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AFTER THE YEAR OF THE WEB AS CLIENTS CHART '96 BUDGET, HOW MUCH IS IN NEW MEDIA KITTY?
(Adweek / National - 1,940 words - January 15 1996)
By CATHY TAYLOR In September 1994, a marketing executive at Federal Express noticed
something of great potential business use emerg-ing in the highly speculative interactive
media frontier.
It was called the World Wide Web, a multimedia subset of the Internet that had yet to make
the leap from the technological fringe to its current place as bold, sexy and exhaustively
promoted media darling.
'Why don't we build a Web site?' mused the executive, FedEx's manager of electronic
commerce, Robert Hamilton. But much to his surprise, the technologically forward company
already had one, a grass-roots effort set up almost as a plaything by Internet-happy
employees in the FedEx information technology division. By the end of 1994, Hamilton had
given the site a clear marketing focus and FedEx began to build an interactive budget
alongside its $42 million in traditional ad spending.
Those who log on to the site today will encounter a slick black, orange and purple venue,
recently pumped with even more eye-popping graphics. But the site also offers a service no
30-second TV commercial can deliver. While BBDO has spent hundreds of thousands of
production dollars on a ubiquitous TV campaign to advertise FedEx's shipping and tracking
software, the Web site, designed by Online Focus in Los Gatos, Calif., is serving as a
distribution point, allowing surfing consumers and businesses to download FedEx software.
With the close of 1995, which could very well be called The Year of the Web, more and more
advertisers are either building sites or, like FedEx, turning interactive media into an
enterprise that dovetails neatly with other marketing programs and is a permanent budget
fixture.
The swiftness of the transformation has stunned even those who saw the Web's marketing
potential as early as Hamilton did. Now, although the marketers themselves are loath to
divulge their interactive plans, industry sources are whispering 1996 billings numbers in
seven figures for site promotion; the Web sites alone may run six figures to produce or
enhance. Anheuser-Busch may have paid as much as $600,000 just to create its recently
unveiled budweiser.com site, developed by New York new media whiz On Ramp.
Sources say that Procter & Gamble may spend as much as $7-8 million to promote a group
of Web sites to be launched this year. IBM, in trying to define its role as a force to be
reckoned with on the Net, could spend as much as $5 million to buy advertising banners on
other Web sites linked to its venues, insiders claim. IBM's sites are being developed by a
coterie of traditional and specialist agencies.
And as part of its efforts to maximize the potential of a recently announced joint site
with Sony, Visa could spend $5-6 million on the Web to get visitors to the site. The duo's
development partner is Silicon Valley hot shop CKS Group.
Consider that a little more than a year ago, when marketers were budgeting for 1995, the
hot news in interactive marketing appeared to be interactive TV, CD-ROMs and marketing
areas on America Online, none of which stimulated a tidal wave of interest or, in the
final analysis, required much cash. Even the marketers who had coughed up $200,000 for ads
on Time Warner's Full Service Network in Orlando had, in large part, been refunded because
of setbacks in the service, launched with a whimper in just five homes in December 1994.
Despite the hype, even companies with interactive budgets did not have many options for
spending money on interactive marketing to reach a mass audience.
Then came the Web. Exceeding even a hard-core techie's expectations, it made interactivity
tangible and gave the marketing world somewhere to invest, as if the Web were as easy to
understand as a hot new magazine or a cable network. So what if its rapid ascendancy as a
medium belied the fact that its primitive graphics remained notoriously slow to download.
The Web made marketing money materialize out of nowhere in 1995 and promises to do the
same in 1996. 'I think, in general, we are certainly seeing more activity,' says Bozell
senior partner Judy Black, the shop's director of interactive media development. 'Clients
are putting more money into this area. That's definite. Where it's coming from is a little
less definite.'
Advertisers interviewed for this story concur that they will spend more on interactive
media in 1996.
Last year at this time major health and beauty aids company Bristol-Myers Squibb wasn't
contemplating spending any of its estimated $168 million marketing budget on the
interactive front. 'It was science fiction for most marketers,' admits Peggy Kelly,
Bristol-Myers' vice president of advertising services. This past year, though, while
Bristol-Myers did not allocate a budget for interactive marketing, it somehow signed a
deal with Paramount Digital Entertainment and, with its guidance, launched the most
ambitious Web site yet in the packaged goods arena. According to Kelly, building the site
required some ingenuity, as funds were redirected from consumer division budgets.
This year, Bristol-Myers will have its first dedicated interactive budget, and the
siphoning of funds from other media will continue. 'Clearly, the money that is being spent
is coming out of general advertising,' she said. AT&T also confirms that a larger
interactive budget means a tightening elsewhere. While Kelly won't say how much
Bristol-Myers is spending on interactive marketing, she expects the figure to grow, even
though the firm has passed the biggest hurdle thus far: launching a Web site.
Like some of its mega advertiser counterparts, GM seems to have spent 1995 in quiet
interactive reflection, but has recently showed signs that the fruits of that study will
be everywhere in 1996. In November, the automaker signed a deal with Hachette Filipacchi,
making it the 'major advertiser' on the publisher's 24 new media properties on AOL and the
Web. The deal is the first in a number of similar alliances those familiar with the
automaker say it will announce this year.
In December, Microsoft proved willing to pony up a record $225,000 to be the top sponsor
of a Super Bowl Web site co-sponsored by NBC and the National Football League, more than
double the prior record for any Web banner deal. By the year's end, the Web site of
Netscape Communications was lined up for almost $2 million in revenue from advertisers in
the fourth quarter.
But many predict that in 1996, as in 1995, a lot of cash will also be spent in making
on-line venues more compelling and maintaining them. 'I still think that the bulk of the
money is not visible and that it's in development and production,' says Greg Stuart,
Wunderman Cato Johnson senior vice president and director of interactive communications.
In the first quarter, when GM launches its mega-Web presence, an umbrella site slated to
incorporate all divisions and include development work from each roster shop, it is likely
to rack up the biggest production cost ever for a Web marketing site. The average cost per
division has been pegged at roughly $2 million, according to some familiar with GM plans,
with the price tag for larger divisions, such as Chevrolet, as high as $3 million.
The fact that an advertiser could even find a way to spend such a sum may be more
important than the figure. Consider that when Saturn launched its independent Web presence
in February, sources placed the initial production cost at a paltry $20,000. What accounts
for the rise in spending? It's probably enhanced technology, which will turn the static
Web sites of 1995 into more dynamic and interesting destinations.
As consumers use the new devices to calculate monthly car payments and set up test drives
on line, the cost for maintaining the technology and managing cyberspace consumers is
bound to rise. Animation and real-time audio, just beginning to appear on the Web, will
also make site maintenance more pricey, even for those who built a site in 1995. 'It's not
a static medium,' explains Leslie Jump, MCI's director of new media and marketing
communications. 'You can't put a site up and leave it there.' The production budget for
each of P&G's major Web sites early next year, for example, is said to be $300,000 on
average, with much of the development probably being handled by roster shops.
Those who contemplate making riches on the Internet, however, should keep in mind that the
increased spending will lead to an inevitable demand for results. The hot market in
Internet stocks aside, part of what turned the Web into a sexy commodity was its
cheapness. The client who set up a site sheerly out of relief to be doing something in new
media in 1995 may be less enchanted in 1996. The possibility of this becomes clear each
time a glowing prediction of the on-line world's future unleashes a counter prediction. At
October's Internet World in Boston, CommerceNet and Nielsen released a study claiming 24
million people on the Net in the U.S. and Canada alone; by December, a principal academic
advisor to the study said the research was skewed and the figure was less than 10 million.
Secondly, the rosy numbers bandied about for Web site promotion may not be so solid. In
mid-December, New York-based WebTrack Information Services attempted to divine how much
advertisers spent in the fourth quarter to promote their site on somebody else's. The
study claimed that the total was $12.4 million, but that seems more than a little
optimistic. According to WebTrack, AT&T led the list, spending $567,000 promoting
itself on the Web, but the announcement of the findings was barely out of the fax machine
before AT&T official Dick Martin called the figure 'outlandishly high.'
The study's main flaw is it could not say how much interactive ad sales business was
negotiated off the rate card. While this issue always arises in media calculations, it is
more acute in the fledgling interactive business. As established media properties such as
Hachette, Time and CNN take their brands on line, it's hard to imagine they would charge
major advertisers on conventional media the full, rate card price. And many links
populating the Web are bartered: You point at my site, and I'll point at yours.
It's enough to make one wonder if the 1996 new media budgets are part of an inexorable
trend, or whether the hype about interactivity will eventually give way to a much slower
emergence of the discipline as a viable advertising medium. Those who have been paying for
interactive media for some time say the best way to justify this spending is to point out
how it saves the client money rather than selling them on the benefits of the digital age.
Wunderman has seen such a savings already, through a pitch to consumers of AT&T's Home
Business Resources, carried on Prodigy, AOL and CompuServe. According to Wunderman's
Stuart, the cost per enrollee, compared to that on other media, was at least half and
sometimes as much as 80 percent less. 'The economics of interactive are so radically
different,' he says.
Of course, the problem with saving clients money on line is that it lacks the sexiness of
portrayals of the medium throughout 1995: It's like meeting someone who exudes passion in
an on-line chat only to find the person unalluring in the flesh. Then again, in the Year
of the Web, many long-held beliefs were turned upside down. Who would have thought that a
lifelong computer nerd like Bill Gates could command swooning hordes of millions?
Copyright ASM Communications, Inc. (1996) ALL RIGHTS RESERVED
Copyright © 1997 ASM Communications. All rights reserved.
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