Offline giants eat up Web ad space

This week, Frito-Lay, the maker of Doritos, said it bagged its annual Super Bowl advertising and tripled its investment in Internet marketing to an estimated $2 million, a move aimed at complementing its broader initiative to reach teens.

On Thursday, fast-food chain Wendy's International signed a multiyear marketing deal with AOL Time Warner, incorporating promotions on television and across the America Online network. Earlier in the week, AOL Time Warner cemented a six-year deal with the National Basketball Association to endorse the organization through television and online venues. And in recent months, online portals MSN and Yahoo have celebrated an array of similar deals.

"Traditional marketers are finally realizing how to use the Internet and see how it fits into their sales strategy," said Denise Garcia, advertising analyst at GartnerG2, a division of research firm Gartner.

"These are advertisers that not only spend a lot more money than the dot-coms did, but they advertise for brand awareness, not necessarily for direct response. That's absolutely good news for online advertising," Garcia added.

The trend highlights an increasing comfort level among traditional advertisers that have long been reluctant to invest in new media. Such a shift has been welcomed by ad-starved Net publishers, which have been hit hard by a dramatic downturn in ad spending since the dot-com fallout and U.S. recession. In the first three quarters of 2001, online ad spending dropped by 8 percent, according to the trade group Interactive Advertising Bureau.

But some analysts expect major advertisers' confidence in Net marketing to help stabilize the industry in 2002. According to a report released this week by New York-based Competitive Media Reporting, Internet advertising will grow by 8.8 percent from its 2001 total, leading the way for an overall upturn in ad spending.

The string of recent deals shows that traditional marketers are earmarking added funds to promote products and services online. But online spending remains a tiny fraction of the overall advertising market, which was worth $94.6 billion in 2001, according to CMR. Internet ad sales reached about $7 billion in 2001.

Betting its chips on the Web
Frito-Lay is one example of a brand advertiser bullish on the Net. With this week's announcement, the company allotted about 8.5 percent of its total advertising budget in 2002 to marketing Doritos online, up from about 3 percent last year, according to Cammie Dunaway, vice president and general manager of kids and teens marketing. Based on 2000 ad-spending figures from CMR, the company is now designating about $2.2 million to online efforts for Doritos.

Though the company has maintained a Doritos Web site for the last five years, this week's investment is its first online marketing and advertising campaign for the brand. The initiative will include Web site partnerships with the likes of MTV.com, advertising and viral marketing promotions, and a Web site relaunch.

The online campaign plans to draw heavily from traditional advertising, letting consumers view TV commercials on the Web. They'll also be able to watch Internet-only treatments of ads created by Frito-Lay's agency BBDO Worldwide New York, parent company of Atmosphere, the interactive unit working on the campaign.

Dunaway said the company has retooled marketing spending because it's determined to reach the growing and active teen population on the Net.

"With that as a primary objective, we wanted to be fully integrated across all media. And a big piece of that would be an online effort," said Dunaway. "The Web is a vehicle that lets us do one-on-one marketing, and I don't know of any other way of making that connection."

AOL is the poster child for cross-marketing agreements, having signed up major companies such as Sprint, Unilever, American Express and Burger King to advertise across its online and offline outlets in recent months.

Although AOL and others typically do not disclose the financial figures involved in marketing pacts, some industry executives say they are encouraged by an increase in spending and longer-term agreements from traditional advertisers.

MSN, for example, said automotive advertisers have jumped "head first" into online marketing recently, spending an average of about 2 percent to 3 percent of their total budgets online. In recent months, the online portal has inked cross-marketing deals with such automakers as Volvo and Toyota. It also signed a deal with Bank One worth more than $30 million.

"We're seeing a shift," said Christine Andrews, an MSN product manager. "Traditional advertisers are definitely responding to online and using it to reach their core audience."

Analysts say the changes are the result of traditional advertisers sorting out perceived conflicts between their distribution channels. Consumer package-goods makers, for example, have long thought that Internet marketing promotes direct sales and could potentially snub distributors, they say.

"It's important to traditional marketers not to disrupt the distribution relationships that they have," GartnerG2's Garcia said. "Until they figured out how to have that relationship with the customer, they couldn't leverage the Internet as a marketing tool."