Saturday
Internet tops TV in battle for teens' time
By Janet Kornblum
USA TODAY
Teens and young adults spend more time on the Net than they do watching TV, a study says today.
Several studies have chronicled the increasing amounts of time spent online by teens and young adults weaned on computers and cellphones. But this time, the Internet seems to have a solid lead.
The study of 13- to 24-year-olds, by Harris Interactive and Teenage Research Unlimited, finds that young people spend an average of 16.7 hours a week online (not including e-mail), compared with 13.6 hours watching TV.
It also confirms something other studies have shown: Young people like to multitask, watching TV while instant messaging and e-mailing or surfing the Web. In addition to the Net and TV, they spend an average of 12 hours a week listening to the radio; 7.7 hours talking on the phone and six hours reading books and magazines.
''This has been a trend that's been building,'' says Lee Rainie, director of the Pew Internet & American Life Project, which chronicles Internet trends. ''This has been a generation that has grown up with these multiple technologies.''
The Net is better than TV, says Brooke Avery, 14, of Mountain View, Calif., who participated in the study. She spends about three hours a day, off and on, e-mailing, instant messaging with friends and checking out Web sites such as mtv.com and seventeen.com.
She doesn't have cable TV, but if she did, ''pretty soon I'd just get bored of it,'' she says. On the Internet, ''you can actually interact with it. TV, you can't really do anything but watch.''
And you can't talk to your friends on television, she adds.
''The reality is the media landscape has changed,'' says Wenda Harris Millard of Yahoo, which commissioned the study with media agency Carat North America. ''It's not that it's about to change. It has.''
The study included an online questionnaire of 2,618 respondents ages 13 to 24 in June and a focus group.
By Janet Kornblum
USA TODAY
Teens and young adults spend more time on the Net than they do watching TV, a study says today.
Several studies have chronicled the increasing amounts of time spent online by teens and young adults weaned on computers and cellphones. But this time, the Internet seems to have a solid lead.
The study of 13- to 24-year-olds, by Harris Interactive and Teenage Research Unlimited, finds that young people spend an average of 16.7 hours a week online (not including e-mail), compared with 13.6 hours watching TV.
It also confirms something other studies have shown: Young people like to multitask, watching TV while instant messaging and e-mailing or surfing the Web. In addition to the Net and TV, they spend an average of 12 hours a week listening to the radio; 7.7 hours talking on the phone and six hours reading books and magazines.
''This has been a trend that's been building,'' says Lee Rainie, director of the Pew Internet & American Life Project, which chronicles Internet trends. ''This has been a generation that has grown up with these multiple technologies.''
The Net is better than TV, says Brooke Avery, 14, of Mountain View, Calif., who participated in the study. She spends about three hours a day, off and on, e-mailing, instant messaging with friends and checking out Web sites such as mtv.com and seventeen.com.
She doesn't have cable TV, but if she did, ''pretty soon I'd just get bored of it,'' she says. On the Internet, ''you can actually interact with it. TV, you can't really do anything but watch.''
And you can't talk to your friends on television, she adds.
''The reality is the media landscape has changed,'' says Wenda Harris Millard of Yahoo, which commissioned the study with media agency Carat North America. ''It's not that it's about to change. It has.''
The study included an online questionnaire of 2,618 respondents ages 13 to 24 in June and a focus group.
Google debuts in Indian languages
By CNET News.com Staff
Web search giant Google on Thursday launched a sister site in India that is available in four major Indian languages as well as in English.
The new site offers Google users in India a choice of interfaces in Hindi, Bengali, Telugu, Marathi and English. The site also lets consumers restrict searches to pages from that country, a Google representative said.
India is a multilingual country with nearly 20 major languages spoken by more than a billion people. But so far, English has been the dominant language on the Internet in the country. Little content is available in local languages.
Yahoo made an early entry into India, launching an Indian Web site in June 2000. But the content and programming on the site was geared toward the English-speaking segment of the country.
Google said it has 77 country-specific domains. It also offers a number of foreign language search tools available on its home page. Users of the tools have immediate access to 88 interface language translations, machine translations for various languages and the ability to restrict searches to 35 languages.
By CNET News.com Staff
Web search giant Google on Thursday launched a sister site in India that is available in four major Indian languages as well as in English.
The new site offers Google users in India a choice of interfaces in Hindi, Bengali, Telugu, Marathi and English. The site also lets consumers restrict searches to pages from that country, a Google representative said.
India is a multilingual country with nearly 20 major languages spoken by more than a billion people. But so far, English has been the dominant language on the Internet in the country. Little content is available in local languages.
Yahoo made an early entry into India, launching an Indian Web site in June 2000. But the content and programming on the site was geared toward the English-speaking segment of the country.
Google said it has 77 country-specific domains. It also offers a number of foreign language search tools available on its home page. Users of the tools have immediate access to 88 interface language translations, machine translations for various languages and the ability to restrict searches to 35 languages.
Yet more growth for internet radio
Percentage of surfers who tune in has tripled
By Toni Fitzgerald
Most people continue to listen to traditional radio, but a growing number of Americans are switching their allegiance to online radio.
Since January 2000, when internet radio usage was a mere 5 percent of the active online population per month, it has more than tripled, to 17 percent, according to a study from Arbitron and Edison Media Research.
The study also reports that more Americans have sampled internet radio at some point -- some 34 percent, up from 25 percent in first-quarter 2002.
Another big increase has come in the area of internet-only radio. In 2003, 19 percent of respondents said they had used it. In 2002, that number was just 12 percent.
Perhaps quality has something to do with the increase in numbers. A July 2001 Arbitron-Edison Media Research study found that 26 percent “liked or loved” internet radio.
This year that grew to 35 percent, many of whom are, not surprisingly, young. Listeners ages 18-24 comprise the largest group of online audio listeners (43 percent), with 25-34s at second with 36 percent.
One group that doesn’t seem to have much use for web radio is 45-54s. Their time spent listening dropped from 2001 to 2002, the only age group to do so.
Many of the most popular online music stations remain the same. Longtime No. 1 America Online’s Radio@Network, MusicMatch, Yahoo’s music station and Virgin Radio are consistently among the most popular.
During May, two jazz and two classical stations claimed four of the top 10 spots.
Meanwhile, the premiere of “Charlie’s Angels: Full Throttle” in theaters last week drove traffic to the Sony Pictures Digital Entertainment site.
Sonypictures.com recorded 636,000 unique visitors for the week ending June 22, with 18 percent visiting the “Angels” page.
Other sites served 16.7 million “Angels” ad impressions for the week ending June 15, making the girls nearly unavoidable.
Still, just as at the box office, the second “Angels” movie may not better the first. When that was released in November 2000, it helped Sony Pictures draw 1.7 million visitors.
Percentage of surfers who tune in has tripled
By Toni Fitzgerald
Most people continue to listen to traditional radio, but a growing number of Americans are switching their allegiance to online radio.
Since January 2000, when internet radio usage was a mere 5 percent of the active online population per month, it has more than tripled, to 17 percent, according to a study from Arbitron and Edison Media Research.
The study also reports that more Americans have sampled internet radio at some point -- some 34 percent, up from 25 percent in first-quarter 2002.
Another big increase has come in the area of internet-only radio. In 2003, 19 percent of respondents said they had used it. In 2002, that number was just 12 percent.
Perhaps quality has something to do with the increase in numbers. A July 2001 Arbitron-Edison Media Research study found that 26 percent “liked or loved” internet radio.
This year that grew to 35 percent, many of whom are, not surprisingly, young. Listeners ages 18-24 comprise the largest group of online audio listeners (43 percent), with 25-34s at second with 36 percent.
One group that doesn’t seem to have much use for web radio is 45-54s. Their time spent listening dropped from 2001 to 2002, the only age group to do so.
Many of the most popular online music stations remain the same. Longtime No. 1 America Online’s Radio@Network, MusicMatch, Yahoo’s music station and Virgin Radio are consistently among the most popular.
During May, two jazz and two classical stations claimed four of the top 10 spots.
Meanwhile, the premiere of “Charlie’s Angels: Full Throttle” in theaters last week drove traffic to the Sony Pictures Digital Entertainment site.
Sonypictures.com recorded 636,000 unique visitors for the week ending June 22, with 18 percent visiting the “Angels” page.
Other sites served 16.7 million “Angels” ad impressions for the week ending June 15, making the girls nearly unavoidable.
Still, just as at the box office, the second “Angels” movie may not better the first. When that was released in November 2000, it helped Sony Pictures draw 1.7 million visitors.
Asian Americans lead other ethnic groups in online buying, Forrester finds
Shoppers tend to buy from different retail formats--including online--according to factors such as demographics and income, but ethnic group identification is also a factor, according to data from Forrester Research Inc.
While, overall, consumers surveyed by Forrester said they purchased online an average of 3.2 times per year, the tendency to buy online varies by ethnic group. Asians buy online an average of 6 times per year, nearly twice as often as any other ethnic group, including whites who buy online an average 3.3 times per year; blacks, 1.8 times; and Hispanics, 3 times.
Forrester points out that Asians` higher propensity to buy online also reflects demographic factors. Youth and wealth are both key indicators of higher technology consumption, and Asian consumers are both the youngest and wealthiest ethnic group in the U.S.–-a reason that Asians shop more frequently both online and in electronics stores than other ethnic groups do.
Forrester says online marketers have an opportunity in blacks’ and Hispanics’ lower propensity to shop online to attract them to e-commerce by aiming at what drives these groups’ purchases, given lower average household incomes. The convenience of buying online doesn’t matter as much to many blacks and Hispanics, who may be more concerned about price than convenience, says Forrester analyst Chris Kelley. Discount online retailers such as Overstock.com and Target.com and marketplaces like eBay should promote the web to these groups as a place to buy name brands at better prices than they might find offline, Kelley says.
Shoppers tend to buy from different retail formats--including online--according to factors such as demographics and income, but ethnic group identification is also a factor, according to data from Forrester Research Inc.
While, overall, consumers surveyed by Forrester said they purchased online an average of 3.2 times per year, the tendency to buy online varies by ethnic group. Asians buy online an average of 6 times per year, nearly twice as often as any other ethnic group, including whites who buy online an average 3.3 times per year; blacks, 1.8 times; and Hispanics, 3 times.
Forrester points out that Asians` higher propensity to buy online also reflects demographic factors. Youth and wealth are both key indicators of higher technology consumption, and Asian consumers are both the youngest and wealthiest ethnic group in the U.S.–-a reason that Asians shop more frequently both online and in electronics stores than other ethnic groups do.
Forrester says online marketers have an opportunity in blacks’ and Hispanics’ lower propensity to shop online to attract them to e-commerce by aiming at what drives these groups’ purchases, given lower average household incomes. The convenience of buying online doesn’t matter as much to many blacks and Hispanics, who may be more concerned about price than convenience, says Forrester analyst Chris Kelley. Discount online retailers such as Overstock.com and Target.com and marketplaces like eBay should promote the web to these groups as a place to buy name brands at better prices than they might find offline, Kelley says.
Friday
Online Ad Revival Confirmed
By Brian Morrissey
Paid search, which just two years ago represented just over one in every ten dollars spent on Internet advertising, will power an online advertising revival that is poised Jupiter Research (a unit of this site's corporate parent).
Jupiter pegs the paid search market as worth $1.6 billion this year, after growing at a 48 percent clip. Over the next five years, the researcher expects spending on search to increase by a compound annual rate of more than 20 percent. In 2008, Jupiter forecasts companies will spend $4.3 billion on search, accounting for 29 percent of the $14.8 billion online advertising market.
Jupiter expects traditional display advertising on the Internet will turn the corner in 2003, retreating slightly from 2002, as AOL continues to drag down industry numbers, but growing solidly in the next five years. In 2008, display advertising is forecast to reach $7.1 billion.
Online classified advertising is forecast to grow solidly, from $1.6 billion this year to $3.3 billion in 2008.
By 2008, Jupiter expects online will grab 6.1 percent of total advertising spending, up from 3.3 percent this year.
While small companies pioneered the search industry, drawn by pay-for-performance deals that fit their modest marketing budgets, Jupiter expects a shift to big-budget advertisers. In its April 2003 survey of marketing executives, 82 percent from large companies and 61 percent from smaller companies surveyed by Jupiter said they were poised to bump up their spending on search marketing.
The attention of big-budget advertisers will drive a growing sophistication in the industry, with improved analytics and optimization techniques. Thanks to these, Jupiter expects the industry's average revenue per click to increase from 27 cents today to 35 cents in 2008.
One major wildcard for search is the degree search providers can provide local search, which Jupiter says could further increase participation in the industry. Google has made some strides in providing local search listing through creative deals with Mapquest and Weather.com, and CitySearch has its own local search product. Within the next year, Overture Services is expected to roll out its own local search offering, which figures to be integrated deeply in Yahoo!, which recently agreed to acquire Overture.
For the short term, search is poised to overshadow other aspects of online advertising, making up for continued sluggishness in display advertising because marketers see results. According to the executive survey, 74 percent of big-budget marketers rated search marketing as "better" or "much better" than banner ads.
By Brian Morrissey
Paid search, which just two years ago represented just over one in every ten dollars spent on Internet advertising, will power an online advertising revival that is poised Jupiter Research (a unit of this site's corporate parent).
Jupiter pegs the paid search market as worth $1.6 billion this year, after growing at a 48 percent clip. Over the next five years, the researcher expects spending on search to increase by a compound annual rate of more than 20 percent. In 2008, Jupiter forecasts companies will spend $4.3 billion on search, accounting for 29 percent of the $14.8 billion online advertising market.
Jupiter expects traditional display advertising on the Internet will turn the corner in 2003, retreating slightly from 2002, as AOL continues to drag down industry numbers, but growing solidly in the next five years. In 2008, display advertising is forecast to reach $7.1 billion.
Online classified advertising is forecast to grow solidly, from $1.6 billion this year to $3.3 billion in 2008.
By 2008, Jupiter expects online will grab 6.1 percent of total advertising spending, up from 3.3 percent this year.
While small companies pioneered the search industry, drawn by pay-for-performance deals that fit their modest marketing budgets, Jupiter expects a shift to big-budget advertisers. In its April 2003 survey of marketing executives, 82 percent from large companies and 61 percent from smaller companies surveyed by Jupiter said they were poised to bump up their spending on search marketing.
The attention of big-budget advertisers will drive a growing sophistication in the industry, with improved analytics and optimization techniques. Thanks to these, Jupiter expects the industry's average revenue per click to increase from 27 cents today to 35 cents in 2008.
One major wildcard for search is the degree search providers can provide local search, which Jupiter says could further increase participation in the industry. Google has made some strides in providing local search listing through creative deals with Mapquest and Weather.com, and CitySearch has its own local search product. Within the next year, Overture Services is expected to roll out its own local search offering, which figures to be integrated deeply in Yahoo!, which recently agreed to acquire Overture.
For the short term, search is poised to overshadow other aspects of online advertising, making up for continued sluggishness in display advertising because marketers see results. According to the executive survey, 74 percent of big-budget marketers rated search marketing as "better" or "much better" than banner ads.
Online Ad Rebound Underway
By Brian Morrissey
The online ad industry turned the corner in the second half of 2002, helped by the red-hot paid search market, the emergence of rich media, and robust ad sales from top publishers, according to new industry figures.
The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) found the Internet advertising market made a strong comeback in the fourth quarter. Spending increased 9 percent from the previous quarter to $1.6 billion, equaling the total from the year earlier period. For the full year, the Internet advertising industry took in $6.0 billion in revenue in 2002, a 16 percent slide from the year before.
The report, compiled by PwC through a survey of top industry players, accounted for the large restatements made by AOL last year by knocking off $77 million from its 2001 revenue report and $138 million from 2002.
Still, the IAB and PwC found signs that the long decline in the Internet advertising industry finally ended last year. One of the key drivers of this growth has been the emergence of paid search. The keyword advertising market more than doubled in 2002, bringing in $635 million in 2002. Overall, it represented 15 percent of the online ad industry � a proportion that the IAB and PwC expect will only increase. As a sign of its momentum, paid search accounted for more than a fifth of all online ad spending in the fourth quarter.
The strength of keyword advertising made up for the disappointing performance of the Internet's traditional ad units: banners and sponsorships. Banners brought in $1.7 billion, a 33 percent decline from a year earlier; sponsorships were down 40 percent to $1.1 billion.
"That's a good news/bad news situation: the sellers and buyers are experimenting with different formats," said Pete Petrusky, director of new media at PwC. "One of the biggest undercurrents that's driving the industry now is going to be the adoption of high-speed broadband."
With 14.2 million broadband subscribers at the end of 2002, more advertisers have turned to flashier online ads for branding purposes, rather than traditional direct response. For the year, rich media spending increased 18 percent to $212 million.
In a separate report, using slightly different methodology, PwC concludes that the online ad industry will continue to claw its way back. In 2006, online ad revenue should finally return to the boom-time levels of 2000. By 2007, PwC forecasts online advertising spending will reach $9.3 billion.
A number of factors set the stage for the comeback. Broadband will continue to wend its way into homes, making rich media more attractive and tethering people to their computers more with always-on access. The online ad industry will continue to improve its metrics, like reach and frequency, to give advertisers a better comparison with traditional forms of marketing.
The report meshes with evidence that the online advertising industry is growing at a steady clip. Goldman Sachs issued a bullish report on the industry, citing Yahoo! as a catalyst for an eventual industry-wide recovery in 2003. The IAB and PwC found the top 10 publishers accounted for 72 percent of ad revenues in the fourth quarter.
By Brian Morrissey
The online ad industry turned the corner in the second half of 2002, helped by the red-hot paid search market, the emergence of rich media, and robust ad sales from top publishers, according to new industry figures.
The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) found the Internet advertising market made a strong comeback in the fourth quarter. Spending increased 9 percent from the previous quarter to $1.6 billion, equaling the total from the year earlier period. For the full year, the Internet advertising industry took in $6.0 billion in revenue in 2002, a 16 percent slide from the year before.
The report, compiled by PwC through a survey of top industry players, accounted for the large restatements made by AOL last year by knocking off $77 million from its 2001 revenue report and $138 million from 2002.
Still, the IAB and PwC found signs that the long decline in the Internet advertising industry finally ended last year. One of the key drivers of this growth has been the emergence of paid search. The keyword advertising market more than doubled in 2002, bringing in $635 million in 2002. Overall, it represented 15 percent of the online ad industry � a proportion that the IAB and PwC expect will only increase. As a sign of its momentum, paid search accounted for more than a fifth of all online ad spending in the fourth quarter.
The strength of keyword advertising made up for the disappointing performance of the Internet's traditional ad units: banners and sponsorships. Banners brought in $1.7 billion, a 33 percent decline from a year earlier; sponsorships were down 40 percent to $1.1 billion.
"That's a good news/bad news situation: the sellers and buyers are experimenting with different formats," said Pete Petrusky, director of new media at PwC. "One of the biggest undercurrents that's driving the industry now is going to be the adoption of high-speed broadband."
With 14.2 million broadband subscribers at the end of 2002, more advertisers have turned to flashier online ads for branding purposes, rather than traditional direct response. For the year, rich media spending increased 18 percent to $212 million.
In a separate report, using slightly different methodology, PwC concludes that the online ad industry will continue to claw its way back. In 2006, online ad revenue should finally return to the boom-time levels of 2000. By 2007, PwC forecasts online advertising spending will reach $9.3 billion.
A number of factors set the stage for the comeback. Broadband will continue to wend its way into homes, making rich media more attractive and tethering people to their computers more with always-on access. The online ad industry will continue to improve its metrics, like reach and frequency, to give advertisers a better comparison with traditional forms of marketing.
The report meshes with evidence that the online advertising industry is growing at a steady clip. Goldman Sachs issued a bullish report on the industry, citing Yahoo! as a catalyst for an eventual industry-wide recovery in 2003. The IAB and PwC found the top 10 publishers accounted for 72 percent of ad revenues in the fourth quarter.
Thursday
Micro Payment solution company secures funding
PALO ALTO, Calif.--(BUSINESS WIRE)--July 30, 2003--BitPass Inc. today announced that it has secured $1.5 million in Series A funding. Lead investors in the round are Garage Technology Ventures and Cardinal Venture Capital. Additional investors include Amicus Capital and Constantin Partners.
BitPass provides a micropayment system for online content. Content providers can start selling their content in less than a day using a self-provisioning, no-charge setup process. After completing a one-time, one-minute setup, buyers can purchase and access BitPass-enabled content with a single-click interface.
"BitPass is the most exciting opportunity I've seen since the Macintosh," said Guy Kawasaki, CEO of Garage Technology Ventures. "Since my days at Apple (Nasdaq:AAPL - News), I have loved technology that empowers the little guy. BitPass does exactly that. This could create a business model for companies and individuals where there was none before."
"Until now there has been no practical way for content providers to offer low-priced music, art, film, documents, pictures, and services for sale over the Internet," said Kurt Huang, CEO of BitPass. "Our system provides a catalyst for providers to increase both the quantity and quality of their content offerings."
Garage Technology Ventures and Cardinal Venture Capital will each have representation on the BitPass Board of Directors.
BitPass recently launched its public beta and anticipates a full release prior to the end of Q3 2003.
About BitPass
BitPass provides a micropayment system for online content. Founded in 2002 and funded by Garage Technology Ventures, Cardinal Venture Capital, and Amicus Capital, BitPass is based in Palo Alto, California. Contact BitPass at www.bitpass.com or call 650-354-1844.
PALO ALTO, Calif.--(BUSINESS WIRE)--July 30, 2003--BitPass Inc. today announced that it has secured $1.5 million in Series A funding. Lead investors in the round are Garage Technology Ventures and Cardinal Venture Capital. Additional investors include Amicus Capital and Constantin Partners.
BitPass provides a micropayment system for online content. Content providers can start selling their content in less than a day using a self-provisioning, no-charge setup process. After completing a one-time, one-minute setup, buyers can purchase and access BitPass-enabled content with a single-click interface.
"BitPass is the most exciting opportunity I've seen since the Macintosh," said Guy Kawasaki, CEO of Garage Technology Ventures. "Since my days at Apple (Nasdaq:AAPL - News), I have loved technology that empowers the little guy. BitPass does exactly that. This could create a business model for companies and individuals where there was none before."
"Until now there has been no practical way for content providers to offer low-priced music, art, film, documents, pictures, and services for sale over the Internet," said Kurt Huang, CEO of BitPass. "Our system provides a catalyst for providers to increase both the quantity and quality of their content offerings."
Garage Technology Ventures and Cardinal Venture Capital will each have representation on the BitPass Board of Directors.
BitPass recently launched its public beta and anticipates a full release prior to the end of Q3 2003.
About BitPass
BitPass provides a micropayment system for online content. Founded in 2002 and funded by Garage Technology Ventures, Cardinal Venture Capital, and Amicus Capital, BitPass is based in Palo Alto, California. Contact BitPass at www.bitpass.com or call 650-354-1844.
Wednesday
Venture Funding Sneaks Up
Dan Ackman
The precipitous two-and-half-year decline in large-scale venture capital investing in the U.S. ended in the second quarter of 2003, according to a new survey, but the level of venture investment is still as low as it has been in six years.
Investments totaled $4.3 billion, up marginally from $4 billion in the first quarter of 2003, according to the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey. A total of 669 entrepreneurial companies received funding in the second quarter compared to 647 companies in the first quarter of this year.
The number of firms receiving their first formal venture funding rose to 153 from an eight-year low of 138 in the previous quarter, the survey indicates. It also suggests that the rate of decline slowed dramatically over the prior nine months, pointing toward a leveling of overall investing activity.
The amount of venture capital funding was a closely watched indicator during the late 1990s technology boom. But in retrospect, the surge of investment in new, unproven enterprises, followed by their premature entry into public markets, was an indicator of an excess of investment more than anything else. Venture capital investing hit its high point in early 2000, just when the overall market was about to decline, not when it was ready to surge. More than 8,000 companies received formal venture funding that year as the door to the public markets seemed infinitely wide, and the appetite for the next Cisco Systems , JDS Uniphase or Amazon.com or even the next Pets.com--seemed infinite. Currently, the amount of venture spending in the most recent quarter was roughly the same as it was at the beginning of 1998.
"Is this quarter a harbinger of a dramatic turnaround in venture capital investing? It's not likely," said Mark Heesen, president of the National Venture Capital Association in a statement. "The venture industry invests based on anticipated future market conditions, so before we declare a trend reversal we must first see a sustained opening of the IPO market and consecutive quarterly increases in corporate capital expenditures."
Heesen is referring to large-scale formal venture investing from the types of firms that occupy Sandhill Road in Silicon Valley. Even at today's reduced levels, the average investment reported by the MoneyTree survey was $6.4 million. The vast majority of new companies never get this kind of investment and typically gain seed capital in less formal ways, such as from friends, family and business associates. Even in the U.S., where formal venture investing is most prolific, just 28% of the investment in entrepreneurial ventures comes from financiers in the full-time business of venture funding. The remaining 72% is informal, according to a recent study conducted for the Kauffman Foundation.
Formal venture spending gets far more attention, however, than the informal sector. Among the companies that attract this type of capital, software firms led the pack, with 179 companies drawing $864 million (an average of $4.8 million). Software was followed by biotechnology, with $639 million going to 66 companies (average: $9.7 million), and medical devices, with 52 companies drawing $437 million (average: $8.4 million).
The trend is towards later-stage investing, the survey says. Investment in so-called "expansion stage" firms actually increased slightly to $2.3 billion, or 54% of total investments. This was partially offset by an increase in investing in later-stage companies, to $958 million, or 22% of total investments. "It doesn't necessarily mean that early-stage investing will subside, but due diligence on early-stage and startup deals is a much more rigorous process than it was two years ago, and it will remain so for the foreseeable future," said Jesse Reyes, vice president at Thomson Venture Economics.
Dan Ackman
The precipitous two-and-half-year decline in large-scale venture capital investing in the U.S. ended in the second quarter of 2003, according to a new survey, but the level of venture investment is still as low as it has been in six years.
Investments totaled $4.3 billion, up marginally from $4 billion in the first quarter of 2003, according to the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey. A total of 669 entrepreneurial companies received funding in the second quarter compared to 647 companies in the first quarter of this year.
The number of firms receiving their first formal venture funding rose to 153 from an eight-year low of 138 in the previous quarter, the survey indicates. It also suggests that the rate of decline slowed dramatically over the prior nine months, pointing toward a leveling of overall investing activity.
The amount of venture capital funding was a closely watched indicator during the late 1990s technology boom. But in retrospect, the surge of investment in new, unproven enterprises, followed by their premature entry into public markets, was an indicator of an excess of investment more than anything else. Venture capital investing hit its high point in early 2000, just when the overall market was about to decline, not when it was ready to surge. More than 8,000 companies received formal venture funding that year as the door to the public markets seemed infinitely wide, and the appetite for the next Cisco Systems , JDS Uniphase or Amazon.com or even the next Pets.com--seemed infinite. Currently, the amount of venture spending in the most recent quarter was roughly the same as it was at the beginning of 1998.
"Is this quarter a harbinger of a dramatic turnaround in venture capital investing? It's not likely," said Mark Heesen, president of the National Venture Capital Association in a statement. "The venture industry invests based on anticipated future market conditions, so before we declare a trend reversal we must first see a sustained opening of the IPO market and consecutive quarterly increases in corporate capital expenditures."
Heesen is referring to large-scale formal venture investing from the types of firms that occupy Sandhill Road in Silicon Valley. Even at today's reduced levels, the average investment reported by the MoneyTree survey was $6.4 million. The vast majority of new companies never get this kind of investment and typically gain seed capital in less formal ways, such as from friends, family and business associates. Even in the U.S., where formal venture investing is most prolific, just 28% of the investment in entrepreneurial ventures comes from financiers in the full-time business of venture funding. The remaining 72% is informal, according to a recent study conducted for the Kauffman Foundation.
Formal venture spending gets far more attention, however, than the informal sector. Among the companies that attract this type of capital, software firms led the pack, with 179 companies drawing $864 million (an average of $4.8 million). Software was followed by biotechnology, with $639 million going to 66 companies (average: $9.7 million), and medical devices, with 52 companies drawing $437 million (average: $8.4 million).
The trend is towards later-stage investing, the survey says. Investment in so-called "expansion stage" firms actually increased slightly to $2.3 billion, or 54% of total investments. This was partially offset by an increase in investing in later-stage companies, to $958 million, or 22% of total investments. "It doesn't necessarily mean that early-stage investing will subside, but due diligence on early-stage and startup deals is a much more rigorous process than it was two years ago, and it will remain so for the foreseeable future," said Jesse Reyes, vice president at Thomson Venture Economics.
SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats
by Bobette Kyle
When you are planning strategically with any company--online or offline--it is useful to complete an analysis that takes into account not only your own business, but your competitor's businesses and the current business environment as well. A SWOT is one such analysis.
Completing a SWOT analysis helps you identify ways to minimize the effect of weaknesses in your business while maximizing your strengths.
Ideally, you will match your strengths against market opportunities that result from your competitors’ weaknesses or voids.
Basic SWOT
You can develop a basic SWOT analysis in a brainstorming session with members of your company, or by yourself if you are a one-person shop. To begin a basic SWOT analysis create a four-cell grid or four lists, one for each SWOT component:
Then, begin filling in the lists.
Strengths
Think about what your company does well. What makes you stand out from your competitors? What advantages do you have over other businesses?
Weaknesses
List the areas that are a struggle. What do your customers complain about? What are the unmet needs of your sales force?
Opportunities
Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company's strengths? Is there a product/service area that you could do well in but are not yet competing?
Threats
Look both inside and outside of your company for things that could damage your business. Internally, do you have financial, development, or other problems? Externally, are your competitors becoming stronger, are there emerging trends that amplify one of your weaknesses, or do you see other threats to your company's success?
Advanced SWOT
A more in-depth SWOT analysis can help you better understand your company's competitive situation. One way to improve upon the basic SWOT is to include more detailed competitor information in the analysis.
Note Internet-related activities such as trade organization participation, search engine inclusion, and outside links to the sites. This will better help you spot opportunities for and threats to your company.
You can also take a closer look at the business environment. Often, opportunities arise as a result of a changing business environment.
Some examples are:
A new trend develops for which demand outstrips the supply of quality options. For example, early on, the trend toward healthy eating coupled with an insistence on good-tasting food produced a shortage of acceptable natural food alternatives.
A customer segment is becoming more predominant, but their specific needs are not being fully met by your competitors. The U.S. Hispanic population experienced this phenomenon in the late 1990s and early 2000s.
A customer, competitor, or supplier goes out of business or merges with another company. With the demise of many pure-play dot-coms, examples of this abound. As each went out of business, opportunities arise to gain the defunct business--customers.
You can also enhance a SWOT analysis through surveys. You can learn more about your own as well as competitor sites and businesses. Areas you can research include
1) customer awareness, interest, trial, and usage levels;
2) brand, site, and/or company image;
3) importance of different site or product attributes to your customers; and
4) product and/or site performance.
Whether using a basic or more advanced approach to SWOT analysis, you are sure to come away with newfound insights. Use these to increase your company's effectiveness and as input into your business or marketing plan.
by Bobette Kyle
When you are planning strategically with any company--online or offline--it is useful to complete an analysis that takes into account not only your own business, but your competitor's businesses and the current business environment as well. A SWOT is one such analysis.
Completing a SWOT analysis helps you identify ways to minimize the effect of weaknesses in your business while maximizing your strengths.
Ideally, you will match your strengths against market opportunities that result from your competitors’ weaknesses or voids.
Basic SWOT
You can develop a basic SWOT analysis in a brainstorming session with members of your company, or by yourself if you are a one-person shop. To begin a basic SWOT analysis create a four-cell grid or four lists, one for each SWOT component:
Then, begin filling in the lists.
Strengths
Think about what your company does well. What makes you stand out from your competitors? What advantages do you have over other businesses?
Weaknesses
List the areas that are a struggle. What do your customers complain about? What are the unmet needs of your sales force?
Opportunities
Try to uncover areas where your strengths are not being fully utilized. Are there emerging trends that fit with your company's strengths? Is there a product/service area that you could do well in but are not yet competing?
Threats
Look both inside and outside of your company for things that could damage your business. Internally, do you have financial, development, or other problems? Externally, are your competitors becoming stronger, are there emerging trends that amplify one of your weaknesses, or do you see other threats to your company's success?
Advanced SWOT
A more in-depth SWOT analysis can help you better understand your company's competitive situation. One way to improve upon the basic SWOT is to include more detailed competitor information in the analysis.
Note Internet-related activities such as trade organization participation, search engine inclusion, and outside links to the sites. This will better help you spot opportunities for and threats to your company.
You can also take a closer look at the business environment. Often, opportunities arise as a result of a changing business environment.
Some examples are:
A new trend develops for which demand outstrips the supply of quality options. For example, early on, the trend toward healthy eating coupled with an insistence on good-tasting food produced a shortage of acceptable natural food alternatives.
A customer segment is becoming more predominant, but their specific needs are not being fully met by your competitors. The U.S. Hispanic population experienced this phenomenon in the late 1990s and early 2000s.
A customer, competitor, or supplier goes out of business or merges with another company. With the demise of many pure-play dot-coms, examples of this abound. As each went out of business, opportunities arise to gain the defunct business--customers.
You can also enhance a SWOT analysis through surveys. You can learn more about your own as well as competitor sites and businesses. Areas you can research include
1) customer awareness, interest, trial, and usage levels;
2) brand, site, and/or company image;
3) importance of different site or product attributes to your customers; and
4) product and/or site performance.
Whether using a basic or more advanced approach to SWOT analysis, you are sure to come away with newfound insights. Use these to increase your company's effectiveness and as input into your business or marketing plan.
Monday
Colgate’s Jack Haber
This VP, e-Business explains how the Internet was used as part of an integrated product launch campaign, and tells us why he believes the Net is a powerful marketing tool.
Interviewed by Dawn Anfuso
As Vice President, e-Business for Colgate Palmolive, Jack Haber is responsible for leading all of the company’s Internet activities globally, including all company Websites around the world, Internet marketing, e-commerce and e-business applications. Haber has overseen the launch of an impressive array of innovative new products, supported by more and better advertising. This includes the successful launches of products like Colgate Total, Colgate Baking Soda & Peroxide toothpaste, Colgate Whitening toothpastes, and others. We talked with Haber recently to find out more about what goes into these launches, as well as about his views of the Internet as a marketing tool in general.
Meet Jack at the iMedia Brand Summit, September 21 – 24, in Tamaya, New Mexico.
iMedia Connection: What’s one of the most successful campaigns your company has executed recently, and what made it successful?
Haber: We ran a program for Colgate Simply White which was successful because it was completely integrated with the brand’s marketing program -- the online advertising tied in with the brand’s advertisements on TV, for example, as well as with the Brand’s promotions. We used TV and other media to give people short, simple messaging about the product and get them interested, and then to send them to the Website where we could show them the product, give them a demonstration, engage them more and provide them with more information. The real trick is in integrating, and in using the Net to its strengths, one of which is its ability to give a greater depth of information.
iMedia Connection: Did you use the Internet for any sort of sampling or couponing?
Haber: Yes, we ran the same offers as in other media, which were high value coupons for $5.00 off and $3.00. We also used the Net to collect names of prospective customers. In fact, we managed to collect information from many thousands of consumers who gave information about themselves, their thoughts on the product, their past product usage, etc.
So looking at it this way, the Web activity included a media element, a promotional element and a research element, fulfilling many roles.
iMedia Connection: What lessons have you learned from your online efforts?
Haber: The greatest lesson overall is that if you use the Internet for its strengths, and integrate it properly with your other efforts, it will work and you should do more of it.
iMedia Connection: What does your company have planned in order to approach the interactive space in different and unique ways?
Haber: I can’t really talk about future plans, but I can say that everything we do now I still consider to be experimental. As an industry we’re still learning how to use the Internet as a marketing tool, discovering how to use it for various products. For example, how you use the Net to support a new high-priced toothpaste is going to be different than how you use it to market Palmolive Dishwashing Liquid. So we have to do a lot of different things to get the most out of the medium.
Several years ago, someone said that the Internet was only 10% invented. I would say online marketing is still only 10% invented. We have a lot more to figure out. It’s not a mature medium.
iMedia Connection: Realizing that it’s not yet a mature medium, what are the vexing issues still facing your company and online advertising/marketing in general?
Haber: We’re sitting on top of an incredibly powerful marketing tool and the challenge is – I would say challenge not vexing issue -- how do you tap the potential of this? You have all the opportunity to reach people one at a time. Whereas this business was built on reaching millions broadly, quickly, now you can reach millions and address them individually, to know who they are as well as things about them, and to have them speak back to us. That’s an incredible opportunity for marketers. We can be more responsive to consumers.
iMedia Connection: How have your goals in the online world changed from last year to this year?
Haber: Our goals haven’t changed; we just see more opportunity and we want to learn more.
iMedia Connection: How did online advertising contribute to your company's overall sales goals last year?
Haber: I really couldn’t say because our marketing efforts are so integrated, it’s difficult to break those numbers out.
iMedia Connection: Does your company plan on increasing its spending on interactive media, and when do you expect interactive to take a larger share of the total marketing budget?
Haber: Definitely. It will continue to increase as we learn more, as we continue to develop and run successful programs.
iMedia Connection: How do you perceive rich media? Have you used it in campaigns? Do you think the benefits make up for the cost?
Haber: Yes, we use rich media of different types. The more you can engage the consumer in a way that works to communicate your message, the better. The extra cost is well worth it. But the trick is to use it properly.
iMedia Connection: How do you evaluate different sites for media placement?
Haber: We work closely with the Digital Edge who helps us select sites that provide the audience we’re interested in, and which can give us the opportunity to run proper creative units, and which can provide contextual relevance for our products.
iMedia Connection: How can online marketing mature to overcome corporate reluctance?
Haber: By establishing a track record of success. People like us who are doing this have to prove that it works and that it’s a real business tool. We have to show successes. So far we have been successful in doing that.
iMedia Connection: What knowledge can you impart to other traditional advertisers that may be hesitant to enter into the online space?
Haber: So far we’ve seen that it works. We really do see a promise. Not only is it a more efficient medium, in many ways it can be more effective in reaching and educating your audience. We see opportunities for even greater effectiveness as a marketing tool.
This VP, e-Business explains how the Internet was used as part of an integrated product launch campaign, and tells us why he believes the Net is a powerful marketing tool.
Interviewed by Dawn Anfuso
As Vice President, e-Business for Colgate Palmolive, Jack Haber is responsible for leading all of the company’s Internet activities globally, including all company Websites around the world, Internet marketing, e-commerce and e-business applications. Haber has overseen the launch of an impressive array of innovative new products, supported by more and better advertising. This includes the successful launches of products like Colgate Total, Colgate Baking Soda & Peroxide toothpaste, Colgate Whitening toothpastes, and others. We talked with Haber recently to find out more about what goes into these launches, as well as about his views of the Internet as a marketing tool in general.
Meet Jack at the iMedia Brand Summit, September 21 – 24, in Tamaya, New Mexico.
iMedia Connection: What’s one of the most successful campaigns your company has executed recently, and what made it successful?
Haber: We ran a program for Colgate Simply White which was successful because it was completely integrated with the brand’s marketing program -- the online advertising tied in with the brand’s advertisements on TV, for example, as well as with the Brand’s promotions. We used TV and other media to give people short, simple messaging about the product and get them interested, and then to send them to the Website where we could show them the product, give them a demonstration, engage them more and provide them with more information. The real trick is in integrating, and in using the Net to its strengths, one of which is its ability to give a greater depth of information.
iMedia Connection: Did you use the Internet for any sort of sampling or couponing?
Haber: Yes, we ran the same offers as in other media, which were high value coupons for $5.00 off and $3.00. We also used the Net to collect names of prospective customers. In fact, we managed to collect information from many thousands of consumers who gave information about themselves, their thoughts on the product, their past product usage, etc.
So looking at it this way, the Web activity included a media element, a promotional element and a research element, fulfilling many roles.
iMedia Connection: What lessons have you learned from your online efforts?
Haber: The greatest lesson overall is that if you use the Internet for its strengths, and integrate it properly with your other efforts, it will work and you should do more of it.
iMedia Connection: What does your company have planned in order to approach the interactive space in different and unique ways?
Haber: I can’t really talk about future plans, but I can say that everything we do now I still consider to be experimental. As an industry we’re still learning how to use the Internet as a marketing tool, discovering how to use it for various products. For example, how you use the Net to support a new high-priced toothpaste is going to be different than how you use it to market Palmolive Dishwashing Liquid. So we have to do a lot of different things to get the most out of the medium.
Several years ago, someone said that the Internet was only 10% invented. I would say online marketing is still only 10% invented. We have a lot more to figure out. It’s not a mature medium.
iMedia Connection: Realizing that it’s not yet a mature medium, what are the vexing issues still facing your company and online advertising/marketing in general?
Haber: We’re sitting on top of an incredibly powerful marketing tool and the challenge is – I would say challenge not vexing issue -- how do you tap the potential of this? You have all the opportunity to reach people one at a time. Whereas this business was built on reaching millions broadly, quickly, now you can reach millions and address them individually, to know who they are as well as things about them, and to have them speak back to us. That’s an incredible opportunity for marketers. We can be more responsive to consumers.
iMedia Connection: How have your goals in the online world changed from last year to this year?
Haber: Our goals haven’t changed; we just see more opportunity and we want to learn more.
iMedia Connection: How did online advertising contribute to your company's overall sales goals last year?
Haber: I really couldn’t say because our marketing efforts are so integrated, it’s difficult to break those numbers out.
iMedia Connection: Does your company plan on increasing its spending on interactive media, and when do you expect interactive to take a larger share of the total marketing budget?
Haber: Definitely. It will continue to increase as we learn more, as we continue to develop and run successful programs.
iMedia Connection: How do you perceive rich media? Have you used it in campaigns? Do you think the benefits make up for the cost?
Haber: Yes, we use rich media of different types. The more you can engage the consumer in a way that works to communicate your message, the better. The extra cost is well worth it. But the trick is to use it properly.
iMedia Connection: How do you evaluate different sites for media placement?
Haber: We work closely with the Digital Edge who helps us select sites that provide the audience we’re interested in, and which can give us the opportunity to run proper creative units, and which can provide contextual relevance for our products.
iMedia Connection: How can online marketing mature to overcome corporate reluctance?
Haber: By establishing a track record of success. People like us who are doing this have to prove that it works and that it’s a real business tool. We have to show successes. So far we have been successful in doing that.
iMedia Connection: What knowledge can you impart to other traditional advertisers that may be hesitant to enter into the online space?
Haber: So far we’ve seen that it works. We really do see a promise. Not only is it a more efficient medium, in many ways it can be more effective in reaching and educating your audience. We see opportunities for even greater effectiveness as a marketing tool.
Eleven Things That Will Happen, Part 1
By Sean Carton
Lately, I've had a lot of time to ponder the state of the Internet. It's great to step back, take a big-picture look at what's been going on in the world, and try to imagine where we're going next.
I'm not interested in far-future prognosticating or Fast Company/Wired-type techno-boosterism. But many identifiable trend lines can be followed through to their logical conclusion, especially now that we have seven years' perspective of e-biz. My predictions are based on those trend lines. I truly believe they will happen... eventually. I'm not saying any of this stuff is going to come true next month, or even next year, but it's hard to imagine (barring major catastrophes) these things won't be part of our lives at some time in the future. Besides, we're already halfway through the year. No better time to beat the end-of-the-year prediction rush . So without further ado, my list of 11 things that will happen in the foreseeable future.
Wireless everywhere. Given the choice between a wired tether and wireless freedom, which would you chose? Right now, those who have the opportunity and the resources to get their data wirelessly, are. With an explosion of Wi-Fi access points everywhere, soon anyone with a Wi-Fi card in her laptop will be able to hang out outside the office as long as the batteries hold out. Add to this the rapid development in small fuel cells that allow computers to run for days without a charge, and you've got a recipe for a major revolution in the way we live with computers. Beyond the laptop, phone access is getting better, palmtops and PDAs have wireless access built in, and people (early adopters, at least ) are starting to expect access.
Will this happen next year? Doubtful, but there's no conceivable scenario I can think of in which people, given the choice and the hardware, won't chose to cut Ethernet (and eventually power) cords. What will this mean to marketers? Ubiquitous data access will allow people to be smarter, make more informed decisions, and be all-around tougher customers. Will wireless advertising take off? Maybe some day, in some fashion we haven't thought of yet. For the next two to five years, we'd better expect our customers to have access to our sites, and our competitors', everywhere they go.
E-mail: death of a marketing tool. OK, start the hate mail now. Unless something's done to stop spam, e-mail as a marketing tool will continue to erode in effectiveness until it's untenable as a legitimate tool. Several recent reports say this summer is when spam will outpace legitimate e-mail. Regardless of present or pending legislation, it's only going to get worse. Even if customers want to receive your e-mail, they'll have an increasingly difficult time finding it in the clutter.
For now, the best marketing strategy is to educate customers on setting up filters so your e-mail lands in the folder that gets read. Legitimate marketers who create desired content will continue to reach some of their audiences. Unless spam goes away, no scenario exists for e-mail to get any easier.
Blogout. Blogs have gotten a lot of attention in the past six months. Many of my ClickZ colleagues have written some pretty compelling pieces about blogs' power as a marketing tool, perhaps even replacing the e-mail newsletters. Outside of its utility for marketing, blogging has taken on a life of its own. Millions of registered users blogging away. It's a new publishing medium that wouldn't have been possible without the Internet, and one that's given a meaningful outlet to many folks.
But (you knew there'd be a "but"), it's not going to last forever. As bloggers know, maintaining a blog is a lot of work. Paying people to keep on blogging can cost lots of money. Eventually, many private bloggers will move on to other things. Corporate bloggers will become too busy (or bored) to blog. As someone who ran a proto-blog for six years, 364 days a year, I know first-hand that at some point, you just run out of steam. Blogs are wonderful innovations. They emphasize the powers of the Net, personality, and instant publishing. Just don't count on them remaining the phenomenon they've been over the past year or so.
Search engine regulation. Search engines are really the main portals (more cynically, chokepoints) of the Web. The power wielded by Google, Yahoo!, Overture, and MSN is astounding. If you don't show up on search engines, you might as well not exist. In a world increasingly dependent on the Web, that's a lot of power. One that won't go unnoticed by government types (or lawyers) forever. At some point, someone's going to file a class action suit, or some legislator whose business got lousy rankings is going to say, "Hey! This isn't fair!" I don't know how attempts at regulation will pan out, but it's inevitable the government will try to get involved.
Convergence... sort of. In media convergence, one plus one won't equal two. Successful convergence media will not take the form of TV over the Web, or the Web on TV. With digital cable in increasingly more homes and multifunctional devices such as cell phone/PDA combos, the trend is to "smush" more functionality into fewer devices. We aren't even close yet, but soon Web features will be combined with TV features to create a medium that acts a little like the Web and TV but looks like neither. Ditto with the cell phone/PDA/camera/GPS combos in our future.
Stay tuned for the next six predictions.
By Sean Carton
Lately, I've had a lot of time to ponder the state of the Internet. It's great to step back, take a big-picture look at what's been going on in the world, and try to imagine where we're going next.
I'm not interested in far-future prognosticating or Fast Company/Wired-type techno-boosterism. But many identifiable trend lines can be followed through to their logical conclusion, especially now that we have seven years' perspective of e-biz. My predictions are based on those trend lines. I truly believe they will happen... eventually. I'm not saying any of this stuff is going to come true next month, or even next year, but it's hard to imagine (barring major catastrophes) these things won't be part of our lives at some time in the future. Besides, we're already halfway through the year. No better time to beat the end-of-the-year prediction rush . So without further ado, my list of 11 things that will happen in the foreseeable future.
Wireless everywhere. Given the choice between a wired tether and wireless freedom, which would you chose? Right now, those who have the opportunity and the resources to get their data wirelessly, are. With an explosion of Wi-Fi access points everywhere, soon anyone with a Wi-Fi card in her laptop will be able to hang out outside the office as long as the batteries hold out. Add to this the rapid development in small fuel cells that allow computers to run for days without a charge, and you've got a recipe for a major revolution in the way we live with computers. Beyond the laptop, phone access is getting better, palmtops and PDAs have wireless access built in, and people (early adopters, at least ) are starting to expect access.
Will this happen next year? Doubtful, but there's no conceivable scenario I can think of in which people, given the choice and the hardware, won't chose to cut Ethernet (and eventually power) cords. What will this mean to marketers? Ubiquitous data access will allow people to be smarter, make more informed decisions, and be all-around tougher customers. Will wireless advertising take off? Maybe some day, in some fashion we haven't thought of yet. For the next two to five years, we'd better expect our customers to have access to our sites, and our competitors', everywhere they go.
E-mail: death of a marketing tool. OK, start the hate mail now. Unless something's done to stop spam, e-mail as a marketing tool will continue to erode in effectiveness until it's untenable as a legitimate tool. Several recent reports say this summer is when spam will outpace legitimate e-mail. Regardless of present or pending legislation, it's only going to get worse. Even if customers want to receive your e-mail, they'll have an increasingly difficult time finding it in the clutter.
For now, the best marketing strategy is to educate customers on setting up filters so your e-mail lands in the folder that gets read. Legitimate marketers who create desired content will continue to reach some of their audiences. Unless spam goes away, no scenario exists for e-mail to get any easier.
Blogout. Blogs have gotten a lot of attention in the past six months. Many of my ClickZ colleagues have written some pretty compelling pieces about blogs' power as a marketing tool, perhaps even replacing the e-mail newsletters. Outside of its utility for marketing, blogging has taken on a life of its own. Millions of registered users blogging away. It's a new publishing medium that wouldn't have been possible without the Internet, and one that's given a meaningful outlet to many folks.
But (you knew there'd be a "but"), it's not going to last forever. As bloggers know, maintaining a blog is a lot of work. Paying people to keep on blogging can cost lots of money. Eventually, many private bloggers will move on to other things. Corporate bloggers will become too busy (or bored) to blog. As someone who ran a proto-blog for six years, 364 days a year, I know first-hand that at some point, you just run out of steam. Blogs are wonderful innovations. They emphasize the powers of the Net, personality, and instant publishing. Just don't count on them remaining the phenomenon they've been over the past year or so.
Search engine regulation. Search engines are really the main portals (more cynically, chokepoints) of the Web. The power wielded by Google, Yahoo!, Overture, and MSN is astounding. If you don't show up on search engines, you might as well not exist. In a world increasingly dependent on the Web, that's a lot of power. One that won't go unnoticed by government types (or lawyers) forever. At some point, someone's going to file a class action suit, or some legislator whose business got lousy rankings is going to say, "Hey! This isn't fair!" I don't know how attempts at regulation will pan out, but it's inevitable the government will try to get involved.
Convergence... sort of. In media convergence, one plus one won't equal two. Successful convergence media will not take the form of TV over the Web, or the Web on TV. With digital cable in increasingly more homes and multifunctional devices such as cell phone/PDA combos, the trend is to "smush" more functionality into fewer devices. We aren't even close yet, but soon Web features will be combined with TV features to create a medium that acts a little like the Web and TV but looks like neither. Ditto with the cell phone/PDA/camera/GPS combos in our future.
Stay tuned for the next six predictions.
Eleven Things That Will Happen, Part 1
By Sean Carton
Lately, I've had a lot of time to ponder the state of the Internet. It's great to step back, take a big-picture look at what's been going on in the world, and try to imagine where we're going next.
I'm not interested in far-future prognosticating or Fast Company/Wired-type techno-boosterism. But many identifiable trend lines can be followed through to their logical conclusion, especially now that we have seven years' perspective of e-biz. My predictions are based on those trend lines. I truly believe they will happen... eventually. I'm not saying any of this stuff is going to come true next month, or even next year, but it's hard to imagine (barring major catastrophes) these things won't be part of our lives at some time in the future. Besides, we're already halfway through the year. No better time to beat the end-of-the-year prediction rush . So without further ado, my list of 11 things that will happen in the foreseeable future.
Wireless everywhere. Given the choice between a wired tether and wireless freedom, which would you chose? Right now, those who have the opportunity and the resources to get their data wirelessly, are. With an explosion of Wi-Fi access points everywhere, soon anyone with a Wi-Fi card in her laptop will be able to hang out outside the office as long as the batteries hold out. Add to this the rapid development in small fuel cells that allow computers to run for days without a charge, and you've got a recipe for a major revolution in the way we live with computers. Beyond the laptop, phone access is getting better, palmtops and PDAs have wireless access built in, and people (early adopters, at least ) are starting to expect access.
Will this happen next year? Doubtful, but there's no conceivable scenario I can think of in which people, given the choice and the hardware, won't chose to cut Ethernet (and eventually power) cords. What will this mean to marketers? Ubiquitous data access will allow people to be smarter, make more informed decisions, and be all-around tougher customers. Will wireless advertising take off? Maybe some day, in some fashion we haven't thought of yet. For the next two to five years, we'd better expect our customers to have access to our sites, and our competitors', everywhere they go.
E-mail: death of a marketing tool. OK, start the hate mail now. Unless something's done to stop spam, e-mail as a marketing tool will continue to erode in effectiveness until it's untenable as a legitimate tool. Several recent reports say this summer is when spam will outpace legitimate e-mail. Regardless of present or pending legislation, it's only going to get worse. Even if customers want to receive your e-mail, they'll have an increasingly difficult time finding it in the clutter.
For now, the best marketing strategy is to educate customers on setting up filters so your e-mail lands in the folder that gets read. Legitimate marketers who create desired content will continue to reach some of their audiences. Unless spam goes away, no scenario exists for e-mail to get any easier.
Blogout. Blogs have gotten a lot of attention in the past six months. Many of my ClickZ colleagues have written some pretty compelling pieces about blogs' power as a marketing tool, perhaps even replacing the e-mail newsletters. Outside of its utility for marketing, blogging has taken on a life of its own. Millions of registered users blogging away. It's a new publishing medium that wouldn't have been possible without the Internet, and one that's given a meaningful outlet to many folks.
But (you knew there'd be a "but"), it's not going to last forever. As bloggers know, maintaining a blog is a lot of work. Paying people to keep on blogging can cost lots of money. Eventually, many private bloggers will move on to other things. Corporate bloggers will become too busy (or bored) to blog. As someone who ran a proto-blog for six years, 364 days a year, I know first-hand that at some point, you just run out of steam. Blogs are wonderful innovations. They emphasize the powers of the Net, personality, and instant publishing. Just don't count on them remaining the phenomenon they've been over the past year or so.
Search engine regulation. Search engines are really the main portals (more cynically, chokepoints) of the Web. The power wielded by Google, Yahoo!, Overture, and MSN is astounding. If you don't show up on search engines, you might as well not exist. In a world increasingly dependent on the Web, that's a lot of power. One that won't go unnoticed by government types (or lawyers) forever. At some point, someone's going to file a class action suit, or some legislator whose business got lousy rankings is going to say, "Hey! This isn't fair!" I don't know how attempts at regulation will pan out, but it's inevitable the government will try to get involved.
Convergence... sort of. In media convergence, one plus one won't equal two. Successful convergence media will not take the form of TV over the Web, or the Web on TV. With digital cable in increasingly more homes and multifunctional devices such as cell phone/PDA combos, the trend is to "smush" more functionality into fewer devices. We aren't even close yet, but soon Web features will be combined with TV features to create a medium that acts a little like the Web and TV but looks like neither. Ditto with the cell phone/PDA/camera/GPS combos in our future.
Stay tuned for the next six predictions.
By Sean Carton
Lately, I've had a lot of time to ponder the state of the Internet. It's great to step back, take a big-picture look at what's been going on in the world, and try to imagine where we're going next.
I'm not interested in far-future prognosticating or Fast Company/Wired-type techno-boosterism. But many identifiable trend lines can be followed through to their logical conclusion, especially now that we have seven years' perspective of e-biz. My predictions are based on those trend lines. I truly believe they will happen... eventually. I'm not saying any of this stuff is going to come true next month, or even next year, but it's hard to imagine (barring major catastrophes) these things won't be part of our lives at some time in the future. Besides, we're already halfway through the year. No better time to beat the end-of-the-year prediction rush . So without further ado, my list of 11 things that will happen in the foreseeable future.
Wireless everywhere. Given the choice between a wired tether and wireless freedom, which would you chose? Right now, those who have the opportunity and the resources to get their data wirelessly, are. With an explosion of Wi-Fi access points everywhere, soon anyone with a Wi-Fi card in her laptop will be able to hang out outside the office as long as the batteries hold out. Add to this the rapid development in small fuel cells that allow computers to run for days without a charge, and you've got a recipe for a major revolution in the way we live with computers. Beyond the laptop, phone access is getting better, palmtops and PDAs have wireless access built in, and people (early adopters, at least ) are starting to expect access.
Will this happen next year? Doubtful, but there's no conceivable scenario I can think of in which people, given the choice and the hardware, won't chose to cut Ethernet (and eventually power) cords. What will this mean to marketers? Ubiquitous data access will allow people to be smarter, make more informed decisions, and be all-around tougher customers. Will wireless advertising take off? Maybe some day, in some fashion we haven't thought of yet. For the next two to five years, we'd better expect our customers to have access to our sites, and our competitors', everywhere they go.
E-mail: death of a marketing tool. OK, start the hate mail now. Unless something's done to stop spam, e-mail as a marketing tool will continue to erode in effectiveness until it's untenable as a legitimate tool. Several recent reports say this summer is when spam will outpace legitimate e-mail. Regardless of present or pending legislation, it's only going to get worse. Even if customers want to receive your e-mail, they'll have an increasingly difficult time finding it in the clutter.
For now, the best marketing strategy is to educate customers on setting up filters so your e-mail lands in the folder that gets read. Legitimate marketers who create desired content will continue to reach some of their audiences. Unless spam goes away, no scenario exists for e-mail to get any easier.
Blogout. Blogs have gotten a lot of attention in the past six months. Many of my ClickZ colleagues have written some pretty compelling pieces about blogs' power as a marketing tool, perhaps even replacing the e-mail newsletters. Outside of its utility for marketing, blogging has taken on a life of its own. Millions of registered users blogging away. It's a new publishing medium that wouldn't have been possible without the Internet, and one that's given a meaningful outlet to many folks.
But (you knew there'd be a "but"), it's not going to last forever. As bloggers know, maintaining a blog is a lot of work. Paying people to keep on blogging can cost lots of money. Eventually, many private bloggers will move on to other things. Corporate bloggers will become too busy (or bored) to blog. As someone who ran a proto-blog for six years, 364 days a year, I know first-hand that at some point, you just run out of steam. Blogs are wonderful innovations. They emphasize the powers of the Net, personality, and instant publishing. Just don't count on them remaining the phenomenon they've been over the past year or so.
Search engine regulation. Search engines are really the main portals (more cynically, chokepoints) of the Web. The power wielded by Google, Yahoo!, Overture, and MSN is astounding. If you don't show up on search engines, you might as well not exist. In a world increasingly dependent on the Web, that's a lot of power. One that won't go unnoticed by government types (or lawyers) forever. At some point, someone's going to file a class action suit, or some legislator whose business got lousy rankings is going to say, "Hey! This isn't fair!" I don't know how attempts at regulation will pan out, but it's inevitable the government will try to get involved.
Convergence... sort of. In media convergence, one plus one won't equal two. Successful convergence media will not take the form of TV over the Web, or the Web on TV. With digital cable in increasingly more homes and multifunctional devices such as cell phone/PDA combos, the trend is to "smush" more functionality into fewer devices. We aren't even close yet, but soon Web features will be combined with TV features to create a medium that acts a little like the Web and TV but looks like neither. Ditto with the cell phone/PDA/camera/GPS combos in our future.
Stay tuned for the next six predictions.
Larger Ad Formats/Units Show Promise
By Joseph Jaffe
This article couldn’t be coming out at a better time, as a slew of new pieces of research speaking to the subject have recently become available to the industry.
But before I dive into some of them, I thought I would take some time to set up this subject, which seems to be in many respects like a piece of gum that has been chewed on for way too long. “Bigger is Better” has been one of the older clichés used to make the case for life after banners, using predominantly skyscrapers and small rectangular units.
Today’s landscape reflects a sea change of formats and units that even resemble offline alternatives, daring to use terms like full screen or half page. We’ve also been witness to expanding and contracting units that morph on demand, at the click or hover of a mouse (try teaching that trick to your old dog).
The bottom line is that the landscape has shifted immeasurably, in part due to the wondrous technologies at our fingertips, but also in part due to good old fashioned creative, marketing and media fundamentals and the best practices application thereof.
Take clutter for example. Old way: multiple competing buttons. New way: one full-screen intro message, one leaderboard with a synchronized skyscraper or one IMU unit on a page with virtually nothing else that would be classified as paid media.
In an environment that is still battling to drive down the number of formats to a sane amount (case in point, the latest Q2 2003 number of ad unit sizes comes in at 10,616 according to the latest DoubleClick Ad Serving trends report), a larger ad size by definition plays an increasing role in terms of reducing the amount of potential distraction.
Larger unit sizes and formats bring a variety of pros to the table. For starters, there are the psychological benefits associated with offering clients a product that exudes quality, relative to its Lilliputian predecessors.
Then there’s the more substantial boon to the creative community, in terms of being able to give the storytelling writers and designers a greater portion of canvas on which to weave their tapestries.
Another important variable is that of message complexity.
“Based on advertiser spending patterns in other media, it shouldn’t be a surprise that the more complex the message an advertiser can create, the more money they will invest in that medium,” states Allie Savarino, SVP of Marketing at Unicast Communications. “It’s obvious by their historical behavior that advertisers do not find banners, buttons, boxes and even fly-by ads to be canvases with enough potential for complexity akin to other media. Online, the messages proven to offer the greatest complexity and creative opportunity, and thus deemed most valuable to advertisers, are those that are large in physical and file size.”
The latest Dynamic Logic research with Nielsen and ESOMAR drives home these points. Relative to their MarketNorms database, large rectangles (336 x 280) and rectangles (180 x 150) outperformed (as an index of composite performance versus the benchmark) the norms at 135% and 129% respectively in terms of effecting brand lift (awareness, association and persuasion). This compared to skyscrapers and leaderboards which came in at 78% and 73%, followed by banners ‘n buttons neck and neck at 52% and 51% respectively.
A couple of conclusions worth sharing here:
The composite numbers are just that…composite. The results tend to vary when compared and contrasted between the various consumer adoption stages (awareness, association and persuasion). The fact that different formats perform differently underpins the importance of being able to map performance back to specific communications objectives. It also demonstrates how stupid we look when we try and evaluate brand messaging against direct-response metrics!
The term “rectangle” is probably a little misleading and not very rich as a descriptor in any event, but the fact that larger rectangles lead the way reminds me of another rectangular medium – the television. Creatives understand communicating in rectangular dimension, be they billboards, spreads or 30-second television spots.
That’s the good. Now here comes the bad and downright ugly.
Ceteris Paribus (all things being equal), if the unit size increases, should the effectiveness match that increase in size? If a page becomes a spread, should the number of leads double? And how does this stack up from a cost perspective in terms of efficiency?
These are some of the questions currently being butchered by several number-obsessed buyers who wholeheartedly subscribe to the “just being we can measure, we should” philosophy.
Luckily, the ESOMAR study comes to the rescue once again:
Based on an exposure of one and using rate card as a benchmark, the study found that the larger units were not only more effective in terms of brand lift, but efficient at effecting that lift as well.
“Overall, larger and newer formats effectively utilize more real estate to communicate and persuade,” says Tom Deierlein, COO of Dynamic Logic. “Our recent work with Nielsen for an ESOMAR study showed that the higher CPMs of the larger formats are justified by returns: the effectiveness is worth additional cost as seen in greater ROI per branding point. The key caveat is that excellent creative is still a major determinant of overall effectiveness for any size.”
Adds Savarino: “All of the research we have seen indicates that there is no point of diminishing return on larger, richer ad units so long as they are delivered (i.e. pre-cached) responsibly and play in a way that is familiar to consumers (i.e. in the transitional space).”
And advertisers are taking note as the DoubleClick chart below suggests:
Larger units are growing not only in pixel size, but in terms of usage as well.
Finally, here is a case example for Snuggle, using the ultimate larger ad format (in terms of usage of available screen pixels), the Full Screen Superstitial.
The Dynamic Logic results revealed exponential lifts in key brand metrics, relative to both MarketNorms and a vertical average for the CPG sector.
The best practice of larger ad formats and sizes is one of those obvious ones that you just know will be completely exploited, mismanaged and abused. Hopefully this article sheds some new light on the subject for those who tend to look a gift horse in the mouth before attaching it to the rear of the cart.
By Joseph Jaffe
This article couldn’t be coming out at a better time, as a slew of new pieces of research speaking to the subject have recently become available to the industry.
But before I dive into some of them, I thought I would take some time to set up this subject, which seems to be in many respects like a piece of gum that has been chewed on for way too long. “Bigger is Better” has been one of the older clichés used to make the case for life after banners, using predominantly skyscrapers and small rectangular units.
Today’s landscape reflects a sea change of formats and units that even resemble offline alternatives, daring to use terms like full screen or half page. We’ve also been witness to expanding and contracting units that morph on demand, at the click or hover of a mouse (try teaching that trick to your old dog).
The bottom line is that the landscape has shifted immeasurably, in part due to the wondrous technologies at our fingertips, but also in part due to good old fashioned creative, marketing and media fundamentals and the best practices application thereof.
Take clutter for example. Old way: multiple competing buttons. New way: one full-screen intro message, one leaderboard with a synchronized skyscraper or one IMU unit on a page with virtually nothing else that would be classified as paid media.
In an environment that is still battling to drive down the number of formats to a sane amount (case in point, the latest Q2 2003 number of ad unit sizes comes in at 10,616 according to the latest DoubleClick Ad Serving trends report), a larger ad size by definition plays an increasing role in terms of reducing the amount of potential distraction.
Larger unit sizes and formats bring a variety of pros to the table. For starters, there are the psychological benefits associated with offering clients a product that exudes quality, relative to its Lilliputian predecessors.
Then there’s the more substantial boon to the creative community, in terms of being able to give the storytelling writers and designers a greater portion of canvas on which to weave their tapestries.
Another important variable is that of message complexity.
“Based on advertiser spending patterns in other media, it shouldn’t be a surprise that the more complex the message an advertiser can create, the more money they will invest in that medium,” states Allie Savarino, SVP of Marketing at Unicast Communications. “It’s obvious by their historical behavior that advertisers do not find banners, buttons, boxes and even fly-by ads to be canvases with enough potential for complexity akin to other media. Online, the messages proven to offer the greatest complexity and creative opportunity, and thus deemed most valuable to advertisers, are those that are large in physical and file size.”
The latest Dynamic Logic research with Nielsen and ESOMAR drives home these points. Relative to their MarketNorms database, large rectangles (336 x 280) and rectangles (180 x 150) outperformed (as an index of composite performance versus the benchmark) the norms at 135% and 129% respectively in terms of effecting brand lift (awareness, association and persuasion). This compared to skyscrapers and leaderboards which came in at 78% and 73%, followed by banners ‘n buttons neck and neck at 52% and 51% respectively.
A couple of conclusions worth sharing here:
The composite numbers are just that…composite. The results tend to vary when compared and contrasted between the various consumer adoption stages (awareness, association and persuasion). The fact that different formats perform differently underpins the importance of being able to map performance back to specific communications objectives. It also demonstrates how stupid we look when we try and evaluate brand messaging against direct-response metrics!
The term “rectangle” is probably a little misleading and not very rich as a descriptor in any event, but the fact that larger rectangles lead the way reminds me of another rectangular medium – the television. Creatives understand communicating in rectangular dimension, be they billboards, spreads or 30-second television spots.
That’s the good. Now here comes the bad and downright ugly.
Ceteris Paribus (all things being equal), if the unit size increases, should the effectiveness match that increase in size? If a page becomes a spread, should the number of leads double? And how does this stack up from a cost perspective in terms of efficiency?
These are some of the questions currently being butchered by several number-obsessed buyers who wholeheartedly subscribe to the “just being we can measure, we should” philosophy.
Luckily, the ESOMAR study comes to the rescue once again:
Based on an exposure of one and using rate card as a benchmark, the study found that the larger units were not only more effective in terms of brand lift, but efficient at effecting that lift as well.
“Overall, larger and newer formats effectively utilize more real estate to communicate and persuade,” says Tom Deierlein, COO of Dynamic Logic. “Our recent work with Nielsen for an ESOMAR study showed that the higher CPMs of the larger formats are justified by returns: the effectiveness is worth additional cost as seen in greater ROI per branding point. The key caveat is that excellent creative is still a major determinant of overall effectiveness for any size.”
Adds Savarino: “All of the research we have seen indicates that there is no point of diminishing return on larger, richer ad units so long as they are delivered (i.e. pre-cached) responsibly and play in a way that is familiar to consumers (i.e. in the transitional space).”
And advertisers are taking note as the DoubleClick chart below suggests:
Larger units are growing not only in pixel size, but in terms of usage as well.
Finally, here is a case example for Snuggle, using the ultimate larger ad format (in terms of usage of available screen pixels), the Full Screen Superstitial.
The Dynamic Logic results revealed exponential lifts in key brand metrics, relative to both MarketNorms and a vertical average for the CPG sector.
The best practice of larger ad formats and sizes is one of those obvious ones that you just know will be completely exploited, mismanaged and abused. Hopefully this article sheds some new light on the subject for those who tend to look a gift horse in the mouth before attaching it to the rear of the cart.
Microsoft considering music store
By Ina Fried and John Borland
REDMOND, Wash.--Microsoft Chairman Bill Gates said his company is exploring ways to develop a music download service similar to Apple Computer's iTunes that would tie into the software giant's multimedia applications.
A Windows Media Player-based digital music store, whether provided by Microsoft itself or by partners, would be a steep hurdle for Apple as it pursues plans to push its own popular iTunes music service into the PC market.
Responding to questions at an analyst meeting here Thursday, Gates indicated that any music store project would be more a matter of providing computer users with added convenience--and presumably, keeping people using Microsoft software--rather than a direct moneymaker.
"It's maybe a feature your platform should offer, but it's not like you're going to make some (big) markup," Gates said.
The online and music communities have been watching closely for a Microsoft response since Apple launched its iTunes music store to widespread approbation in April, promising a Windows version close to the end of the year.
The likely form of that response has been unclear, however. Microsoft has historically focused on producing the underlying multimedia software, rather than producing e-commerce services that would compete directly with the customers for its technology.
Already it has integrated several partners' music subscription services, including FullAudio's MusicNow and Pressplay, into the Windows Media Player. Analysts have said those services, among others, are likely to move toward an Apple-style pay-per-download service in the near future. They or other partners could be the vehicle for Microsoft's plans.
As others rush to match the success of Apple, which sold 5 million songs online in the first two months of store operation, it appears the Windows market will soon be quickly crowded with downloadable music stores.
On Tuesday, Buy.com CEO Scott Blum launched his BuyMusic venture, promising to spend $40 million on advertising the new online music store. Listen.com and RealNetworks are expected to add song sales to their Rhapsody subscription service. Amazon.com also is expected to launch its own service.
Gates indicated that America Online, Yahoo and RealNetworks will likely be competitors to any Media Player-based service.
By Ina Fried and John Borland
REDMOND, Wash.--Microsoft Chairman Bill Gates said his company is exploring ways to develop a music download service similar to Apple Computer's iTunes that would tie into the software giant's multimedia applications.
A Windows Media Player-based digital music store, whether provided by Microsoft itself or by partners, would be a steep hurdle for Apple as it pursues plans to push its own popular iTunes music service into the PC market.
Responding to questions at an analyst meeting here Thursday, Gates indicated that any music store project would be more a matter of providing computer users with added convenience--and presumably, keeping people using Microsoft software--rather than a direct moneymaker.
"It's maybe a feature your platform should offer, but it's not like you're going to make some (big) markup," Gates said.
The online and music communities have been watching closely for a Microsoft response since Apple launched its iTunes music store to widespread approbation in April, promising a Windows version close to the end of the year.
The likely form of that response has been unclear, however. Microsoft has historically focused on producing the underlying multimedia software, rather than producing e-commerce services that would compete directly with the customers for its technology.
Already it has integrated several partners' music subscription services, including FullAudio's MusicNow and Pressplay, into the Windows Media Player. Analysts have said those services, among others, are likely to move toward an Apple-style pay-per-download service in the near future. They or other partners could be the vehicle for Microsoft's plans.
As others rush to match the success of Apple, which sold 5 million songs online in the first two months of store operation, it appears the Windows market will soon be quickly crowded with downloadable music stores.
On Tuesday, Buy.com CEO Scott Blum launched his BuyMusic venture, promising to spend $40 million on advertising the new online music store. Listen.com and RealNetworks are expected to add song sales to their Rhapsody subscription service. Amazon.com also is expected to launch its own service.
Gates indicated that America Online, Yahoo and RealNetworks will likely be competitors to any Media Player-based service.
No Complaints in the Online Ad Biz
Snazzier ads and better technology are luring more marketers to the Web, providing nice, steady growth for DoubleClick and aQuantive
DoubleClick CEO Kevin Ryan says he always seems to get the same reaction whenever he sees old friends: They'll offer a sympathetic handshake and cautiously whisper, "Times must be tough." Well, they were. But after two lean years, life is looking up again for Ryan and the online ad business.
Boosted by renewed advertiser and agency demand for DoubleClick's ad-serving technology, its fortunes are on the mend. "My human resources manager is pleading to hire more in-house recruiters because we can't fill all the open positions fast enough," says Ryan. "It reminds me a little of 1999. It's not the same scale, but times are good in a manageable way."
Manageable growth is just what DoubleClick (DCLK ) and its competitors aQuantive (AQNT ) and ValueClick (VCLK ) treasure these days. In its short history, the online ad biz has lurched from feast (1997 to 1999) to famine (2000 to 2002). Late last year, the industry started to pick up again. But the majority of new online ad dollars were directed toward paid search links, a market dominated by Overture (OVER ), recently acquired by Yahoo! (YHOO ), and Google (see BW Online, 7/15/03, "Why Google Should Be Worried").
YEARS OF GROWTH. Now, the old guard of the online ad biz may finally be getting its share. Research firm eMarketer projects that online ad spending will reach $6.3 billion in 2003, a 4.8% rise over 2002 and its first year-over-year increase since the dot-com heyday. Even better, the market is expected to continue to grow steadily through 2006 when spending will reach $8.1 billion, according to eMarketer.
DoubleClick's and aQuantive's earnings, announced this week, mirror the industry's steady rise: DoubleClick's revenues rose 5% sequentially, to $63.6 million -- though they were down 16% over a year ago due to divestitures in the business. AQuantive's second-quarter revenue hit $52.0 million, a 71% jump over the same period a year ago. Net income for aQuantive totaled $2.4 million, compared to a net loss for the year-ago second quarter of $1.8 million.
DoubleClick's shares rose 11%, from $10.19 to $11.38, on its earnings news and remains in the $11 range. aQuantive's stock shot up 22%, from $7.90 to $9.67, and closed at $10.75 on July 24. "We believe we're leading indicator of what will happen in the online ad space," says aQuantive president and CEO Brian McAndrews. "I don't think there will be a big hockey stick. Instead we'll see a gradual rise."
AGENCIES LOG ON. That gradual climb should be driven by several trends. First, a larger number of advertisers are shifting dollars to the online medium. In the fourth quarter, 286 of the 500 largest U.S. companies were spending money online, according to a January, 2003, report from research firm AdRelevance, up from 270 a year earlier. The reason: Big advertisers, including McDonalds (MCD ), Estee Lauder (EL ), and General Motors (GM ), are beginning to use the Net for traditional branding campaigns, not just a direct-marketing vehicle.
According to DoubleClick's own ad-serving report, which extracts trends from the 150 billion ads served this quarter, click-throughs, which measure when a computer user clicks on an ad, are being deemphasized. Instead, advertisers are focusing on -- and improving -- "view-through" rates, which assess whether the consumer took any action within 30 days of viewing an online ad. The average view-through rate in the second quarter was 0.63%, vs. 0.52% for click-throughs.
As the big advertisers move dollars online, ad agencies, too, are beginning to embrace the Net. Revenues from DoubleClick's ad-serving technology for agencies and advertisers jumped 22% last quarter compared to the previous quarter, and 12% year-over-year. Compare that to the numbers generated by the technology it sells to publishers -- its original business -- which saw revenues skid 2% last quarter and 18% year over year. aQuantive, which owns rival ad-serving technology called Atlas DMT, says it added 12 new customers -- primarily ad agencies.
ATTENTION TRACKER. Finally, the effectiveness of rich-media ads has put a sparkle in marketers' eyes. Though paid search links are still the most effective way to lure customers, advertisers are having increasing success with large-format animated ads, dynamic pitches that fly across Web pages, and pop-ups. According to research firm Dynamic Logic, rich-media ads are generally twice as effective as traditional banner campaigns in lifting brand awareness.
To take advantage of rich media, advertisers need technology from DoubleClick, aQuantive, and others. So, both have released new versions of their ad-serving software in mid-July that makes it easier for agencies to roll out rich-media ads and track their effectiveness.
aQuantive's new release allows agencies to track how long a user is exposed to each rich-media ad -- the equivalent of knowing that a TV viewer watched an ad for 15, 30, or 60 seconds. Atlas DMT President Tom Sperry says the technology will help agencies design better creative campaigns that fit the attention span of their viewers. It will also allow media buyers to compare how much exposure their ads get on various Web sites, as well as the different sections of each Web site. According to DoubleClick, the number of rich-media ads nearly doubled, from 17.3% of all ads in the first quarter to 31.7% in the second.
FEW BUYS. It's this kind of "manageable" growth that helps DoubleClick's Ryan sleep soundly at night. But should investors be tempted by the stocks? Unfortunately, that opportunity may already be lost. DoubleClick shares are up 46% since Mar. 31, while aQuantive's have skyrocketed more than 120% in the same period. No wonder Wall Street analysts remain cautious. According to Thomson Financial FirstCall, a consensus of 11 analysts rate DoubleClick a hold. Only two analysts cover aQuantive -- one rates it a strong buy, the other a hold.
Still, after a two-year depression, the online ad guys can't complain. For the first time in their history, company CEOs -- and their investors -- are pleased to see slow and steady growth. It sure beats getting consoled about how rough times must be.
Snazzier ads and better technology are luring more marketers to the Web, providing nice, steady growth for DoubleClick and aQuantive
DoubleClick CEO Kevin Ryan says he always seems to get the same reaction whenever he sees old friends: They'll offer a sympathetic handshake and cautiously whisper, "Times must be tough." Well, they were. But after two lean years, life is looking up again for Ryan and the online ad business.
Boosted by renewed advertiser and agency demand for DoubleClick's ad-serving technology, its fortunes are on the mend. "My human resources manager is pleading to hire more in-house recruiters because we can't fill all the open positions fast enough," says Ryan. "It reminds me a little of 1999. It's not the same scale, but times are good in a manageable way."
Manageable growth is just what DoubleClick (DCLK ) and its competitors aQuantive (AQNT ) and ValueClick (VCLK ) treasure these days. In its short history, the online ad biz has lurched from feast (1997 to 1999) to famine (2000 to 2002). Late last year, the industry started to pick up again. But the majority of new online ad dollars were directed toward paid search links, a market dominated by Overture (OVER ), recently acquired by Yahoo! (YHOO ), and Google (see BW Online, 7/15/03, "Why Google Should Be Worried").
YEARS OF GROWTH. Now, the old guard of the online ad biz may finally be getting its share. Research firm eMarketer projects that online ad spending will reach $6.3 billion in 2003, a 4.8% rise over 2002 and its first year-over-year increase since the dot-com heyday. Even better, the market is expected to continue to grow steadily through 2006 when spending will reach $8.1 billion, according to eMarketer.
DoubleClick's and aQuantive's earnings, announced this week, mirror the industry's steady rise: DoubleClick's revenues rose 5% sequentially, to $63.6 million -- though they were down 16% over a year ago due to divestitures in the business. AQuantive's second-quarter revenue hit $52.0 million, a 71% jump over the same period a year ago. Net income for aQuantive totaled $2.4 million, compared to a net loss for the year-ago second quarter of $1.8 million.
DoubleClick's shares rose 11%, from $10.19 to $11.38, on its earnings news and remains in the $11 range. aQuantive's stock shot up 22%, from $7.90 to $9.67, and closed at $10.75 on July 24. "We believe we're leading indicator of what will happen in the online ad space," says aQuantive president and CEO Brian McAndrews. "I don't think there will be a big hockey stick. Instead we'll see a gradual rise."
AGENCIES LOG ON. That gradual climb should be driven by several trends. First, a larger number of advertisers are shifting dollars to the online medium. In the fourth quarter, 286 of the 500 largest U.S. companies were spending money online, according to a January, 2003, report from research firm AdRelevance, up from 270 a year earlier. The reason: Big advertisers, including McDonalds (MCD ), Estee Lauder (EL ), and General Motors (GM ), are beginning to use the Net for traditional branding campaigns, not just a direct-marketing vehicle.
According to DoubleClick's own ad-serving report, which extracts trends from the 150 billion ads served this quarter, click-throughs, which measure when a computer user clicks on an ad, are being deemphasized. Instead, advertisers are focusing on -- and improving -- "view-through" rates, which assess whether the consumer took any action within 30 days of viewing an online ad. The average view-through rate in the second quarter was 0.63%, vs. 0.52% for click-throughs.
As the big advertisers move dollars online, ad agencies, too, are beginning to embrace the Net. Revenues from DoubleClick's ad-serving technology for agencies and advertisers jumped 22% last quarter compared to the previous quarter, and 12% year-over-year. Compare that to the numbers generated by the technology it sells to publishers -- its original business -- which saw revenues skid 2% last quarter and 18% year over year. aQuantive, which owns rival ad-serving technology called Atlas DMT, says it added 12 new customers -- primarily ad agencies.
ATTENTION TRACKER. Finally, the effectiveness of rich-media ads has put a sparkle in marketers' eyes. Though paid search links are still the most effective way to lure customers, advertisers are having increasing success with large-format animated ads, dynamic pitches that fly across Web pages, and pop-ups. According to research firm Dynamic Logic, rich-media ads are generally twice as effective as traditional banner campaigns in lifting brand awareness.
To take advantage of rich media, advertisers need technology from DoubleClick, aQuantive, and others. So, both have released new versions of their ad-serving software in mid-July that makes it easier for agencies to roll out rich-media ads and track their effectiveness.
aQuantive's new release allows agencies to track how long a user is exposed to each rich-media ad -- the equivalent of knowing that a TV viewer watched an ad for 15, 30, or 60 seconds. Atlas DMT President Tom Sperry says the technology will help agencies design better creative campaigns that fit the attention span of their viewers. It will also allow media buyers to compare how much exposure their ads get on various Web sites, as well as the different sections of each Web site. According to DoubleClick, the number of rich-media ads nearly doubled, from 17.3% of all ads in the first quarter to 31.7% in the second.
FEW BUYS. It's this kind of "manageable" growth that helps DoubleClick's Ryan sleep soundly at night. But should investors be tempted by the stocks? Unfortunately, that opportunity may already be lost. DoubleClick shares are up 46% since Mar. 31, while aQuantive's have skyrocketed more than 120% in the same period. No wonder Wall Street analysts remain cautious. According to Thomson Financial FirstCall, a consensus of 11 analysts rate DoubleClick a hold. Only two analysts cover aQuantive -- one rates it a strong buy, the other a hold.
Still, after a two-year depression, the online ad guys can't complain. For the first time in their history, company CEOs -- and their investors -- are pleased to see slow and steady growth. It sure beats getting consoled about how rough times must be.
