10 percent, Talkway reports clickthroughs of 10 percent or better, while Mindarrow says its overall clickthrough rate is 13.5 percent.

But numbers can be misleading. Various research firms reporting anything from two percent to 20 percent clickthrough rates on email campaigns.

Not all lists are created equal

"In general, it depends on how opted-in the list of people you are sending it to is," explains Scott Altman, director of marketing communications for Mindarrow. "If you're truly opting them in the right way and sending the kind of material they wish to receive and in a rich media format people are going to like, your response rates are going to be good. But if you're providing them something inappropriate, you're just going to upset people."

But that's not to say technology is not still a hurdle; from firewalls that block java script on corporate sites and the systems of providers like AOL, to the plethora of email clients and operating systems, it's a technological jungle out there.

"Every day we learn something new about what happens in Netscape and AOL and Outlook 97 and the rest," says Altman of Mindarrow. "It's learning by doing."

EMarketer analyst Jonathan Jackson, who specializes in email, acknowledges the high response rates, but adds a dose of skepticism.

"If users can get it, they'll open it more frequently, but not everyone can get it," he maintains. "The cost is exponentially higher to produce these things. You get a better marketing tool, but you have to consider, can everybody get it?

[Email solutions providers] are doing fantastic things, but we may be one or two steps ahead of where the market is," he adds. "Unless it's highly targeted to college kids in dorms where you know there are high speed lines, it's still a risky proposition."

Says Radical Communication's Donaldson: "Obviously we disagree with that."

Next Week: Getting the eyeballs on email

---

April 4, 2001

Eyes on the Prize

Keeping fingers off "delete" is the challenge for rich emailers

By Lawrence Pintak

One hundred billion.

That's how many opt-in, or permission, emails American will receive this year. Throw in another 62 billion spam messages and you're talking an awful lot of email.

Those figures, from market research firm eMarketer, give some idea why email marketing is getting so much attention these days.

But the numbers also speak volumes about the looming danger of email overload -- especially when you consider that opt-in email alone is expected to more than double by 2003.

"In general, people get too much email," says David Soklolic, vice president of Marketing for Gizmoz, an email solution provider. "[Email overload] is a danger for the whole industry."

To cut through the noise, many marketers are turning to rich media alternatives. But the technology brings a host of new issues. As discussed in last week's Turboads.com story, technology solutions providers are employing a combination of sniffers, compression and text-based alternatives with embedded links to deal with the fact that 95 percent of Americans are still using a dial-up connection.

Seeing is believing

But even when these smart solutions are able to serve up emails people can actually see, there is another challenge: Getting consumers to look at the messages before they are deleted.

"The good news is that everybody can see these messages," adds Blair Lyon, CEO of TMX Interactive. "The issue is, 'How many get to see them instantaneously inside your email?'"

Americans have a notoriously short attention span and few consumers have the patience to sit waiting while something they know is a sales pitch downloads into their email client.

To ensure users don't delete the message even before it is loaded, many companies are seeking ways to avoid plug-ins, which require a step many consumers are not willing to take.

"The upside of rich media is delivery," says David Soklolic, vice president of marketing for Gizmoz. "The downside is having to work with plug-ins."

Playing with Gizmoz

Gizmoz's solution is to require a single download of their tool which then automatically feeds all opt-in emails from their customers into a separate program where they wait until the user chooses to view them. That approach eliminates the problem of in-boxes crowded with ad-based emails, but assumes the consumer actually will periodically check his or her "Gizmo" for ad messages.

Most other leading solutions stick to the in-box, but all are designed to get eyeballs on the message as fast as possible.

"On a 56.6k line, you're going to start downloading graphics within five seconds and the media should start playing within 15 seconds," says Radical Communications co-founder Chris Donaldson of his RadicalMail solution, which requires a 46K download.

"By making sure the graphics start to come in quick, they know something is coming down the pipe and when it comes, it hasn't been a two-minute long experience waiting for it to happen," he adds.

Anyone who has ever looked at a blank window in an email client knows the importance of getting content in place before the consumer hits delete.

"Sixty percent of the population can see our messages instantaneously," cliams Blair Lyon, CEO of TMX interactive. "We track against who gets to see it instantly, who gets to see it through a link and who just sees text."

Use some marketing savvy

But even as they extol the virtues of rich email, the people who provide the technology caution that not every email campaign requires rich media.

"It's not always appropriate," says Donaldson. "Sometimes you only want to send text messages. Rich media is generally received very well, but it would be foolhardy to say it should be used all the time."

And when it is the right solution, they say, it must be used right.

"In the rich media space a lot of people have been oversold on what it's all about," says TMX's Lyon. "It's not necessarily about opening my email and having a hologram just out."

RadicalMail recently handled a campaign for restaurant directory Zagat that allowed recipients to view products, shop and conduct a credit card transaction all within the email client.

"If you're going to use rich media to communicate with me, it better not just be a TV commercial," says Lyon of TMX. "I'm ready, I've got my mouse in hand. Give me the capability to make decisions within the email. Don't just say, 'click on this link' and send me to get lost in a website."

Still, with less than a third of their intended audience actually able to see their rich message (see last week's story), email technology providers know they still have their work cut out for them.

Sometimes it must seem to rich emailers that they face hurdles at every turn: The world's largest email delivery vehicle, AOL, strips Java script. HTML-based email providers block most rich media. And many consumers have Java script disabled in Microsoft Outlook and other email clients -- all of which means either the rich media messages default to text or they don't get through at all.

"Because there's this wide variety of email clients out there, what we're looking to do is provide some additional options asking consumers [during the opt-in process] whether they would like to receive messages as text or html and asking what they're email client is," says Scott Altman, director of marketing communications for Mindarrow, another rich email provider.

But, the catch is, many consumer simply don't know much about their computer.

"Could we do it better?" asks Donaldson of Radical Communication. "Of course, that's the challenge that faces all of us. You've got to keep your eye on the ball."

---

April 7, 2001

Black & White and Read All Over

Minority-focused Internet sites reaching booming new markets

By Lawrence Pintak

News organizations in the past few weeks have been busy reporting that the latest census figures show a huge increase in the nation's Hispanic and Asian populations.

But the fact that America's complexion is changing comes as no surprise to Internet marketers, who have been quietly building an industry to serve them.

"It's no longer a so-called 'mass market,'" says Jeff Lin, CEO of Admerasia, an advertising agency specializing in the Asian-American market. "There are African American markets, Hispanic markets, Asians, gays and lesbians, even children. And I believe that one of the beauties of the Internet is its unique ability to reach all of them."

Even as major Internet sites from Go.com to Inside.com scale back, consolidate or shut down, other portals that serve specific ethnic groups are gearing up.

"Up until recently, the broad assumption was that people of color weren't online, so it wasn't seen as relevant to ethnic marketing, but in the last 18 months you're seeing a 180 degree turn," observes Omar Wasow, president of Blackplanet.com.

Just as the Internet is changing the nature of marketing, the country's shifting population is dramatically altering the marketing terrain. In the past decade, according to the latest census figures, the Hispanic population has grown by a staggering 58 percent, drawing about even with African Americans. Asians, meanwhile, are expected to make up 10 percent of the population by 2050.

The shift is dramatized by news that whites now comprise less than 50 percent of California's population, throwing into question the very definition of the word "minority".

"Even with the economic downturn, we can see more and more opportunities for people to shift their focus to specific ethnic groups or specific channels to create more efficiency," says Lin of Admerasia.

When the 50 member companies of the Association of Hispanic Advertising Agencies (AHAA) gathered for their semi-annual convention in Phoenix last week, Internet marketing had a key spot on the agenda.

"Given the big number of Hispanics now on the Internet, it has become an excellent tool to talk directly to them," says Guillermo Paz, president of Populi Communications, a Hispanic advertising agency based in Puerto Rico, who was at the conference.

Lin's Admerasia agency is one of several retooling to tap the potential of ethnic advertising. It is has taken on a new name, New A, grouping subsidiaries focused on advertising, Web design, translation and marketing services aimed at the Asian American audiences and what are known as "emerging ethnic audiences", such as Eastern Europeans and South Asians. Multicultural marketer Muse Creative Holdings recently moved its headquarters from Los Angeles to New York, and late last month advertising giant Publicis Groupe announced a major investment in two Hispanic specialty agencies to form Publicis Sanchez & Levitan.

One reason for the renewed interest in minority marketing is that with the growing population has come dramatically increased buying power.

Seventy percent of Asian homes have Internet access and 61 percent of Asians make purchases online, according to a study last year by Insight Research. Asians have the highest household income in the U.S. and a survey commissioned by San Francisco TV station KTSF found that 28 percent of Chinese households trade stocks online. Admerasia recently built a Chinese-language site for E*Trade to tap that wealth.

Perhaps more surprising are the figures for the Hispanic population. A study commissioned by AHAA found that 38 percent of Hispanics 16 years and older regularly use the Internet, spending almost 5 and a half hours online per week. Of this group almost a third have shopped online, with CDs, books, electronics and airline tickets the most often-purchased items. Overall, 60 percent of Hispanics have logged on to the Internet at some point.

"The old messages and stereotypes have to be updated a little," says Wasow of Blackplanet.com, which also operates Asianavenue.com and a new Spanish-language site, Mihente.com. "Market to them as users of digital culture not victims of the digital divide."

Major national advertisers from Citibank to Mercedes Benz are doing just that. Typical is last week's announcement by music giant BMG of a sponsorship deal with BET.com and 360HipHop.com that includes the creation of listening parties, dedicated chat rooms and exclusive interviews.

Such microsites within "minority" portals are becoming common as advertisers tap the Web's ability to develop one-to-one relationships with ethnic consumers. BMG had previously set up similar arrangements with Spanish-language Starmedia.com and PlanetOut.com, the leading gay and lesbian site.

"There's a core model in the black community of audience participation being central to the success of a venture, whether you're talking about Showtime at the Apollo -- where the audience is cheering or heckling someone on stage -- or a Baptist church," says Wasow of Blackplanet.com. "That kind of audience participation is really hard to do in traditional media."

But it comes naturally on the Web.

And it doesn't only work among African Americans. Paz's agency, Populi Communications, recently mounted a similar campaign for Budweiser among Hispanic consumers, using opt-in email campaigns to invite consumers to special events, mounting online cybercast parties and niche content, all within the boundaries of Spanish-language web sites.

"The Internet has affected our efforts in a very positive way," he reports. "It has given us the opportunity to be even more direct in marketing campaigns. Many brands have been able to pick up the strengths of the medium and come out with a very powerful message for Hispanic consumers."

Next week: Markets within markets

---

April 14, 2001

Markets Within Markets

Online minority consumers are not just divided by ethnicity

By Lawrence Pintak

When most people think ethnic markets, they think niches. But as the latest census findings demonstrate, the nation's "minorities" are quickly becoming huge and highly cohesive markets. And, like the nation at large, minorities are moving online at an astounding rate.

For many, minority-focused web sites are the prime destination. And the numbers are nothing to sneeze at.

Blackplanet.com, for example, is ranked among the nation's top 50 sites, according to Nielsen, and is one of the ten stickiest. Chinese language site Sina.com boasts 17 million users worldwide, 1.8 million of those in the U.S.

In general, African American Internet users tend to skew older than their Hispanic and Asian American counterparts.

"Young people in all three groups are online, but in the 40s and 50s there's a drop off among Asian and Hispanics," says Omar Wasow, president of Blackplanet.com.

That's true among Asians in particular because the biggest growth in the Asian-American population is coming through immigration, primarily among blue collar workers, who tend to be less tech-savvy and less likely to speak English.

That hasn't prevented Sina.com from building itself into the largest Asian American-focused destination on the through a combination of financial services, chat rooms and virtual mahjong parlors.

For advertisers trying to reach the fragmented network of Chinese enclaves spread across the U.S., the Internet offers an unparalleled opportunity.

"It is a real national community -- a true national media. That's something that in the mainstream market is taken for granted, but in the ethnic media is new," says Hurst Lee, CEO of Sina.com. "It is close to impossible to reach the whole Chinese community in traditional media. This is one-stop shopping."

But Sina.com's numbers also reflect a cold hard fact of ethnic advertising on the Web: Just because the site is speaking a certain language, it doesn't mean it is reaching the audience you want.

"One of the stunning things that people have to remember is that ethnic marketing does not mean in-language marketing. It is marketing within a culture," says Benjamin Sun, founder of Asianavenue.com.

And even within those cultures, there can be dramatic differences.

"You have to look at the Asian population in two different categories," explains Joseph Lam, founder of L3 Advertising, one of the first agencies to focus on Asian-Americans. "A lot of new immigrants are working class. They are the other half of the Asian population. Their education level is not as high as is documented for the Asian population in America as a whole. Then again, their children have almost instantly become very affected by Internet technology."

Where Sina.com's U.S. audience is drawn largely from among foreign-born and first generation Chinese who tend to favor the mother tongue, Asianavenue.com is aimed at second- and third-generation Asians, who generally prefer English.

"For me, even though I'm Chinese, I have a lot more similarities to a second-generation Korean-American than an immigrant Chinese," explains U.S.-born Sun. "That Korean-American has gone through very similar cultural and life experiences, unlike the person who immigrated from China."

To illustrate the changing face of the Asian American consumer, Sun tells the story of his brother, who, concerned about the family's reaction to his plan to marry a Caucasian, asked his grandfather for permission. "My grandfather burst out laughing," Sun recalls. "He said, 'What's the problem? You're not Chinese! You barely speak the language. You've been to China once. You eat a lot of Chinese food, but so do plenty of other Americans."

Which emphasizes the danger of old stereotypes in the New Economy.

"An Asian American of second or third generation may take offense if someone looks at their face and assumes, 'Well, you're Chinese, right?' And bases their marketing message on that," says Lee of Sina.com.

That shifting of identity is beginning to occur among other minority groups as well.

"Where a lot of people expect the tension [between specific national backgrounds] to make a pan-national site difficult, we find that's not a barrier," observes Wasow of Blackplanet.com, sister site to Asianavenue.com and Mihente.com, a Spanish-language site. "It's important to let people express their heritage, but the old model of national heritage being the most important thing is falling away."

Nor is language necessarily the key.

"At home, Spanish many times is the preferred language," says Guillermo Paz, president of Populi Communications, a Puerto Rico-based advertising agency. "But once you leave your doorstep, many younger Hispanics shift to English."

One study found that only seven percent of Hispanics prefer to surf in Spanish. That reality is leading some advertisers to ensure that their messages in one language track closely with those in another.

"A lot of Hispanics watch Spanish TV and English TV, and it was weird when you saw a Bank of America ad in Spanish and one in English with a totally different vocabulary," says Paz. "People are realizing they should have one voice. The Internet makes that even more important."

The global nature of the Internet creates another set of challenges. By 2005, according to Insight Research, 70 percent of web-users will be non-English speakers. Which raises the question for marketers targeting ethnic groups online: Who do they want to reach, a billion Chinese on the other side of the Pacific or a few million inside the U.S.? And, if they are advertising in-language, what do they have to do differently to reach one and not the other?

The question even comes up when the language is English.

The U.S. portal of Rediff.com attracts a huge following among tech-savvy Indian expatriates -- and plenty of eyeballs around the world.

"There is tremendous language efficiency," says Jeff Lin, CEO of Admerasia, an advertising agency specializing in the Asian-American market, about Rediff.com's South Asian audience. "They all communicate in English so advertisers are not as reliant on the mother language as they are with Koreans or Japanese or Chinese."

But it also means advertisers need to keep their eye on the ball.

"The Internet helps companies expand beyond boundaries and has really brought our clients to the overseas audience," says Lin. "But the question of what we do with that is still in the infant stage."

Like their mainstream cousins, ethnic Internet sites are not immune to the dot com malaise. The collapse of sites like Quepasa.com, which just last summer commanded the highest awareness of any Spanish-language site, has left some media buyers treading softly.

"We've seen a lot of Spanish-language web sites that have already gone under, so from an advertising standpoint it makes us a little squeamish," says Kim Chance, associate media director of Hispanic advertising powerhouse Bromley Communications. "But we still think it's a viable medium to target our consumers."

And at the end of the day, most ethnic marketing specialists say, it all comes down to marketing 101.

"The Internet gives us the ability to do a regional attack, to know where the potential customers live and their specific ethnic backgrounds and tailor messages to fit," says Paz of Populi Communications. "This is no different than you would do with the general market."

Adds Wasow of Blackplanet.com: "One of the core messages of ethnic marketing even before the Internet was that you need to approach people with a relevant message and you need to try to build a relationship with the community. So while the strategy of a lot of ethnic oriented marketers may not change, the Internet really raises the bar."

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April 21, 2001

Conferences in the Mist

How trade show producers are coping with the downturn

By Lawrence Pintak

Newspapers are reeling, dot coms are tottering and ad agencies are bleeding, but in the midst of what is quickly becoming the Great Media Meltdown, Internet tradeshow organizers are dodging and weaving to find opportunity in the angst.

"The Internet community needs these events more than ever because there's more information to share and people need new clients," says Jason McCabe Calacanis, editor and publisher of Silicon Alley Reporter, which produces several industry conferences.

Many of Calacanis' colleagues agree, with a very large caveat.

"There's actually more of a real need now for really sound advice and counsel on how to do business on the Internet and how to use it effectively, but the reality is that companies that were funding many of these conferences are looking at every ad dollar they are spending in a much different way," reports Jonathan Zemmol, a principal of the International Advisory Group. The firm has produced conferences for such Internet players as Gartner Research, Screaming Media and Concrete Media, but Zemmol says that the number has dropped sharply this year.

"It's becoming more challenging," he observes. "I think people will still pay to attend conferences where you have good, high quality, high level speakers. It's when the issue is having companies sponsor or fund these programs that you run into a problem."

"At the end of 2000, anybody could put together a show," adds Calacanis of Silicon Alley. "Get some sponsors, put the word on the Internet and people would show up. Now it takes a lot more work."

Short & Sharp

One solution is smaller, shorter, more tightly focused events, with lower overhead and fewer sponsors.

"We realized there wasn't going to be a future for big, general events and we refocused our product line to be very niched and extra-focused," says Calacanis. "Typically our events were one to three thousand, we're now trying to have 300 to 700 of the 'right' people and five to 15 sponsors."

Silicon Alley has also increased its emphasis on exclusive events like an invitation-only CEO dinner series: "In this economy, the decision markers are so busy they don't have time to spend three days at a conference."

Quality over quantity is a formula many conference organizers are shooting for. And with it, they say, is an emphasis on raising the level of attendees as well -- from mid-level managers looking for information to top execs on the prowl for new survival skills and deals.

Barry Soicher who heads The Industry Standard's conference division, reports that the company's recent wireless event, Roam, drew 350 "really good quality" participants.

"The level of attendee has increased," says Soicher, who recently joined the Standard from Red Herring. "They're trying to figure out how to run their business in the midst of all this and having a more hands-on approach. Getting out of your office and getting a reality check is even more important than before."

Better than expected

The organizers of the big May Internet advertising event, @D:Tech, say that despite the ongoing ad industry fallout, prospects for success still look good.

"Our experience, so far anyway, is very surprisingly positive in that the show has held up extremely well through this serious downturn," says Joel Davis, a vice president at Imark Communications. "We've seen a little slip on the exhibit floor. A number of companies are not with us anymore, but we have added more companies that have not exhibited with us before."

And while networking at trade shows may be more important than ever for some executives, that doesn't mean they feel the same way about sitting through an expensive program.

"What we're seeing is an increase in the number of people coming who are exhibit hall-only attendees -- just to see the booths and exhibitors -- and a reduction in the number of people coming for the entire fully-paid conference," Davis reports.

Which gets right back to the issue of quality. Organizers say that if they are going to continue to attract these new, higher-quality conference attendees, they have to provide something worth coming back for.

"I find this year it's all about delivering the goods: A great program with great content," says Soicher of the Standard, who insists his company is in it for the long haul. "We have to be smart: Under-promise and over-deliver. This is not the year we're going to make a huge sum of money, but we'll do ok."

Overall, the numbers are down, but, according to the gatekeepers, not disasterously. Calacanis reports that attendance at Silicon Alley 2001 was off only 15 percent from last year's event, and Soicher says the Standard's Roam wireless conference in mid-April paid its own way.

"We didn't compromise our values, we didn't give away tickets, we didn't have to beg," he says proudly. "We kept to our model."

Bernardo Joselevich, who compiles the weekly Bernardo's List, a compendium of Internet events and parties in New York, says there are still 45 Web-related events a day in the Big Apple, where last year there were 60.

"Conferences still fill up," says Joselevich. "It irks me that journalists call and say, 'Isn't all this terrible?' And actually, what's newsworthy is exactly the opposite."

In for the long haul

Soicher says he is building for the future, creating events that will have the legs to bring back participants year in and year out.

"You can't just cut and burn everything, otherwise you don't have a product. You have to stay in the game," he insists. "Would you stop publishing a magazine just because it didn't get enough ads?"

Well, actually, most publishers eventually would. Still, many conference organizers say it hasn't yet come to that.

"People still need information, they still want to be face-to-face with their customers or peers or competitors and stay on top of the marketplace," says Davis of Imark. And, he adds, trade shows have an advantage over advertising-driven media.

"Where ad dollars are often cut very quickly, trade show spending usually comes from the sales promotion budget and those dollars are typically not cut so quickly," he says. "And in bad times you don't want people to look around [a trade show] and say, 'They mustn't be around anymore."

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April 25, 2001

Getting Rich on the Downturn

Ad industry woes giving rich media a shot-in-the-arm

By Lawrence Pintak

When Merrill Lynch's advertising gurus recently decided they wanted to run a flight of rich media ads on financial web site MotleyFool.com beginning later that same day, it was left to solutions provider Point Roll to cut through the technical red tape.

Within two hours, MotleyFool.com's technicians had fielded, tested and approved the format.

"A year ago, that would have taken days or weeks," says Jules Gardner, Point Roll's CEO. "Site acceptance is a borderline walk in the park today."

Money has always talked. But in the current slump, advertising dollars have a louder voice than ever before. That has produced good news for companies that produce rich media solutions and the ad agencies who use them.

"There's a definite wave toward publishers being more humble and more accommodating toward online advertising as a whole and rich media especially," Gardner says.

To be fair, even before the slump, many major sites had moved toward broad acceptance of many forms of rich media. Part of the reason is the aggressive education efforts of both solutions providers and advertising agencies.

"People have become much more accepting of rich media," reports Karim Sanjabi, CEO of Freestyle Interactive, an ad agency. "One of the reasons is they have familiarized themselves with the various mediums and understand what online advertising can do in general.

Sanjabi says his firm regularly recommends to clients that 95 percent of the creative in their campaigns be rich media. "The term rich media is almost obsolete, because to us, it's just the media that we work with."

That's not to say there weren't -- and aren't -- holdouts among publishers. But financial realities are quickly breaking down the remaining doors.

"Publishers have always wanted to do rich media, they've just been hesitant because they've thought that it was going to crash people's browsers or not be compatible with their sites," Sanjabi says.

"The truth is, a lot of the technical ability was always there," agrees Ben Saitz, vice president of advertising operations at Phase2Media. "It was policy not to allow it. But as spending tightens and they more aggressively chase the numbers, they take things they wouldn't touch before."

But not every site is as responsive as MotleyFool.com proved to be for Merrill Lynch. The very reason some sites are dropping the barrier to rich media advertising -- they need the money -- is hampering their ability to accept it.

"There are definitely some sites out there with no experience whatsoever with rich media; they don't even have rich media tags to serve up a rich media ad," says Point Roll's Gardner. "The difficulty is that with downsizing, you have a publisher with a desire from a sales perspective to run rich media, however you have ad testing departments that have been downsized so their workload is so much greater that something that should take a day to coordinate takes a week."

Still, even people with a vested interest in gaining broad acceptance for rich media know that for publishers, it remains a balancing act.

"Sites have a challenge: They need to generate advertising revenue so they need to be accepting when advertisers come and they want new technologies and new solutions," says Richard Cleveland, vice president of marketing at Bluestreak, which provides rich media solutions. "At the same time, we're sympathetic to the fact that they have to protect their audience experience."

Visit the web site Solbright, which produces automated online media buying and selling solutions, and you will be greeted by a pop-up window offering a free download of a white paper on flash technologies.

"We created the white paper because we noticed that a lot of people only looked at this from their own point of view, they didn't understand the problems from the other points of view, or there were misunderstandings," says Arthur McKinley, vice president of business development at Solbright. "Since we sit in a real central position we wanted to explain the new flash standards for all points of view."

It's all part of the industry's ongoing effort to educate those still outside the loop.

Over at Phase2Media.com, Ben Saitz provides clients with a backdoor to a site he runs that contains evaluations of a host of rich media solutions and help on using them.

A lot of these vendors are creating these technologies without talking to buy-side people," explains Saitz. ""They may not have research to prove it works. There's no centralized authority that says, 'this works and doesn't crash browsers.' There are still no standards with regards to how long an interstitial stays there."

The Rich Media Task Force of the newly renamed Interactive Advertising Bureau is hoping to change that. It is closing in on a set of standards for rich media advertising to mirror those recently released for banner ads.

"This way the guy sitting in the garage building this stuff has an idea of what to build in," says Saitz, who serves on the committee. "It's about tracking, it's testing, it's standards for expandable banners. It's a lot of basic things publishers think we can get together and agree on.This will allow vendors to get products ready for prime time."

This week's [EDITOR: WEEK OF 4/23] conference call by the group, which includes technology providers, ad agencies and web publishers, may put it in a position to issue a set of standards in early May.

Jason Burnham, president of MassTransit Interactive, thinks they are long overdue.

"You can put together a plan for 20 sites using a particular solution and find only two take it," he says. "That makes it very expensive and not very efficient.

"All the ad servers are doing their part in educating publishers, but it's a matter of us all coming together as an industry to educate and push publishers to take rich media," he adds.

Cleveland of Bluestreak is hopeful: Sites have to make a decision about how they are going to balance presentation of their content with ad content and that continues to be a challenge. Maybe these new standards will help them do that."

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May 3, 2001

Radio Silence

Streaming technology companies big winners in AFTRA online radio dispute

By Lawrence Pintak

Loyal online listeners clicking on the "listen live" link on the web site of New York's WABC in the past few weeks have been greeted by this notice: "We are very sorry you can't listen to WABC right now. WABC has temporarily removed our audio stream."

The news-talk giant, which regularly drew some of the largest audiences on the Internet, is one of hundreds of stations across the country that have pulled the online plug. At issue is a demand from the union representing actors that they receive a royalty for each radio spot that is streamed online.

If terrestrial broadcasters are, at least for the moment, the losers in the dispute, the other half of the station's notice to listeners makes clear who the winners may be: "WABC and all of the ABC stations are implementing major (and expensive) technological solutions in order to be compliant with the Digital Millennium Copyright Act and we do intend to be back on air as soon as feasibly and commercially possible."

That's music to the ears of the companies that build those (expensive) technological solutions.

"I think it's great," Tom DesJardines, chief technology officer of Lightningcast, says of the dispute. He would. His company specializes in the advertising insertion technology that allows stations to substitute online Internet-only ads for spots carried in the terrestrial feed. The dispute, he says, "just creates more demand for what we do."

For several years, companies like Lightningcast have hustled to convince radio stations there was money to be made online and that they could help them make it. The dispute with the actor's union, AFTRA, they believe, provides them with a new window of opportunity.

"The short term media boost is great for the ad insertion folks because it highlights what the technology does in a real world environment," says Wayne Hickey, a spokesman for Hiwire, which markets just such a system. "Initially we were talking about helping broadcasters generate revenue online. Now we say there's a more immediate use: Stripping out ads not in compliance and inserting those that are."

But not everyone is convinced.

"Everyone knows there's value in the Internet, but no one understands how to get it yet," says Tim McCarthy, Vice President and General Manager of WABC Radio, who is currently evaluating his entire Internet strategy. "Nobody's making money at this, and the solutions [to the latest dispute] just look like they're going to cost us more."

"They are all claiming it is very simple and they've got people deployed today that are using this stuff," says Bill Piwonka, vice president of marketing for MeasureCast, which compiles weekly Internet radio ratings. "I think I would characterize it differently: What has been a thin margin business just got thinner."

The AFTRA dispute came on the heels of demands for online royalties from the music industry -- all as radio stations scramble to cope with plummeting advertising revenues.

"This is like a big NASCAR race that's in the first 50 laps and we're just gotten the second caution flag," says Tom Taylor, editor of the M Street Daily, a radio industry newsletter. "For many broadcasters, it was reason to look again at their Internet strategy and say, 'We're not making any money and we're subject to these financial penalties, let's pull back into the pits and wait this one out.'"

While deep-pocketed ABC is taking the plunge into ad insertion, not every broadcaster thinks the time is right.

Susquehanna's Merge933.net in Dallas was one of the first stations that set out to blur the line between radio and the web. It would be natural that the pioneer would dive headfirst into cutting edge technology solutions to maximize its online revenue potential in the face of the dispute. So what is it doing?

"We put together a tape of promos that we run online during commercials," explains Dan Bennett, Susquehanna's vice president and market manager for Dallas. "It isn't like clients are mad because their ads aren't on the Internet."

In fact, while radio and web programming may be "merged" at the Dallas rocker, Internet exposure isn't even part of the sales equation.

"Most clients realize that what they're buying first and foremost is radio. The net was really just a little added ingredient that came with it. We don't put it in any of our sales presentations," he says.

Ad insertion executives say the AFTRA dispute offers broadcasters the opportunity to refocus on generating online revenues. Bennett, who oversees four major market stations, doesn't see it that way.

"That's probably wishful thinking at this point. It may be true at some point down the road, but today there's not going to be that kind of demand," he observes.

Bill Piwonka, vice president of marketing for MeasureCast, which compiles weekly Internet radio ratings, argues that such thinking is missing the point.

"Many of these broadcasters had not deployed ad insertion up until now, so they may or may not have had the ability to go out and sell the value of their stream," he argues.

"Sure they could say to their local advertisers, 'By the way, we stream and our Internet listeners will hear it,' but now they have the possibility to sell two ad avails: the terrestrial side and the Internet side. It's different demographics," Piwonka adds.

Those demographics are skewed heavily toward affluent college educated males, many of whom are streaming in office settings previously out of reach.

Like national radio sales rep firms, the insertion companies sell ad space on a national basis on behalf of the stations they stream.

"The broadcasters don't have to worry about the sales end of it," says Hickey of Hiwire, which claims nine million listeners across its stream of hundreds of stations. "We're delivering local advertising where you want it, but you don't have to go to those individual stations and say, 'I want to buy KTLA.'"

But while terrestrial broadcasters debate their next step online, one group has already benefited from the silence in the stream: Web-only broadcasters.

After an initial dip in online listening as stations began to pull the plug, Measurecast reports a 35 percent increase in total hours streamed since January. Where terrestrial broadcasters like WABC once topped the charts, more than half of the top 25 stations on last week's list were Internet-only stations.

That, says Taylor of M Street Daily, could mean that by pulling back, broadcasters are creating a vacuum the competition may quickly fill.

"The numbers indicate that although very small, the online listening audience is growing and if it can't listen to WABC, it will find others to which it can listen."

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May 8, 2001

A is for Apple, B is for Broadband

Ad agencies getting a course in Streaming 101

By Lawrence Pintak

They didn't have to raise their hands to go to the bathroom, but the ad executives who gathered in a Chicago conference room not long ago were definitely back in school.

The subject matter, streaming media, was something their clients were likely to test them on one of these days.

"The traditional folks had a larger learning curve, but I've been in this space a long time, and even I learned something," says Julie LaGuardia, an associate media director at TribalDDB, who was in the room that day. "It's one thing to be knowledgeable about it but another component is actually using it and understanding its value in a tangible way."

The session mid-March was the first stop on a three-city agency road show put on by RealNetworks. It was part of an expanding effort by streaming media companies to educate advertising agencies about the merits -- and complexities -- of streaming media advertising.

"It's important to be able to say, 'You might think you know about streaming media, but sit through one of these and we think you'll be surprised at how far things have come," says Steve Grimes, creative director for RealNetworks consumer group.

One ad is better than none

One measure of how far things have come is found in a study released by Arbitron this week -- to coincide with one of its own road shows -- that found that 85 percent of webcasters report they have sold at least one advertising buy in the past year, up dramatically from a year 2000 survey.

But those numbers also speak to how far the industry still has to go. Imagine publishers in any other medium being pleased they had sold "at least one" flight of ads.

The survey also contains the key to the sudden onslaught of educational road shows aimed at advertising agencies: One third of those webcast ad dollars came from interactive agencies and only 25 percent from traditional agencies.

"We found that there are so many pieces to the streaming media puzzle that when we go to an agency, a lot of people have tried it but they don't necessarily see the whole overview," explains Bill Rose, general manager and vice president of Arbitron Webcast Services, which tracks online audiences. "We're telling them the story of webcasting; what it's all about, teaching them about the value of streaming media advertising."

"One of the biggest hurdles we face is that people don't realize a number of things about streaming," adds Grimes of RealNetworks. "How effective it is, how relatively easy it is to get something up and how we can help them do this."

Preaching to the converted?

The RealNetworks tour hit agencies like FCBi, Digital@JWT and TribalDDB, which, at least on the surface, would seem like preaching to the converted. But even the agency experts say that when it comes to streaming advertising, these really are the early days.

"Folks in the agency space aren't all like me," says Rod Rakic, an FCBi Chicago account director who was a developer at Real earlier in his career. "They're not all people who've been online since '96. Even though it looks like it, this is not television and that's the first thing that folks -- whether a planner or a buyer or creative -- need to understand.

"Everyone came away with a basic understanding of what's possible," he says of the RealNetworks presentation at his agency. "For some it opened up some new avenues to think about. The exciting part is that once you get this basic education to creative people -- and I don't just mean the people in the creative department -- interesting things happen."

"It's so new that I don't think anyone presupposes that an interactive media buyer has done a lot of streaming advertising," says Susan Bratton, marketing director at broadband provider Excite@Home, who took part in a tour organized by webcaster iBeam. "It's really just coming to fruition, so nobody is really behind the eight ball."

LaGuardia of TribalDDB says that roadshows like these bolster internal efforts to bring those on the "traditional" side of the agency up-to-speed on interactive solutions.

"When a road show like this comes along it validates our teachings because they're actually seeing it work and hearing it from somebody who lives in that landscape," Laguardia observes. "It wasn't over anybody's head. They explained what the hell it is and talked not just about the banners and buttons of the world but what they can do and what the category can do beyond that and -- even more important -- how it can be measured."

But, as anyone who has ever gone to an industry conference -- in any industry -- knows, there is a fine line between "informational presentation" and sales pitch. And ultimately, the goal of agency presentations by companies like Real, Arbitron, iBeam and other streaming companies is to sell their services.

"They're blended and we know it," says FCBI's Rakic of the education/sales balance. "You're marketing to marketers. And that's ok, it's part of the dance. As soon as it goes into blatant sales pitch you'll see people get up and walk out of the room. It's as simple as that."

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Mary 16, 2001

For(d) the Birds

Yahoo ads

By Lawrence Pintak

Cynics have been saying for years that Internet advertising is for the birds. Now Yahoo has proven them right. And in the process, it may have set a new course for the advertising flock to follow.

Industry analysts see the so-called "takeover ad" that Yahoo ran May 4 for the 2002 Ford Explorer as a bellwether for the next generation of highly interactive, highly intrusive advertising on the Web.

"We're definitely going to see a lot more of this," predicts Cheryl Benton, partner and managing director at Messina Brown Interactive. "The good news is, it pushes the boundaries, we'll learn from it and it will have other iterations,"

The ad, produced by J. Walter Thompson, began with several crows perched on a Ford Outfitters banner under the main Yahoo logo. The birds then flew across the page to a pile of birdseed. As they ate the seeds, a Ford Explorer '02 banner was revealed. Those who clicked on the banner saw their screen start to shake and heard the sound of an engine ignition. A split-second later, the entire Yahoo homepage was replaced by an animated Flash ad for the vehicle.

"The creative platform for the product launch was, 'Experience is life's best souvenir.' So everything we have done has been very interactive," explains Doug Scott, group SUV marketing manager at Ford.

The homepage "takeover ad" -- so named because it literally takes over the full screen -- was part of a broad campaign that includes a heavy television buy, billboards, and a four-page print insert in 24 magazines that requires readers to physically pull off a Poloroid photo.

But the Internet plays an integral role in the campaign. Along with the "takeover ad," which appeared only one day, Ford is running a series of more traditional Web ads on several Yahoo properties and streaming TV spots on Yahoo Broadcast. Another aspect of the campaign involves an interactive golf game on the FordOutfitters.com site, which ties in with a promotion being launched in golf magazines.

"We're looking at connecting with our owners, and one of the things we know about them is they're on the Web much more frequently than buyers of other Ford products," says Scott. "So if you're trying to connect with those owners, the Web is a good medium."

This isn't the first time "takeover ads" have been used. Both Terra Lycos and iWon.com have experimented with them. And numerous sites have used images that move across the page. What has the industry buzzing about the Yahoo ad is the combination of a high-profile site, a high-profile "traditional" advertiser and a memorable concept -- a confluence likely to help legitimize the approach.

"Sites have not been as open to taking these kinds of ads because they didn't have to," observes Susan Bratton, director of marketing at broadband provider Excite@Home. "But now the markets have gotten more competitive and even sites like Yahoo that prides itself on lightweight page loads have elected to load them up with these intrusive messages."

Both Ford and Yahoo object to the term "intrusive".

"In everything we do, we're always focused on the end-user experience," insists Yahoo spokesperson Nicki Dugan. "With that in mind, we worked in conjunction with Ford and JWT to get across their message in a way that's interactive and eye catching but consistent with the user experience."

Though it was clearly more than birdseed, neither side is saying precisely what the home page ad cost. Ford's Scott laughs when asked whether the company paid through the nose for the high-profile exposure.

"The answer is no. The spending on a launch of this size is fairly substantial anyway and this was another medium that we could use besides traditional to achieve our objective," he says. "We spent what we felt was good value and based on the results it was a good buy."

The ad tallied close to 39 million impressions with nearly a half million clicks on the birdseed to activate the on-screen Ford. Of the visitors that got that far, 250-thousand actually clicked through to the fordoutfitters.com site -- an average of 185 visitors a minutes for the 24 hours the ad ran.

"The feedback we've gotten has been phenomenal. There was literally nobody who said they resented us using this," reports Scott.

Even if there was, says Benton of Messina Brown Interactive, complaints have to be put in perspective: "Along the way there are going to be things that are annoying and we'll re-adjust. But let's not kill the fun stuff before we have a chance to try them."

"I think this type of innovation will help the interactive advertising industry, especially as it relates to branding on the Internet," agrees Chytanya Rangaiah, vice president and media director at interactive agency i-Traffic. "I would hope they would publish a case study."

Others say forget fun, focus on results.

"We all know how important the Internet is for a car company, but you're not going to sway people because you've got a bird flying off a perch," says Andrew Pakula, CEO of Orb, an interactive advertising agency that emphasizes real-time transaction tracking. "You may get some PR value out of it, but how does that relate to selling a car?"

Pakula argues that the current high price of producing and serving such interactive ads make them far less cost-efficient than other forms of Web-based and traditional advertising.

"We all have to get into reality. Not a lot of companies have the kind of money to do this," he says. "Sooner or later that CFO is going to come in and say, 'So you spent all this money. What did we get for it?'"

But Benton of Messina Brown Interactive believes the Ford ad represents the inevitable direction of online advertsing: "All the sites trying to sell media are going to have to take this kind of thing seriously if they want traditional advertisers who are interested in the branding experience."

Yahoo is certainly doing just that.

"You can expect to see us continue to expand and explore new creative ways of helping our advertisers reach their objectives," Dugan promises.

And even Pakula agrees Ford's experiment represents the inevitable future: "The Holy Grail is interactive TV and as we edge our way in that direction, sooner or later it's going to become cost-efficient to produce it."

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May 30, 2001

It's Not Only a Game

Advergaming set to become a billion dollar industry

By Lawrence Pintak

It claims to be "the best free Shockwave gaming site on the Internet."

Gamers clicking on candystand.com may indeed react like -- well, like a kid in a candy store. After all, it would be hard not to, since everywhere they look there is candy...even on the names of the games: Gummysavers Rock 'n Skate, Lifesavers Field Goal Challenge, Nabisco World Chess, and plenty of in-your-face branding for Lifesavers products.

The site is an example of one of the Internet's latest advertising-content hybrids, the so-called "advergame."

"People are starting to realize it's a much more effective way to advertise by embedding the brand in the gaming experience because that's what the users pays attention to," says Bill Pidgeon, an analyst with research firm Jupiter Media Metrix.

From Molson's virtual hockey league to the Web-wide mystery associated with the new film A.I.: Artificial Intelligence, these so-called "advergames" are quickly carving out a slice of the interactive budgets of advertisers. Particularly those targeting children and young adults.

"With kids, if you build a good game, you create a positive brand perception," says Jay Coalson, an account director at interactive agency Nine Dots, which recently launched the latest generation of Capncrunch.com for client Quaker Oats. "If you can simply establish the brand as being cool and relevant you've cleared a major, major hurdle."

It's all in the stats

But positive perception isn't the only thing game sites are giving advertisers. Capncrunch.com, for example, captures names and email addresses during registration, then tracks aggregate consumer behavior and product preferences -- though, the agency insists, individual names and emails are never used.

"One of the key elements of successful online marketing is initiating customer interaction and then building and leveraging databases for ongoing relationships. Gaming is one of the key portals to create these relationships," says Nine Dots president Andrew Shakman.

Forrester Research predicts advertising revenues from online gaming will reach $1 billion by 2005.

Not surprisingly, that has created an entire sub-culture of agencies that combine the marketing savvy of an advertising agency with the out-of-the-box fantasy life of the game developers.

"The challenge is to have the game idea melted with the characteristics of the brand you are trying to amalgamate to produce a game that makes sense for the product to be involved in and makes sense for the gamer," explains Tom Hostler, director of British design agency Deepend. The company develops 20 games a year for the Cartoon Network Europe and others for a variety of consumer products.

Deepend helped create one of the early examples of a cross-Web tie-in game for Coca-Cola's Tango drink. The game, aimed at the European market, was a downloadable Shockwave application that required players to log online periodically to obtains keys that allowed them to proceed to higher levels, and ultimately win big prizes -- including a date with a supermodel. The catch was that the keys were hidden in the web sites of advertising partners.

"It was hugely successful," Hostler recalls of the promotion, launched in early 2000. "With this kind of thing everybody wins: The brand that create the site wins, the partner brands win, and the players win."

Word-of-mouth speaks volumes

Such Internet-wide games also generate plenty of word-of-mouth, as Warner Brothers is discovering with its elaborate information-hunt tied to the upcoming movie "A.I.: Artificial Intelligence." The promotion has spawned a host of sites where players can trade clues.

"It's not unusual for some games to produce a viral compounding rating of 400 percent," reports Jane Chen, a strategy manager at KPE Interactive, which claims to have coined the term "advergames."

There is little data so far on the branding power of gaming, but most experts point to stickiness rates far higher than for other forms of advertising.

"It's very difficult to imagine anyone staring at a magazine ad or banner for three to eight minutes," observes Chen.

Adds Pidgeon of Jupiter Media Matrix: "People just play those games for a long period of time, so if you embed the exposure within the brand you're getting mindshare."

That kind of attention is responsible for the rapid deployment of brand-focused games. And it's not only kids they're after. From beer to basketball shoes, product marketers are latching on to games as the Next Big Thing.

A recent study by Harris Interactive and PERT Survey Research found that 40 percent of the Web sites of the companies surveyed offered games. The catch, however, was that only 12 percent of the consumers surveyed said they wanted games.

"There is going to be scrutiny on behalf of brand managers with large advertisers to make sure these initiatives are creating measurable value," predicts Shakman of Nine Dots. "That's going to take a lot of people into some soul searching. There will be a need for acquisition-oriented gaming that ties back to the source of [brand] authority."

Next Week: Games as an ad platform

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June 6, 2001

Let the Games Begin

Online games becoming a winning play for advertisers

By Lawrence Pintak

When kids log on to the games page of Nick.com, the web site of the Nickelodeon television network, one of the first things they are likely to encounter is banner ad that reads: "You're a player? Choose a game."

Their choices include the Honeycomb Craver Course, Lunchables Scooter Challenge, Climb Mt. Mac & Cheese, and KOOL-AID Wakeboarding.

A click of the mouse takes them not to Nick.com's games page, but to a site run by -- you guessed it, Kraft Food.

The banner is a byproduct of the new emphasis among consumer marketers on branded online games as a tool to raise product awareness (see Turboads, May 23, 2001).

After all, just because you build a game -- which can cost upwards of $100,000 -- it doesn't mean they will come. Internet content sites have enough trouble harnessing visitors, imagine the challenge of an overtly product-oriented site.

Which is why, along with those banners and Interstitials driving gamers to advertiser-hosted sites, Nick.com also offers an entire section of its own site devoted to advertising-oriented games, which it calls "advertoys."

"It is being actively sold as an integrated opportunity on the site," says Stacy Nathan, vice president of advertising sales for Nick.com. "We made an area on the site that was clearly different. When kids come in, they know they're coming to an advertising area."

Even Nathan adds, though, that when it comes to advertising and editorial, "I will admit that on the Web, things are blurred."

It's a confession not likely to drive away too many advertisers.

It's all part of the game

But driving traffic to branded games isn't the only use being found for online games sites. Far from it. RealArcade, the games hub recently launched by RealNetworks sees advertising as one of its primary revenue streams.

"For advertisers, gaming provides a highly desirable demographic," according to Michael Diranko, an advertising manager with RealArcade. "People that are engaged in this tend to be on the site longer and more actively engaged. The ability to integrate your brand or message is an outstanding opportunity that might not be available in other environments."

And we're not just talking banners here. RealArcade is exploiting every available moment to expose its advertisers: In an "info-window" as the games are being downloaded, in "branded messages" that appear during the game, and in email newsletters after they log off.

"It's the same idea as a product placement in a movie," adds Tony Learner, RealArcade's product manager. "While the customer is experiencing the entertainment, they are being shown contextual branding messages."

Such advertising is nothing new to most hardcore gamers.

"Until very recently, all of the online gaming media have been advertising supported," says Brian Clair, publisher of the Adrenaline Vault, a site devoted to reporting about online gaming. "Interestingly, none of that makes money for the gaming sites, or not very much [because] most of them are bad businesspeople."

More bang for your buck?

"Advertising is also very much a part of the online rental opportunity," explains Steig Westerberg, CEO of Streamtheory, a company that handles the technical side of streaming games to users. "It gives our rental partners the opportunity to upsell additional products or sell products coming in the future."

Traditional advertisers have included movie companies, game producers and others interested in the particular demographic of hardcore gamers.

Westerberg, whose company streams ads while the game is buffering, uses the example of Quake III, a hugely popular "deathmatch-style" game that advertises itself as, "The final word in online multiplayer mayhem."

"On Quake III, you could have advertising for a similar title or an ad for a gun -- something that would be specifically tied to that title," he explains.

According to a Forrester Research study, three quarters of the $1 billion expected to be spend on games-related advertising in 2005 will come from in-game product placements, in which game sites weave products into the fabric of their offerings.

"It's a switch from publishers asking advertisers if they can use the products to make the game more realistic to advertisers paying for product placement in a much more active sense than in movies," says Bill Pidgeon of Jupiter Media Matrix. "And it will be much more effective than the movies."

In fact, Forrester analyst Jeremy Schwartz goes so far as to predict that TV shows will eventually become loss leaders that drive games.

But can they ever replace "I Love Lucy?"

"Games will overshadow their TV show 'parents' as TV networks produce programs whose sole purpose is to divert viewers to a revenue-producing game," according to a study produced by Schwartz. "Product placement and commerce revenues derived from playing the game will make up for consumers' growing ad-skipping behaviour."

Others doubt that such a paradigm-shifting change is on the cards, but few question the basic premise that games are fast becoming a critical piece in the online branding puzzle.

"A lot of companies are beginning to recognize the appeal and power of gaming as a medium," says Jane Chen, co-author of a study on gaming released by KPE Interactive. "And whether they choose to do an advergaming approach, product placement or advertising, gaming will be a powerful force."

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