After The Storm, Internet Execs See A Brighter Day


To borrow from Charles Darwin: "It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change."

That is how Sony Electronics svp and senior general manager Patrick Vogt concluded his keynote address last Wednesday at Ad:Tech in San Francisco.

It was an appropriate ending to the three-day conference, which attracted more than 4,000 attendees—up 30 percent over the year before—many of whom survived the boom and bust to now enjoy the build back up.

The claustrophobic, boisterous exhibit hall at the Palace Hotel—home to more than 100 vendors—represented an industry that not only responds to but thrives on constant changes in technology and consumer habits.

Though the atmosphere was reminiscent of the dot-com heyday, with a plethora of parties and tchotchkes, the sense was that it was reality-based rather than bubble-induced.

While everything is moving at "a hundred miles an hour," as it did during the boom, today's environment is "focused and sober," Vogt said. "It was not the Internet that caused the bust. It was poor business planning and poor business plans."

Continuing the speed and Darwin metaphors, Peter Weedfeld, svp of strategic marketing and new media at Samsung Electronics America, called the Internet "Darwin on speed." "Everything we do starts with the Internet, because it's the most exciting, powerful, vibrant medium," he said, during an hourlong keynote address last Tuesday.

Weedfeld emphasized the "disruptive" nature of the Web, which is changing the way companies historically have done business. The record industry, for instance, is suffering a significant CD sales slump, due largely to peer-to-peer file-sharing and fee-based online music services.

Despite the disruption, some decision makers continue to live in a "1971" ad world, where mass media is king, said Mike Windsor, CEO of WPP Group's OgilvyInteractive. While interactive agencies are enjoying the upswing that resulted in an estimated 40 percent year-over-year revenue increase in first-quarter Web ad spending, there's still considerable arm twisting when it comes to persuading clients to shift media dollars to the Net.

"Our role is to be persistent, just short of harassment," Windsor explained at one session, adding that putting interactive in the context of a client's overall ad spend makes a strong case. "This is peanuts," he said. "For the cost of one TV commercial, you can double your Internet budget."

One point of entry for risk-averse, broadcast-buying behemoths is to put TV-like creative and ad-supported video on the Web. The latter, which lets users control, condense and combine footage, presents advertisers with narrowcasting opportunities to reach attractive at-work, male-skewed and teen audiences.

"MSN Video is a bridge to TV advertisers who have not yet embraced the Web," said Todd Herman, the streaming-media evangelist at the Microsoft Internet property. (Advertisers on MSN's 6-month-old video service include Procter & Gamble, McDonald's, Disney Travel and Sprint PCS.) "There are large groups of consumers who no longer watch broadcast TV. Those are the ones that are streaming."

Because of that, more Web publishers are betting on video as a boon to their businesses. CNET Networks, for instance, next month plans to roll out footage of its editors giving product reviews preceded by 15-second spots. "There is enormous pressure on the creative side of the world to make that commercial creative work harder than before," said Chas Edwards, vp of business development at CNET., meanwhile, will introduce user- and system-initiated personalization features for its video application within the next six to eight weeks, said ESPN Motion director and general manager Ed Davis. The Disney-owned online property will let users create playlists of the content they want to view. It will also send consumers video clips based on their past behavior.

Several Ad:Tech attendees thought the eventual rise in personal video recorders will translate into more money for the Web. According to TiVo's estimates, consumers skip through about three-quarters of commercials. A Gartner Group survey of marketing professionals found that if TV-spot surfing continues as PVR usage grows, 31 percent would reduce their broadcast spend by 20 percent.

While PVR penetration is fairly small at some 3.6 million households, surveys such as that have manufacturers, advertisers and agencies devising ways to prevent on-air marketing messages from being shut out. The Gartner study also revealed that 24 percent of the respondents would increase their broadcast spend if the PVR evolves and enables ad delivery.

"PVRs are not the death of advertising as we know it," said Allan McLennon, managing partner at Puremac Digital/IP-DTV. "They are expediting a new form of advertising and the need to be an element or extension of the programming that lives within."