Online Rebounding (for Real)

With their perennial predictions of an online-advertising recovery, fans of the medium have been known to cry wolf. But they may finally have something to shout about—or, at least, to look forward to. A study released last week by New York research firm eMarketer projects Internet ad expenditures to rise 5 percent this year to $6.3 billion (out of $248.2 billion in total U.S. ad spending). Internet ad spending was $6 billion in 2002, down for the second year in a row after reaching a high of $8.1 billion in 2000. Analysts at eMarketer forecast steady growth during the next three years, with spending reaching $8.1 billion again by 2006. "This is not the first time people have been saying the rebound is coming, but this one seems for real," said Gary Stein, an analyst for Jupiter Research in San Francisco, which late last year projected flat growth online in 2003 but has seen evidence of a turnaround in the deals struck between Web publishers and marketers. Stein said he looks to Yahoo!'s numbers as a key indicator. The company's net revenue for the second quarter ending June 30 totaled $321 million, a 42 percent increase from the $226 million reported for the same period in 2002. "It's one publisher, but Yahoo! is such a bellwether that how their earnings come out really tells a story." Other analysts concurred that the tide began to turn late in the first quarter. However, Yahoo!'s revenue growth, while strong, was not as robust as many had expected. "People were expecting a lot more," said Peter Dunay, chief market and options strategist at brokerage Wall Street Access. Thus, the consensus seems to be that the rebound is here, but that it's fragile. The underlying source of the revival? Long-term marketing deals between Web publishers and advertisers have been growing steadily over the past few years, studies have shown. "The Web publishers really deserve the credit for this rebound," said Stein. "Publishers all seem to be listening more closely to advertisers and discussing ways to make the medium work. You have to remember: The medium itself didn't burst ... And there were a lot of good, smart people trying to make it work."The advent of "paid performance advertising," which allows marketers to pay by number of response clicks, has paved a new way for advertisers to reach people, Stein said. He pointed to the growing use of ads on search engines. "Yahoo!, in particular, found solid ways that advertisers can tap into the Internet behavior of searching for items as a basis for creating targeted messages," he said. In developing portal marketing options and sponsorships, the industry is moving beyond pop-ups and banners to forge more meaningful partnerships, analysts said. AOL, MSN and Ask Jeeves have hired executives with traditional marketing backgrounds, helping to change perceptions of the sites and the marketers seeking new online opportunities, said analysts. Automotive is considered an Internet pioneer, with Toyota, for example, forging relationships with Yahoo! and other sites, analysts said. In April, it launched a book club on Yahooligans!, Yahoo!'s Web site guide for kids, with a tie-in to the 2004 Sienna SUV. Kids can design features on the Sienna and e-mail the results to their parents along with their wish list of books.Other categories following auto's lead are electronics and apparel, Stein said.

Brand Marketing

Online Rebounding (for Real)

David Kaplan

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David Kaplan