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Net advertising on a road revisited

Publishers are eyeing old technologies like video and consumer tracking as catalysts for upcoming growth in the Internet advertising industry.

SAN FRANCISCO--Now that publishers are making money from Web advertising again, they're placing new bets on old technology to make even more.

Video and consumer tracking are pegged as two catalysts for upcoming growth in the Internet ad industry and are among the most talked about trends at Ad:Tech, the triannual industry conference held here this week. Web publishing and ad executives are looking to these methods to build on a resurgence in online advertising and capture a larger portion of major advertisers' budgets.

"We're constantly looking for the next big thing and reinventing ways to effectively reach the consumers," said Jason Heller, chief executive of Mass Transit Interactive, an ad agency.

Industry trade group Interactive Advertising Bureau reported on Monday record sales of $2.3 billion for online ads in the first three months of 2004, up 40 percent from the same period last year. That tally recorded the highest sales for a three-month period since the IAB began monitoring the industry in 1996.

Ad:Tech even reported record attendance for its conference this year, with as many as 4,000 attendees and exhibitors.

Much of the growth is thanks to the thriving paid-search market, which is expected to account for between $2.4 billion and $4 billion of ad sales this year. While many of the attendees and exhibitors are abuzz about search, many others are already looking to the next wave of progress.

So-called behaviorally targeted advertising is a method of compiling data on Web visitors, such as their surfing history, gender, age and personal preferences, to later target them with tailored ads. The form of advertising was hyped during the Internet heyday as the promise of a one-to-one medium, but failed to deliver because of technology limitations and privacy concerns.

Now many companies are striking deals to offer behavioral advertising with the hopes of charging advertisers higher prices for better targeting. Profiling company Tacoda Systems signed a deal with U.S. News and World Reports to monitor visitors and deliver tailored ads. Online ad network 24/7 Real Media partnered with paid search company Kanoodle to combine personalized ads, targeting people with text links. Online ad network Burst Media signed a deal with Tacoda to analyze Web surfers across its network of sites and deliver relevant ads.

"The dominant theme in online advertising is targeting qualified audiences," Burst CEO Jarvis Coffin said. "First it was about targeting people in context of a page (via search technology). Now it's about targeting people by their behaviors."

Advertisers are signing up, too. Randy Kilgore, vice president of advertising for The Wall Street Journal's online leg, said in a panel Monday that between 30 percent and 40 percent of its advertisers request information on the site's fairly new behavioral targeting services. The Wall Street Journal Online uses Revenue Science to compile data on visitors and their reading preferences. It then uses that information to display relevant ads on its site.

Still, ad executives urged the industry to avoid irrational exuberance and respect privacy concerns.

"These are powerful weapons" said Tacoda CEO Dave Morgan, referring to collections of data on Web surfers' behaviors. "We'll see people abusing this kind of technology. We have to avoid the flavor-of-the-month hype."

Another predominant theme at Ad:Tech is broadband video and rich-media advertising, which was similarly heralded during the Internet boom days. But download speeds for graphically rich ads were stifled by the low number of people with high-speed connections.

Hooked on high speed
Many Web publishers and marketers are touting new subscriber numbers for broadband Internet connections as impetus for progress made in graphically rich ads like video and TV commercials online. Online marketers are hoping that rich-media ads will appeal to major-brand advertisers enough to allot more of their TV and offline budgets for the Web.

RealNetworks, Maven Networks and Unicast Communications are all promoting new opportunities for rich media and video ads. Another technology company, Viewpoint, is experimenting with 3D video-streaming objects that can fly over a Web page.

Todd Herman, streaming-media evangelist at MSNBC's site, said Microsoft has made some headway with its MSN video service, which allows advertisers to play a 15-second commercial before visitors reach news clips or music videos. He said that this year, three of the country's leading brand advertisers--McDonald's, Pfizer and Procter & Gamble--have signed on to advertise with the service, in a sign of growing acceptance by mainstream marketers.

Video advertising and other rich media could help buoy sales online, because they typically have higher price tags than standard banners. Herman said video ads can fetch between $35 and $65 per thousand people who view the ads. That's compared with rates as low as $1 to $5 for standard banners.

"Advertisers are doing it this time for the right reasons," Herman said. "They're buying (video ads), because there's less clutter on the page. People (can't skip) them, and they provide interactivity."

"This is a bridge to TV money," Herman added.