Ad nausea Miserable sales of online advertising push Web publishers to new highs--and lows.
When the year began, Internet publishers and analysts held out hope for an advertising recovery during the second half of the year. As the year winds to a close, they're still waiting.
Rather than simply wait for a rebound, however, Web publishers were aggressive on several fronts: They improved content, pushed subscription services and embraced more intrusive ad formats. The results were a mixed bag for the three top Web portals--America Online, Yahoo and Microsoft's MSN.
On the content front, America Online overhauled its network to emphasize exclusive programming and features, resembling an HBO subscription service. Yahoo, RealNetworks and others also shaped subscription services around so-called premium content that people would be willing to pay for.
A handful of Internet operators proved there is a viable market for subscriptions, including online video and audio service RealNetworks.
Web operators pushed flashier, TV-like advertisements, giving marketers more options than ever before to catch consumers' attention. In some cases, the efforts went too far: Consumer outcry caused ISPs such as EarthLink, AOL and MSN to temper the use of annoying pop-up ads. Still, more graphics and video-laden advertisements are expected in 2003.
Search engine marketing also took center stage this year, as advertisers warmed to the efficiency of reaching surfers where they click. Search tools proved fertile ground for growth, drawing many competitors including No. 1 search service Google.
The payout has been lucrative for top portals too. In the second half of 2002, Yahoo turned around its losses to regain profitability, thanks to a deal with pay-for-performance search service Overture, considered a bellwether company in online advertising.
Still, tensions mounted in 2002 around aggressive marketing tactics that had people labeling almost anything unwanted as "spam." Junk mail reached an all-time high this year, prompting discussions in Congress and more technology solutions from upstarts. PC users also dealt with the greater prospect of stealth marketing software being installed on their computers.
Meanwhile, the Internet broadened into a backdrop for entertainment. Portals including Yahoo and AOL emphasized Hollywood stars and programming in partnership with the studios. And while filmmakers lobbied to protect movies in digital formats from rampant Internet piracy, they also unveiled a first-ever studio-backed video rental service on the Internet.
As broadband adoption quickens, the entertainment and Internet industries are on a collision course in the coming years. --Stefanie Olsen