Dot-coms shifting to online ads

More dot-coms put marketing budget in online ads Web ads are easier to track, more focused, less costly

By Michael McCarthy USA TODAY

NEW YORK — Dot-com advertisers are beating a hasty retreat toward the safety of cyberspace.

As the dot-carnage of dying Web firms piles up, survivors are shifting from big bucks television and print advertising to cheaper online ads.

Dot-com advertisers outnumber “traditional” marketers on the Web by two to one, says a recent report by Web ad tracker AdRelevance, a unit of Media Metrix that tracks Internet ads.

Dot-coms made up 68% of the Top 200 in June 2000, up from 54% in July 1999, and accounted for 77% of ad impressions in June vs. 64% in July 1999.

“Dot-coms are spending more and more money in the online medium,” says Marc Ryan, director of media research for AdRelevance.

That shift to cheaper online alternatives makes sense, says Charlie Buchwalter, vice president of media research.

“Online is their market,” he says. “It’s where they come from. It’s what they understand.”

Driving the U-turn is more than cost. Online ads are more targeted, and results more easily tracked. Profitability (or at least the prospect of it) is what is being demanded now by the venture capitalists who freely bankrolled 1999’s dot-com ad spree: $3.1 billion poured into the coffers of off-line media and ad agencies in a quest for brand recognition.

“The dot-coms don’t have open checkbooks from VCs anymore,” says Jim Nail, senior analyst at Forrester Research.

A survey of 66 e-tailers by The Boston Consulting Group and trade group found the share of their ad budgets devoted to online advertising “increased sharply” to 59% in the second quarter from 49% in the first. The amount spent to acquire each customer fell to an average of $40 in the second quarter from a peak of $71 in the final quarter of 1999.

“Given the tighter capital markets, online retailers are being more focused in their approach to marketing as they strive to acquire and retain customers,” says James Vogtle, director of e-commerce research at Boston Consulting.

Even many of the starstruck dot-coms that shelled out more than $2 million apiece for 30 seconds of fame during Super Bowl XXXIV in January are on board with the new austerity.

Among them:

* The online recruiter is shifting from “mass to more targeted communications,” says Ken Pierce, chief marketing officer. Translation: Goodbye TV, hello online.

Will buy ads in big TV events such as the Super Bowl again? “Doubtful,” says Pierce. “We viewed it as a one-time event.”

* Agillion: This business-to-business company bought Super Bowl commercial time in 10 major markets. Now, CEO Steve Papermaster says, “Our marketing and advertising will shift to become as targeted and pinpointed as it can possibly be.”

* LifeMinders: The e-mail marketer paid $2 million-plus to run the self-described “worst commercial” on the Super Bowl. Now it has dropped the dot-com from its official name and put all of its ad budget online, says Melissa Radin, vice president of marketing.

Dot-com advertisers “won’t play much of a role” in such TV events as the Olympics and the upcoming Super Bowl, says Buchwalter. Only the biggest and most financially stable (that is, profitable) dot-coms, such as and E-Trade, have signed up for Super Bowl XXXV.

Observers say the advertising industry, while taking a hit from reduced dot-com spending, remains healthy, as traditional advertisers continue to spend big in a robust economy.

Says Nail: “They may have to cut back on the caviar at holiday parties. But the ad business is still doing quite well.”