Ads A Growing (And Risky) Proposition For Dotcoms

http://www.internetwk.com:80/columns/rash120699.htm

WAYNE RASH

The cars weren’t moving at all, and I had no idea when I’d be going anywhere. So I settled back to listen to the radio, which was my only option since I’d forgotten to fill the CD changer that day.

One commercial followed another in a seemingly endless stream. Then I realized something: It was beginning to sound as if every ad was about the Internet.

I heard commercials for Yahoo, Alta Vista, Amazon and Barnes & Noble. And ads for Web sites that sell toys, computers and cars. Eventually, when the traffic relented, I made it home and turned on the television. More Web site ads. It seems like the main beneficiary of the e-commerce explosion is traditional print and broadcast media. Why isn’t advertising on the Internet good enough?, I wondered.

Then I realized the point: These ads aren’t so much designed to attract users currently online as they are to attract people who don’t use the Internet. If the only place you put ads is on the Web, the only people you’ll attract are those already there.

These ads also are aimed at catching regular Internet users at times they’re not normally online. Like many drivers, I spend a lot of time in my car doing nothing (but driving). If a Web site ad is played often enough during this time, I’ll remember it well enough to go look it up when I get home. Same goes for TV advertising. Clearly, I’m not the only person who reacts this way, because ads for Web sites are nearly ubiquitous.

So, does this mean that Internet advertising doesn’t work on the Internet? Well, no. Properly designed ads on the Web can be very effective, since they offer great convenience by making you aware of a product or service, and give you access to it with a single click. Problem is, really big e-commerce sites need a lot of traffic to make money, so they’ve got to do more than just compete for space on other Web sites. Instead, they need to get the attention of Internet users wherever they are and help create a few more Internet users in the process.

To accomplish this, these Internet companies are spending millions of dollars on advertising. In some cases, large portions of these companies’ start-up funding (and sometimes sums exceeding their annual revenue) go to ads instead of development. How bad can it get? At least a dozen “dotcoms” reportedly plan to advertise on the Super Bowl telecast next month, spending more than $2 million per 30-second commercial.

While all of this Web advertising on the radio and TV and in the newspaper is helping the Internet grow–if only because it makes the Internet seem like everyone is using it–the cost puts a terrible burden on these companies and places them in a very risky position indeed.

Can these companies absorb these costs and stay in business? Only if these ads generate enough business to offset their cost. If these companies guess wrong, they could be out of business.

If you do business with one of the Super Bowl dotcoms, you might want to pay attention to their financial status afterward and be prepared for some tough questions. Traditional media can be very expensive. Can these Internet companies afford all of this advertising? And for how long?

Wayne Rash is managing editor/technology at InternetWeek. He can be reached at [email protected] and [email protected].