Some Advertisers Lament Google's Dominance

Business Week

Google Inc.'s Internet dominance is a concern to advertising firms, because it could limit the choices they can offer clients online, said Bob Lord, the head of Publicis Groupe SA's Razorfish agency.

"People don't want Google to become Kleenex," said Lord, the chief executive officer at Razorfish, which Publicis acquired from Google rival Microsoft Corp. this year. Microsoft took a 3.3 percent stake in Publicis as part of that deal. "I don't want one big giant here. If I only have one major platform to go to like Google, it's hard for me to do my job."

Google, which already leads the market for search advertising, is now gaining customers for display ads—an area where Microsoft and Yahoo! Inc. have had an edge. Google also is bolstering its mobile-ad business. Even so, Microsoft's new Bing search engine is letting the company "give Google a run for their money," Lord said.

The total market for Internet ads is showing signs of recovering from the recession, when Razorfish clients such as Starwood Hotels & Resorts Worldwide Inc. and Capital One Financial Corp. curbed spending, Lord said.

"I don't know if it is a full recovery, but I see my advertisers planning out the whole year," he said. "People are feeling more stable. That is giving me hope and making me more bullish."
Nothing for Granted

Adam Kovacevich, a spokesman for Mountain View, California-based Google, said the ad market remains highly competitive.

"We don't take anything for granted, since new players are emerging all the time," he said. Google also has a great relationship with Razorfish and works closely with the company, Kovacevich said.

Google announced plans last month to acquire AdMob Inc., paying $750 million for the mobile-phone advertising startup. The U.S. Federal Trade Commission is now reviewing that deal, The Wall Street Journal reported this week, citing unidentified people familiar with the matter. Last year, Google backed out of a proposed advertising partnership with Yahoo, after the Justice Department raised antitrust concerns.

Publicis, the fourth-largest network of ad agencies, acquired Seattle-based Razorfish in October for about $556 million in cash and stock.
Increasing Share

Microsoft has gained about 2 percentage points of the U.S. Internet-search market share since Bing debuted in June, according to research firm ComScore Inc. That's increasing the amount of listings that clients want to buy on Bing, Lord said.

Microsoft, No. 3 in the U.S. search market, accounted for 9.9 of queries in October, compared with 65.4 percent for Google, according to Reston, Virginia-based ComScore. Yahoo ranked second with 18.8 percent.

Microsoft has tweaked its Internet-search strategy, shifting from bigger, less frequent upgrades to a steady stream of improvements, Lord said. That, along with a July deal to combine search efforts with Yahoo, has kept Bing in the mind of advertisers, he said.

"The industry was sort of surprised that Microsoft launched Bing the way they did and got such a reaction," he said. "Everyone stepped back and said, 'There is another alternative here.'"

Still, Google has good software for managing campaigns and tracking whether ads are effective, Lord said. The company's effort to sell more graphical ads also is bearing fruit, he said. Customers seem to be increasing the percentage of display-ad budgets spent with Google as well as focusing on Google SEO, Lord said. He said he wasn't able to provide specifics because Razorfish is still crunching its own numbers.

Google rose $2.48 to $591.50 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 92 percent this year. Paris-based Publicis, up 49 percent this year, was little changed at €27.32 in French trading today.

In the coming year, Lord expects customers to gravitate to social-media advertising on Facebook Inc. and Twitter Inc. The two sites still need to figure out what advertising business models allow them to make enough money, he said.

Rallying Cry for Display Ads

Microsoft, Others Say Online Banners Trump Search Ads

Display ads have fallen on hard times. The graphic ads that border a Web page are among the slowest-growing formats in the online-ad marketplace, and they are seen by many marketers as stodgy and ineffective.

But some ad-technology and Web-measurement companies are trying to engineer a comeback for display ads, offering data that they say show display advertising is more effective than marketers think. Microsoft is the latest company to make this declaration, with new evidence coming next week that it says proves display ads are actually better than searches at triggering consumers.

Microsoft is the latest company to make a case that online display ads are ripe for a comeback, claiming new data proves that they are more effective than search ads.

Companies like Microsoft have a financial interest in pushing online ad formats besides searches. Google has what would appear to be an insurmountable lead in the search business, the biggest online-ad medium. Meanwhile, Microsoft, Yahoo and Time Warner's AOL have invested billions of dollars in new display-advertising technology hoping to lure advertisers that have poured money into search ads.

Still, there is a burgeoning debate about whether display ads have been overlooked amid the euphoria over searches. "Obviously, Microsoft has a motive to shift dollars from search to display advertising because it is getting creamed in the search space," says Ben Winkler, a director of interactive media at the Martin Agency, a unit of Interpublic Group. "But this does help us get a much better picture of how our online advertising is working."

The debate revolves around what leads consumers to take actions on the Web: buying something, printing a coupon or visiting a Web site. Up to now, most advertisers judged the effectiveness of an ad campaign by what consumers did after they clicked on the ad. But some marketers say they are now using research not only from Microsoft, but also independent Web-measurement firms like comScore and Omniture, to figure out what happens before people click on ads -- even in situations where they don't end up actually clicking on the ads.

The major conclusion of this research: By the time consumers search for a product or service, they've often already made up their minds to buy it. And display ads are often an important factor in their reaching that conclusion.

Part of the reason display has fallen out of favor is that it's been hard to prove that the ads work. Skeptics point to low click-through rates -- a fraction of a percent, at best -- and scientists have coined the term "banner blindness" to refer to the way Web surfers ignore display ads.

Nielsen Online on Thursday reported a 6% year-over-year decrease in display advertising during the first half of 2008, including a 27% decline in spending by financial-services companies. Meanwhile, spending on so-called rich-media ads increased 60% overall in the first half of the year, and overall online ad spending -- including search-ad dollars -- increased 11% during the first half of the year, Nielsen says.

ComScore and Omniture work with dozens of marketers to find out which pages customers visit before landing on an advertiser's site. That research shows that the full impact of display advertising isn't always taken into account, says comScore analyst Andrew Lipsman.

Microsoft's research comes from the Atlas Institute, the research arm of its ad-serving unit Atlas, and was started more than two years ago before it was acquired by Microsoft. It has looked at the various components of a marketer's ad spending to see the relative effectiveness of each. (Microsoft sells both search and display ads, but the latter is a much bigger piece of its business.) Atlas's latest round of research was a month-long study of ad campaigns from 500 marketers appearing on 1,000 sites.

One limitation with the research, according to marketers, is that it only takes into account ads that run on Atlas, which is usually a subset of any marketer's total ad spending.

Earlier this year, Atlas conducted a study with Alltel Wireless that it says showed people who were exposed to both search and display ads were 56% more likely to purchase an Alltel phone or wireless plan than those who clicked only on a search term without any exposure to its display ads.

Some digital-ad executives say the new research won't change their trust in searches, but it may help them persuade more marketers to move from traditional advertising to online. "Search is still just as powerful. But things like display that looked really bad before aren't as bad. Now we can prove it," says Jennifer Zola, partner and director of strategy and insights at WPP Group's Mediaedge:cia.

Microsoft plans to use its research as a sales pitch to get more publishers and advertisers to use its ad technologies.

By: Emily Steel
Wall Street Journal; September 19, 2008

Newspaper Inserts Trending Down

Advertisers Not Using As Many Print Inserts

Newspaper Industry experts cite several reasons for a recent slowdown in the retail insert marketplace, among them declining news paper circulations, rising paper and ship ping costs, as well as advertisers' desire to reach younger, text-savvy consumers. Several printers and at least one media company, however, have introduced data-intensive programs designed to convince retailers of the power of print.

“We see a decline in inserts year-over-year, of between 12% to 20% industry wide,” reports a marketing director at Quebecor World Market ing Solutions Group.

Printers point to a decrease in pages as the cause. “Retailers are increasing insert page counts for key events like Christmas, Thanksgiving, Mother's Day and Father's Day while decreasing pages for other, less key, events,”. Costly gate-folds are also used less often. Newspapers in general are no longer delivering Return on Investment for Advertisers.

“The newspaper home sub scriber has always been one of the retailer's most valued consumers, and advertisers are beginning to walk away from newspaper and insert advertising efforts,” reports a top sales officer at Valassis Communications Livonia Michigan.

There are a few positive signs remaining for Hypermarket Meijer is taking in 10 times the number of paper coupons that it did last year, accord ing to Valassis. “Cash register returns drive circular and preprint behavior.

Targeted marketing, a direct marketing strategy, using demographics, minority demographics are all being applied to retail inserts more often to drive relevance.

Tribune Company, which publishes 10 daily newspapers, has started rolling out a program called PrePrint Optimization. It pairs client customer data with subscriber data to target where and how advertisers can effectively reach consumers.

“We know we're in the age of account ability and that this was a key component missing from newspaper advertising,” says an advertising director for major accounts at The Chicago Tribune, of the Tribune Newspaper's data-oriented market segmentation advertis ing programs. Linking Tribune newspaper household demographic data bases with their own customer databases, advertisers can insure they are get ting the best return on investment from print insert efforts.

PrePrint Optimiza tion is too new for results. Tribune Company said retail advertising revenues were down 26% for the second quarter; preprint revenues dipped 19%.

Sometimes analytics show the best medium for an advertiser to be one of Tribune's non-subscriber publica tions or its shared mail program. By ensur ing that advertisements are more targeted, Tribune hopes to increase the relevance of ads for consumers and advertisers.

“Advertisers test different methods to reach consumers to see what works best,”says a sales manager for Direct Delivery+ at Tribune Media Net, Tribune Company's national sales arm. While no “silver bullet” may exist, “by no means are we sitting back on our laurels, we have to get aggressive to counter internet marketing and the power of Google."

Retail insert printers Quebecor World, Vertis and Valassis have each introduced strategies for print advertising by crunch ing available data. The goal is to assist retailers to effectively reach their audi ence through such vehicles as shared mail, targeted direct mail, in-store on-demand coupons and other print solutions.

Advertising Opportunities are there for retailers to reach consumers via print, offered a SVP of sales at Vertis. “Free-standing inserts are one way to convey a print message. It needs to be part of the total media mix.

By its cross-selling initiatives, Valassis shifted $7.3 million in newspaper preprint business to shared mail in the first half of 2008, giving advertisers a way to reach non newspaper-reading households (not reported is the breach of privacy used to identify and list non-newspaper households.

This month, Quebecor World will launch Store.driver, a new direct-mail piece — designed to drive people into retail stores — that can be printed in-line with a map, paper gift card and fragrance strip.

All of these untested, new print advertising programs appear as desperate efforts by the print and newspaper community to combat the shirt of advertising dollars migrating to online marketing programs.

Web Start-Ups Seek New Ways to Click

Social, Video Sites Duck Some Old-Style Pitches And Go for Interactivity

As concerns mount that the slowing economy may hurt the online-ad market, Silicon Valley Web start-ups are developing new approaches. Companies such as online-software venture Slide and video and social-networking site Bebo are trying to run ads that appeal to a younger audience -- one that often turns up its nose at old-fashioned online ads, such as traditional "banners" trying to promote brands.

When a user clicks on a small version of this ad on Meebo, it expands and plays a snippet from the television show "Dexter". That footage also can be shared with friends.

Worries about a slowdown in Internet ad growth have added urgency to the push for advertising models that can reach this audience more effectively. Consumers are flocking to social-networking sites like Facebook and Meebo, but many still aren't clicking on the ads that such companies are banking on to generate revenue. Start-ups that have raised cash from venture capitalists but haven't produced much revenue yet -- let alone profit -- are hurrying to develop ads that are more interactive.

Some efforts show early signs of working. Slide, which sells programs that people can use to decorate their pages on sites such as Facebook, has launched campaigns with advertisers including Energy Brands' Glaceau Vitaminwater and Estée Lauder.

One campaign lets Slide users send virtual representations of different-flavored bottles of Vitaminwater to friends online through an application called "Top Friends." In eight days, Slide says, users sent 10 million "bottles" of Vitaminwater.

Meebo, which offers instant messaging and chat rooms, announced last week that it had raised $25 million in financing. To generate more revenue, the company will start selling ads this quarter that users can forward to friends or even shut off, unlike traditional ads that stay on the computer screen. Some spots may contain movie trailers or computer games, which can be enlarged on screen and shared with friends.

The new Meebo ads can also be used to customize a user's Meebo page -- by substituting a photo of a movie star or a new CD cover for one's own "buddy icon" on the site, for instance. The company says that in trials, the spots have had much higher "click-through" rates -- the percentage of users who see the ad who actually click on it -- than traditional, more-static display ads.

For social sites like Meebo, "it's very clear that regular display ads are not the answer" to making money, says Martin Green, Meebo's vice president for business. Users accustomed to interactive content online -- chatting with friends, or sharing photos on Google's YouTube -- will respond better to more interactive ads, Mr. Green says.

Social-networking sites have to work harder than Web-search sites to make money from advertising. Unlike people visiting a Google or Yahoo search page, users of social-networking sites aren't there to seek out other sites or to buy things, which might make them more receptive to ads. And because many of these people construct elaborate personal home pages on sites like Facebook and News Corp.'s MySpace, they may not want ads encroaching on their space. At the same time, some marketers have been hesitant to advertise alongside unpredictable or racy content posted by users.

The economy isn't helping. Though online advertising has been growing rapidly over the last few years, some investors predict growth will slow as big companies start cutting their ad budgets in the face of a possible recession.

Jim Breyer, a venture capitalist with Accel Partners, which backed Facebook, said he would be "absolutely shocked" if some of the companies he's funded don't see slower growth in online-ad revenue soon. "Companies that aren't experimenting will be left far behind," he says.

Slide is also worried about how advertisers will respond to the likely recession; it also faces the obstacle of competing with huge sites like Google and Yahoo for ad business. As well as testing more-creative touches like the Vitaminwater ad, it is trying to come up with other ways to make money from customers, such as subscription fees.

Bebo, which Time Warner's AOL recently agreed to purchase, is also trying out new ad models, including more-sophisticated product placements inside video dramas running on the site, such as the popular series "KateModern." MySpace and Facebook are trying to tailor ads to people based on interests they highlight in their online profiles; someone who expresses an interest in cars might see an ad from Toyota Motor, for instance.

Other Web start-ups are using video-ad technology developed by fellow start-up VideoEgg. To promote its Office products, Microsoft has tested new VideoEgg technology that places ads containing videos or online games on a network of social-media and gaming sites. It says it is pleased with the results.

Not all these efforts work. Facebook stumbled badly last year when it introduced a program called Beacon, which allowed users to track their friends' activities on other Web sites. The service, which was designed partly to highlight brands and products that Facebook users were buying, was criticized as too intrusive, and Facebook Chief Executive Mark Zuckerberg later publicly apologized for problems the new system had caused.

By: Rebecca Buckman and Emily Steel
Wall Street Journal; May 5, 2008

Cox Invests In Web Future With Adify Acquisition

Media conglomerate Cox Enterprises Inc., betting its future on Internet advertising as newspaper and television audiences shrink, plans to spend $300 million to buy a start-up that helps Web sites pool their ad space. The all-cash deal with Adify Corp. is set to be announced Tuesday. With Adify, Cox gets a technology platform that can help Web sites more successfully sell higher-priced ads targeted to specific audiences, such as travel enthusiasts.

By: Associated Press
Wall Street Journal; April 2008

CBS TV Stations Start Up An Online Ad Network

Television stations owned by CBS Corp. are launching an online advertising initiative with local bloggers and social media sites, the company announced. The ad network will involve CBS-owned TV stations generating online modules called “widgets” which individuals can easily add to their Web sites. The widgets will contain local news as well as advertising, which the CBS stations will sell. The online partners will receive a share of the revenue, but specific financial details weren’t disclosed.

- Associated Press