Ads with added value

In the future, Web ads won't just suggest what online readers should buy; they'll actually sell products to consumers, according to AOL's Ted Leonsis.

3 min read
NEW YORK--In the future, Web ads won't just suggest what online readers should buy. They'll actually sell products to consumers.

That was the prediction offered today by America Online (AOL) executive Ted Leonsis during a speech to online advertising insiders here today.

Speaking before an audience attending a conference on Internet advertising hosted by market research firm Jupiter Communications, Leonsis said that Web advertising and e-commerce are on a convergence course. In the future, he said, online ads won't be just ads but e-commerce applications built right into the content.

For example, Leonsis explained, Web advertisements may offer customer service and custom programming to let visitors conduct transactions such as purchasing advertised products online at a discount.

"Is this an advertisement, is it a transaction, or is it customer service?" he asked, adding that the new advertisements will combine all three concepts.

Leonsis said the transformation to interactive ads will make today's static ads and even the Web's "buttons and banners" obsolete by as early as 1998. He concluded in his speech that the new hybrid of ads and e-commerce will help bring billions of dollars in ad revenues to the Net.

Leonsis is in charge of content delivery as president of AOL Services.

The message was a welcome one for conference attendees, including some Net advertisers, who wonder if their online investments will ever pay off, and some Web developers, who wonder if there is enough advertising revenue available to support the burgeoning online content market.

Their skepticism is well founded. Today, Net advertising is only a fraction of total U.S. advertising expenditures, mostly because the core market for Net advertisers is confined to the technology industry.

AOL itself is already working to clear a "migration path" for mainstream advertisers' move to the Internet and to help them take advantage of the new kinds of technologies like Web ads that are themselves virtual storefronts. Leonsis said that although it may take years, increasingly effective Web advertising technology will eventually overcome advertisers' qualms about the Net and greatly boost online ad spending.

Who will reap the ad revenues? Leonsis believes that a few multimedia networks will emerge to take the lion's share of ad dollars.

Internet content providers (including AOL, of course) will undergo a major overhaul, he said. Companies that want to attract large ad revenues will have to build cross-platform programming empires and win brand-name recognition among consumers.

Leonsis is betting that the industry's revenue center will quickly move to content providers in much the same way that the cable television industry is dominated by service providers with original content, such as HBO.

And in that case, AOL will do very well. AOL will top 10 million subscribers by the end of 1997, according to Leonsis, and is already pulling in ratings that are much greater than CNN and ABC networks.

But before all this comes true, Leonsis predicts the industry will suffer a "Web winter" as many current online publishers flee the industry to be replaced by more interactive businesses.

"We will look at a lot of these Web sites and call them grave sites." he said.