Internet Firms Developing Ads Targeted To Users
By Susan Nadeau
dailynews.yahoo.com
MINNEAPOLIS (Reuters) - Wednesday June 16 - Internet advertising firms are developing ways to post ads on Web sites that are hand- picked to match the user's interests and competition in the field is heating up.
At an investment conference here, two leading Internet advertising companies, NetGravity Inc. and DoubleClick Inc. (Nasdaq:DCLK - news), boasted of technology that will detect who is entering a Web site and post an ad that will be targeted to his or her tastes, spending habits and location. This differs from the random banners that pop up on Web sites now.
''Ultimately, whoever targets the best will win,'' Stephen Recht, chief financial officer of NetGravity, told Reuters after his company's presentation Tuesday.
Internet advertisers have been struggling to stop a decline in ''click through'' rates, or the number of users who actually click on the little banner and see the entire ad.
Ilona Nemeth, director of investor relations for DoubleClick, said the U.S. click-through rates, currently at about 0.6 to 0.7 percent, should plateau. Outside the United States, where Internet use typically is not as advanced, click through rates are about double.
Targeting services should boost click through rates and improve the efficiency of Internet advertising and the Internet ad firms are expecting the services to be profit drivers.
Just Monday, DoubleClick said it agreed to buy for $1 billion Abacus Direct Corp. (Nasdaq:ABDR - news), which analyzes and collects data on retail and catalog shoppers.
Rival NetGravity has alliances with MatchLogic, Excite+Home's profile data supplier and HNC Software Inc. (Nasdaq:HNCS - news), which through its credit card fraud business has data on individual spending habits. The company provides targeting services through its global profile service, which was launched in October and is still under development.
''We needed to create a lot more value in Internet advertising,'' John Danner, chairman of NetGravity, told the conference.
NetGravity's Recht said the company's global profile service accounted for just 11 percent of revenues, but NetGravity expects that number to grow to 40 to 45 percent of revenues.
''That's not to say the software business isn't growing rapidly,'' he said, adding that because of the company's large customer base, the potential for the global profile service is huge.
DoubleClick's Nemeth said DoubleClick and Abacus together should be able to reach or top DoubleClick's expected annual revenue growth of 55 percent despite a lower estimate for Abacus alone.
She said that with Abacus, some 10 to 20 new products are on the horizon and DoubleClick plans to hire at least 50 people this year. The acquisition of Abacus is expected to close late in the third quarter.
Shares of NetGravity closed down 56 cents at $16.50, while DoubleClick gained $5.25 to close at $76 a share.
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