Here is a very pertinent article about the future of Internet advertising. NETP would fit quite nicely in either Doubleclick's or 24/7's stable.
DoubleClick's land grab
Web ad firm getting big ... in a hurry
By Simon Walsh, CBS MarketWatch
Last Update: 2:37 PM ET Jul 29, 1999
Also: Net Stocks
SAN FRANCISCO (CBS.MW) -- Kevin O'Connor is in a hurry.
In two short years, the 38-year-old founder and
chief executive of DoubleClick Inc. (DCLK: news,
msgs) has helped transform Internet advertising from
punchline to powerhouse. In June, he agreed to pay
a billion dollars for Abacus Direct Corp. (ABDR:
news, msgs), a company that maintains a database
of catalog buying habits. This month, he arranged for
the $530 million acquisition of former rival
NetGravity Inc. (NETG: news, msgs), which
specializes in the placement and tracking of online
ads.
And, as if that weren't enough running around,
O'Connor recently climbed aboard a jet and flew to
the West Coast for a grueling week of meetings with
clients and prospects.
"It's been busy," O'Connor told
CBS.MarketWatch.com, a client, during a break
in California. "We're just going morning, noon and
night."
The personal touch
Like many Web executives, O'Connor believes there's one way to win on
the Internet: Get big fast. That means snatching up all the tools and
technology his company needs to give Web publishers every possible
advertising option -- before somebody else does. And finding ways to cut
his dependence on AltaVista, which accounted for more than 40 percent of
DoubleClick's first-quarter "actual recognized revenue" of $31 million but is
unlikely to continue that relationship after being dealt by Compaq to
CMGI.
Perhaps the key challenge for DoubleClick: delivering on the big promise
of Web advertising -- offering the capacity to pitch specific products to
specific people.
DoubleClick bought NetGravity in part to broaden its revenue base.
NetGravity's 130 clients don't overlap much with DoubleClick's. And
NetGravity does something DoubleClick doesn't: sell the software
companies use to place their own Web ads. As a result, NetGravity tends
to serve larger Web players, like Time Warner's (TWX: news, msgs) Time
and E-Trade (EGRP: news, msgs).
After soaring to an all-time high of 176, DoubleClick got caught in this spring's Internet
meltdown and retreated to the 80s, despite positive revenue news.
DoubleClick tends to service smaller sites that want it to sell and place all
their ads. The ads are stored on DoubleClick's computers and sent to the
client's site when a visitor requests a page. DoubleClick gets a cut of every
sale. This group, called the DoubleClick Network, has 1,500 members,
including AltaVista, Dilbert and U.S. News & World Report.
A full-service shop
Aside from expanding the client base, NetGravity also helps DoubleClick
provide a full product range. At one end of the spectrum are companies
that sell and serve ads on their own. They can buy NetGravity software. At
the other end are companies that don't want to do anything. The
DoubleClick Network is for them. And in the middle are companies -- like
MarketWatch.com -- that want to sell ads but don't want the hassle of
serving them. They can use DoubleClick's servers and DART technology
to do that.
DART is attractive because it costs little to run and expand. That means
DoubleClick can pocket maybe 75 cents on every dollar of DART
revenue, said Tara Long, an analyst with C.E. Unterberg, Towbin. But
others aren't so sure the business of placing ads makes sense in the long
run.
"I don't know how
much the ad-serving
business is going to be
worth in the grand
scheme of things," said
Jay Friesel, executive
vice president of sales
and marketing at 24/7
Media (TFSM: news,
msgs), DoubleClick's
biggest competitor.
"The real money is in
the e-commerce side of things and in the advertising and marketing of it."
New media vs. old
One thing is clear: There's lots of room for growth in Web advertising. It
amounted to $2 billion last year -- less than 1 percent of total U.S. ad
spending.
Getting a bigger slice of that pie won't be easy, though. Many advertisers
are wary about committing larger budgets to the Web. They see ad
banners as a waste of money, since most Net surfers tend to just scroll
down and ignore them.
"I think you're going to see some companies saying, 'Let's drop out of
advertising on the Web,' " predicted Lawrence York, who manages the
$36 million WWW Internet Fund. York recently sold his DoubleClick
position, which amounted to 10,000 shares, or about 2.5 percent of the
fund's holdings. "It's not as bad as selling books or CDs," he said, "but
everybody's chasing the same pie -- the online guys, the agencies."
DoubleClick's response to that is to deliver on the promise of one-to-one
marketing. To do that, it needs to get more data on the people visiting its
sites. There's just one hitch: Most of the sites in the DoubleClick Network
don't have any personal data for most of their users. No names, no
addresses, no credit-card numbers. They just don't collect that kind of
information because most offer their content for free.
Ferraris and chrome trim
A sports site might know that its users, on average, make a certain amount
of money per year and have so many cars in the garage. But in most cases
it doesn't know a thing about the midnight browser on the NASCAR page
-- that he's named Mr. Brown, buys chrome trim for his Chevy pickup and
earns $35,000 a year. Or that the fan reading the women's soccer page is
named Mrs. White, adores tennis and drives a Ferrari. They can't know
these things unless Mr. Brown or Mrs. White provides some information
by making a purchase or filling out a registration form. And the vast
majority of Internet users don't do either when they visit the typical news
and information sites run by publishers.
So DoubleClick's challenge is to get more people to volunteer personal
data. With that they can link back to the Abacus database, which details
the buying habits of more than 88 million American households. They can
see if you've been buying boat gear from L.L. Bean. Or baby clothes from
the Gap.
The general strategy for getting this information is always the same: Offer a
service that doesn't work without personal data. AltaVista, for example,
will automatically find movie theaters near your house -- but only if you
register with your home address. It'll also list your horoscope -- but only
after you reveal your birth date.
O'Connor said he's exploring the full range of these "opt in" programs.
"What we want," he said, "is to give marketers more ways to influence
people."
He'll have plenty of competition. Last year, 24/7 Media teamed up with
IntelliQuest Information Group (IQST: news, msgs), a provider of
consumer profiles, to deliver targeted advertising. Now people who
register for sites in the 24/7 network get personalized ads based on their
IntelliQuest profiles. "We're not just selling banners," said 24/7's Friesel.
"We're selling people."
Look for 24/7 and DoubleClick to focus more of their attention on
e-commerce ventures with the likes of Amazon.com (AMZN: news, msgs)
and Dell Computer (DELL: news, msgs). These sites don't run ads. But
they may be intrigued by the Abacus and IntelliQuest databases, which can
describe their customers' buying behavior.
DoubleClick aims to take this one step further and help Abacus shepherd
catalog retailers to the Web.
There'll also be more consolidation. "I think in the next few weeks you'll
see some very surprising developments," said 24/7's Friesel. "The noise we
make is good noise."
O'Connor declined to comment on DoubleClick's plans. But he said the
future looks bright for advertising on the Internet. "I've never seen an
advertiser leave the medium," he said. "And budgets keep going up." |
