Olympics not a starting gun for online ad sales

So-called traditional advertisers are investing their marketing dollars in every medium to capture the greatest audience during the Games--including the Internet. For example, online sports program Quokka Sports along with NBCOlympics.com signed on a half-dozen of these deep-pocket advertisers for the event, including IBM, General Motors and Visa.

It's the kind of lift struggling Web companies are looking for to counter a predicted online ad revenue drought. But analysts say the Olympics won't likely kick-start Web marketing spending by big-brand advertisers, which have mostly stayed on the sidelines of the online marketing game.

"Brand advertising relies on slick creative," said Pete Petrusky, a researcher with PricewaterhouseCoopers. For now, people won't have the patience to watch a 30-second commercial on their computers "if they have to fingerdrum and wait for it to download."

Analysts have warned of an ad revenue shortfall in the coming months as Internet start-ups--which have so far spent the most on publicizing their brand names--are either shutting down or trimming their marketing budgets.

This dip in ad spending has taken its toll on Net companies. Even shares of Yahoo fell earlier this month amid pessimistic analyst reports about the advertising landscape.

Industry researchers agree that survival for these companies depends heavily on traditional advertisers picking up the slack created by collapsing dot-com marketing budgets. But while many have already invested some dollars online, most big ad companies remain reluctant to embrace the Web, where banner ads and sponsorships have been the primary marketing vehicles to date.

"What they're looking for is something that doesn't exist yet," said Mark Ellis, a senior vice president at Quokka.

Web portals have been working to create new opportunities for advertisers, which have gained increasing clout in demanding more bang for their online advertising buck. Hybrid marketing deals, in which the ad buyer pays a smaller up-front fee and a percentage on actual sales, have grown increasingly popular. In addition, major advertisers such as Pepsico have partnered with Web portals on marketing blitzes that include both online and offline components.

But analysts say traditional advertisers are unlikely to increase online marketing budgets significantly until the Web develops stronger avenues for brand-building campaigns, for example, by alleviating broadband constraints that limit the use of video for commercials.

As a result, television remains the most effective medium to reach and entertain a large audience, said Norman Lehoullier, managing director of Grey Interactive in New York.

Still, popular sporting events such as the Olympics create an ideal scenario for traditional advertisers and Net companies such as Quokka. The interactive element of the Net allows readers to click an ad for athlete profiles, event statistics and other information about the Games in Sydney, Australia.

Company executives are not releasing financial details of the arrangement, but Ellis said the revenues "far exceed what they had planned." Some of the big brand names Quokka secured for the Olympics have agreed to sign on for coverage of the Salt Lake City games in 2002.

Timing of the ad deal couldn't be better for Quokka. At the end of June, auditors required the company to state on its Securities and Exchange Commission financial filings that it "may not continue as a going concern."

In the recently ended second quarter, Quokka reported a net loss of $24.6 million on revenues of $12.6 million.

What's more, Quokka's market debut in July 1999 turned out to be a bust. Shares slid below the $12 initial public offering price on the first day of trading--an uncommon occurrence in the investment world.

In August of this year, Quokka signed a deal with NBC to jointly cover the Olympics, providing a golden opportunity for the sports programmer to drive more traffic to its site.

The arrangement seems to have worked. According to Nielsen/NetRatings, Quokka-produced NBCOlympics.com drew more than 900,000 visitors who have viewed more than 43 million pages since the Games began last weekend. On Monday, the site recorded more than double the total number of page views that Superbowl.com registered during the entire month of January.

The report follows news Monday that the company raised $76 million in debt financing through its relationship with NBC--funds that would carry it through 2002, executives said in previous news accounts.