Death and taxes used to be the only certainties in life. Today you can add one more: advertising.
Advertising messages are ubiquitous. Everywhere you turn you’ll find an advertising message. From television to taxicabs to T-shirts. From billboards to buses to bathrooms. (Now you can’t even take a leak without being exposed to advertising.) In some circles, elevators are considered the next fast-rising advertising medium.
Every major auto race, golf tournament, and tennis tournament has a corporate sponsor. All the bowl games are already taken, from the Hooters Hula Bowl in Hawaii to the AT&T Rose Bowl in Pasadena to the Nokia Sugar Bowl in New Orleans.
Sports arenas around the country are rapidly selling their names for advertising purposes. In San Francisco, Candlestick Park is now 3Com Stadium. The Washington Redskins’ Landover Stadium is now FedEx Field. Internet companies are also getting into the act. The Baltimore Ravens sold the naming rights for their National Football League stadium to PSINet in a twenty-year deal for $105 million.
But the mother of all naming deals happened in Atlanta. Naming rights for the city’s new basketball and hockey stadium were sold to Philips NV in a package deal estimated to be worth $200 million over twenty years. (The new Philips Arena cost only $140.5 million to build.)
When the name on the stadium is worth more than the physical stadium itself, you know that we live in an advertising-oriented world.
The traditional media, of course, have been saturated with advertising for as long as we can remember.
The average magazine is 60 percent advertising. The average newspaper is 70 percent advertising. But print media are at least partially supported by subscribers. Radio and broadcast television are almost totally supported by the advertising revenues they generate.
And they generate a lot of revenue. In a recent year, advertisers spent $49 billion on broadcast TV advertising and $17 billion on radio advertising.
Cable television was once touted as the first ad-free communications medium, but that didn’t last very long. Today cable TV is almost as saturated with advertising as regular TV.
With billions and billions of advertising dollars chasing every available medium, you can’t blame the Internet folks for trying to tap into this treasure trove. The Internet was going to be another advertising medium, but bigger and better and eventually more rewarding than television.
Initially, at least, advertising supported all the commercial Websites. The game plan was simple: “We will give away the content in order to draw traffic, which we can then use to sell advertising.” Exactly the way television and radio currently work.
So we had free browsers, free search engines, free electronic mail, free electronic greeting cards, free Internet access. Even free phone calls and free tax returns.
Instead of paying America Online $23.90 a month, you used to be able to sign up with NetZero and get ten hours of Internet service per month for nothing. The catch: You had to fill out a questionnaire that revealed your demographic information and agree to put up with an onslaught of advertising messages. (Today NetZero has merged with Juno and changed its name to United Online, and it charges $9.95 a month.)
There was even free beer on the Net. Miller Brewing gave away two million electronic coupons each good for one six-pack of any Miller beer brand.
The great Internet giveaway reached its zenith when a company called Free-PC announced a plan to give away ten thousand Compaq computers that permanently display on-screen ads. More than a million people volunteered to take one.
If “free” isn’t a big enough come-on, how about “pay”? A number of Websites offered to pay you for exposing yourself to advertising while you surfed the Net.
AllAdvantage.com offered to pay you fifty cents an hour (up to ten hours a month). MyPoints.com gave you either cash or points that could be exchanged for things like free movie rentals, gift certificates, ski-lift tickets, even exotic vacations. (Surf the Web today, surf Hawaii tomorrow.)
Many Websites featured giveaways of one kind or another. PlanetRx.com gave away 672 Palm V organizers (one an hour, every day, for four weeks). Lycos.com is a portal that had a Lucky Numbers Game you could play up to four times a day. Just pick six numbers and cross your fingers. You could have won one of 5,000 prizes, including a grand prize of $5 million.
The really big money was being thrown around by the CBS-backed Website iWon.com. The portal was giving away $10,000 a day, $1 million a month, and a cool $10 million on tax day, April 15, 2000. (Get it? I won.)
What the giveaway had to do with the Website remains a mystery. Unlike Youbet.com, iWon.com is not a gambling site. Rather, it is a portal that offers e-mail, search services, and online shopping, as well as content from CBS Websites including SportsLine USA and MarketWatch.com. All financed with $100 million of CBS money.
Besides the giveaways, many sites spent a fortune on launch parties. Pixelon.com, a California company that planned to introduce a new Internet-broadcast technology, raised $23 million of venture capital and then promptly spent $10 million of that on a launch party. Called iBash ’99, the day-long Las Vegas party was headlined by The Who, along with other acts that included Kiss, Natalie Cole, the Dixie Chicks, Tony Bennett, and LeAnn Rimes.
It won’t surprise you to learn that Pixelon.com is no longer with us. It did surprise the investors, however, when they found out that the founder was a convicted con artist and a fugitive from the law.
This flurry of spending was designed to attract millions of Web visitors who could then be sold off to companies as advertising chattel. As a matter of fact, Internet operators were drooling over the advertising riches soon to fall their way. Forrester Research, a high-tech consulting firm, predicted that advertising spending on the Internet would jump from $2 billion in 1999 to $22 billion in 2004, or 8 percent of total spending. This would mean that the Internet passed the magazine medium and was neck and neck with radio.
Don’t believe a word of it. The Internet would be the first new medium that will not be dominated by advertising.
Let us repeat that statement. The Internet will be the first new medium that will not be dominated by advertising, and the reason is simple.
The Internet is interactive. For the first time, the user is in charge, not the owner of the medium. The user can decide where to go, what to look at, and what to read. At many sites, the user can decide how to pick and arrange the material to best fit that user’s needs.
Advertising is not something that people look forward to. They tend to have an underlying resentment toward advertising. They see it as an intrusion into their space, an invasion of their privacy. “Junk mail” is the popular term for direct-mail advertising.
(If magazines were interactive, the first thing readers would do is to put all the editorial material up front and all the advertising in the back.)
Initially, of course, people were curious about this new medium called the Internet. And they were happy to click on banner ads to see what the buzz was all about.
But things are changing. Surveys show that the number of people who click on Internet ads has been dropping steadily. According to Nielsen/NetRatings, which tracks the effectiveness of Internet advertising, the click rate in two years dropped from 1.35 percent to 0.3 percent.
Internet advertising rates have also been dropping, not a sign of a healthy medium. According to one research firm, the cost for banner ads has dropped from $20 per thousand last year to about $10 per thousand this year.
For a number of years, the largest advertiser on the Internet has been General Motors, which is currently spending about $50 million a year on Web advertising, or about
2 percent of its annual advertising budget. (All this advertising didn’t help GM much. Its share of the domestic automobile market has declined to 27 percent, its lowest level since the thirties.)
One indication of the user’s attitude toward Internet advertising is the rapid rise of ad-blocking software. Known by names like At Guard, Junkbuster Proxy, Intermute, and Web Washer, these programs work by blocking ads before they appear on the user’s screen. Often they speed up computer performance because they skip the files that contain ads loaded with graphics, making page loading far quicker.
Even the $3 billion of current Internet advertising is a dubious number. It includes commissions paid to such companies as Doubleclick, the leading seller of advertising on the Net.
Doubleclick is aptly named. Instead of the traditional advertising agency’s 15 percent commission, Doubleclick takes 35 percent to 50 percent of the Internet advertising it sells. Maybe Tripleclick would be a more appropriate name.
Not all Internet advertising revenues represent real money either. Some sites swap advertising with each other, allowing each dotcom to book ad revenues. (The kid who trades a $50,000 dog for two $25,000 cats isn’t really receiving $50,000 in revenue.)
Don’t be misled either by the apparent analogies with the print and broadcast media. The Internet is not just another medium. If it were, it would not be the revolutionary medium that many people, including us, believe it is going to be. As such, you should expect to see a revolution, not just a replay of the past.
Was television a revolutionary new medium? Not really. Did it change your life in any significant way? Not really. Even television’s highly touted home shopping networks didn’t amount to very much. “Radio with pictures” was the judgment of many commentators.
You can’t have it both ways. The Internet cannot be a revolutionary new medium that operates in exactly the same way as traditional media. Where’s the revolution?
It’s staring us in the face. The Internet is interactive, and that’s the revolutionary aspect of the medium. For the first time the target is in charge, not the shooter. And what the target definitely does not want is more advertising arrows shot in its direction.
What people do want is information. Prices, sizes, weights, shipping dates, product comparisons. All presented in an interactive format.
We’re not negative about advertising. Quite the contrary. The Internet will continue to spawn an enormous increase in advertising volume, except that it will be off the Net rather than on the Net. This advertising will be “tune-in”—or rather “type-in”—advertising that will direct you to the names of specific Internet sites.
For a couple of years, the Internet drove up advertising on the outernet, especially on radio and television. Radio, in particular, was red-hot, with three years of double-digit increases in a row.
Then the dotcom disaster hit, followed by the terrorist attacks, and all advertising expenditures are down. But we expect that as the economy improves, advertising volume will increase, with dotcoms making a strong comeback.
Super Bowl Sunday was a particular favorite of Internet advertisers. Of the 36 companies that bought advertising time on Super Bowl XXXIV, 17, or almost half, were dotcoms. The NFL extravaganza didn’t come cheap, either. The average cost for a thirty-second commercial was more than $2 million, an increase of 25 percent over Super Bowl XXXIII.
The reason the Internet has resulted in dramatic increases in outernet advertising has to do with the nature of the human mind.
One of the most remarkable characteristics of the human mind is its ability to forget.
Some things, of course, are never forgotten. A cruel insult in high school. Getting dumped by a lover. Being fired from a job. It all depends on the emotional impact of the event.
A person who can remember all the details of an embarrassing event that happened several decades ago might easily forget the underwear brand he or she put on this morning.
An Internet brand suffers from this ability of the mind to forget in two different ways. First, the brand is invisible on a daily basis. Many brands in the physical world benefit from a daily dose of visual reinforcement. Shell, Starbucks, Mobil, Coca-Cola, McDonald’s, Tylenol. There are literally thousands of brands that a person will regularly see on the highways, in the supermarkets, in the drugstores.
An Internet brand, on the other hand, will never suddenly appear before you unless you summon it to do so. Out of sight, out of mind.
Second, an Internet brand (like most brands) suffers from a lack of emotional involvement. Some people fall in love with their brands. Most do not.
For most people a brand is nothing more than a guarantee of quality and a system for saving time. A way of making sure that the products you buy are decent without having to spend an inordinate amount of time comparing one product with another. Not too many people fall in love with a bottle of Heinz ketchup. Which is why Heinz needs the visibility on supermarket shelves and restaurant tables to keep the brand alive.
What does an Internet brand need to do to stay alive? It also needs visibility in the real, or physical, world.
The best and most cost-effective way to achieve visibility is with publicity. The first brand in a new Internet category is generally blessed by a blizzard of publicity. Amazon.com, Priceline.com, and Bluemountain.com are prime examples.
Some sites are capable of generating publicity on a continuing basis. The crazy auctions that happen every day on eBay are an endless source of stories. A recent headline in the National Enquirer: “He buys $3 pickle jar at garage sale & sells it for $44,000.” (On eBay, naturally.)
The Internet itself will spawn an enormous increase in PR activity. “Just as network TV built the advertising business,” says Ray Gaulke, former president of the Public Relations Society of America, “the Internet technology has the capacity to dramatically build the PR business.”
Sooner or later, however, many Internet brands will exhaust their publicity potential. At this point they will need to shift their emphasis from publicity to advertising. How else are you going to keep an invisible Internet brand alive?
Publicity first, advertising second is the general rule, and it applies to all branding programs, especially for Internet brands. (A much more detailed discussion of the relationship between publicity and advertising is contained in this book under the Law of Publicity and the Law of Advertising.)
As the Internet grows up, you are going to see an explosion in outernet advertising. And much of this advertising will be directed at creating customers for Internet brands.
In particular, radio will turn out to be the primary medium for dotcom advertising. Radio’s perceived negative, the lack of visuals, is not a disadvantage for an Internet brand. There are no visual attributes of an Internet brand. No yellow flesh that helps identify Perdue chicken. No radiator grills that do the same for Mercedes-Benz automobiles. The only thing your mind needs to remember to log on to a site is the name.
On the Internet the name is everything. A verbal medium like radio is perfect for driving an Internet name into the mind. Advertising might be vitally important for driving prospects to your site, but once they get there you can forget about using them as human fodder for your advertising messages.
On the Internet, interactivity is king. Advertising is something that prospects put up with, not something they search out. Interactivity gives them a choice, and in our opinion most people will use this choice to turn off the advertising and turn on the information.
If you want to build a brand on the Net, forget about trying to attract advertising to your Website.
Make your brand a source of information that prospects cannot find elsewhere. Or a place to buy things they cannot find elsewhere. Or a place to buy things at prices they cannot find elsewhere. Or a place to meet people they cannot meet elsewhere.
Don’t make your site an excuse to run advertising that people have already seen in newspapers and magazines or heard on radio or TV.
The Internet is a revolutionary new interactive medium. And when people interact with advertising, they generally turn it off.