Disclaimer: This information comes from sources that cannot be verified. As such, make no assumptions about its completeness or accuracy. We endeavor to keep this information up to date as much as possible. Feel free to send comments/ updates to the Security News Editor.

November 10, 1997, Section: News & Analysis

IT Alert: The E-Ads Are Coming

By Richard Karpinski

The static ad banner is dead. Now what?

For IT managers and Webmasters, it means creating or supporting a whole new set of technologies and business practices that will help drive Web advertising from mere brand identity to a key cog in the E-commerce wheel.

Consider this an early warning to IT departments: Plagued by anemic click-through numbers and softening ad rates, Web advertising and marketing managers are experimenting like crazy to find ways to make ad banners more relevant and lucrative.

And if they aren't already, these folks will soon be knocking on the IT department's door asking for support for a new, more network- and commerce-centric advertising solution.

Some leading-edge vendors and users even see the entire advertising architecture turning inside out, with merchants and advertisers-rather than publishers-running their own ad servers alongside their existing Web and commerce servers. This would let Web merchants not only better control where and when they place their ads, but allow them to feed all of the usage, demographic and transaction data collected from distributed ads directly into their own back-end servers and databases.

As a result, the entry point for Web-based commerce transactions can literally start anywhere on the Web and be seamlessly driven back into a company's own Web-enabled enterprise. Leading Web advertisers and merchants are already experimenting with these new architectures, experts say.

"The next step is really E-commerce, where you start closing a sale online and right within an ad," said Hilmi Ozguc, chief executive officer at Narrative Communications, whose Enliven product enables interactive advertising. "Customers need to be acquired easily and inexpensively, and from the places on the Web they naturally tend to go to anyway."

Of course, the basic ad banner isn't going away anytime soon-the simple, GIF-based banner is expected to generate almost $1 billion in revenue Webwide this year, according to estimates by research company Jupiter Communications. Ad banners subsidize the wide array of free content now available on the Internet, which in turn helps draw an ever-growing audience of users-surfers today, perhaps buyers tomorrow.

But cracks are beginning to show. Monthly research from Web advertising management vendor Focalink Communications shows Web ad rates actually fell in October for 20 of the 30 categories it tracks, suggesting a significant softening of the market.

Meanwhile, fellow advertising vendors Internet Profiles Corp. and DoubleClick last year released a study that found an industry-average 2.2 percent click-through rate, reflecting the percentage of times users click on an ad. That number hasn't risen at all in the past year, said Tim Reed, director of marketing and business development at I/Pro.

That needs to improve.

"We've seen a lot of interest in using new technology that will build into a banner what an advertiser wants to carry out without forcing the user to leave the site," Reed said. In short, the answer to the click-through problem may be to reduce the emphasis on click-throughs altogether.

In many ways, it isn't surprising to see the ad market turn in this direction. The promise of the Web has always been one-to-one marketing and commerce, and conventional wisdom says truly targeted and personalized advertising will play a major role in this process.

To meet this promise, developments are moving at breakneck speed toward the three main points on the advertising "triangle": Web sites selling ads are supporting richer media, such as audio and video, and more targeted delivery via improved ad servers; ad buyers are integrating them more seamlessly into the commerce process; and users are keeping a strict eye on privacy and download issues as they plunge into this new, more interactive advertising environment.

Some interesting experiments in commerce-enabled advertising are already under way.

AT&T is working with Open Market this month to distribute a series of ad banners that let users purchase prepaid calling cards directly from the ads themselves.

The campaign takes advantage of Open Market's Transact server, which lets AT&T embed actual product information, in the form of a script, directly into the URL for an individual ad banner. Then, when the user clicks on the ad, he or she is sent directly to a shopping cart with half of the purchase form-including product, price and special offer information-already filled in, said Sharon Robbins, director of marketing for AT&T's prepaid card unit.

In a landmark development, advertising agency J. Walter Thompson recently purchased a high-end NetGravity ad server to let its clients-most notably Ford Motor Co.-have more hands-on control of ad placement. It is one of the first examples of ads serving technology moving out of the hands of publishers and into the hands of merchants.

What's the result of all this tighter control and back-end integration? Consider an airline ad that interacts with users and sends frequent-flyer miles to their accounts if they buy a ticket. Or a shipping company ad that offers a discount to a customer who inputs his or her account number into the ad banner, Narrative's Ozguc said.

"This isn't going to happen tomorrow," he said, "but fast-forward six months from now and check back with me."