(COMTEX) B: Web Ads Won't Pay, Say Experts B: Web Ads Won't Pay, Say Experts
Sep 29, 1999 (Tech Web - CMP via COMTEX) -- Don't rely on banner advertisements to pay for your online business. This was the message Wednesday from e-commerce experts.
There is a finite pot of cash to be spent on online ads and some large companies are turning away from them as they are deemed ineffective.
Online brokerage Charles Schwab has reduced Web advertising, co-CEO David Pottruck told the Fortune Global Forum gathering of world business leaders in Shanghai.
"I happen to be someone who's actually fairly negative on online advertising," Pottruck said. "I think most online advertising tends to commoditize you to be equal to the other commodity sellers who advertise online. We have no desire to be another button on somebody's website or a banner that clicks on annoyingly that no one really notices."
Dell CEO Michael Dell agreed. Rather than try to build its brand by putting ads on thousands of websites, Dell could more effectively influence consumers on its own website, Dell told the forum.
In the United Kingdom, the amount of money spent on Web ads is very low compared to other media. The latest figures from Internet watcher Fletcher Research of London put this year's total at 42.1 million pounds ($69.17 million). By the middle of next year, the company predicts, it will reach 106 million pounds ($174.14 million).
One analyst said that online business are not going to pay for their overhead through advertising.
"You've got to have something concrete to offer, a product or service -- just being a source of information doesn't count," said Jon Collins, senior analyst at IT consultancy Bloor Research, Milton Keynes, U.K. "People who are giving things away for free and saying they are going to get their money from ads -- there's an upper limit on the amount of money available from those things and it isn't clear they know where else to look for revenue."
Collins was referring mainly to free Internet services that rely on advertising for income. He said this model may not be sustainable in the long-term.
Successful Internet businesses are likely to follow something more like a retail model, he said, where the overhead of the service would be invisible.
"If I want to buy a shirt, I don't have to pay to go into the shop, I don't take other people's advertising -- it's all in the price of the shirt," Collins said. "The only thing people are going to want to pay for is a product or a service."
He said there would always be scope for Web advertising, "but, we will also always be able to turn it off," so they could not be relied on for revenue.
Consumers will get tired of banner ads and customization will offer better returns for advertisers, said CommerceNet U.K. membership services manager Paul Bessant.
"It's quite likely something new will evolve between what we have at the minute and something like a retail outlet," Bessant said. "Because of the personalization opportunities, we wouldn't be subjected to banner ads, but based on what we know about the customer, we'd be able to charge for positioning."
Like supermarkets do now, product sellers could charge makers of related products for relevant product placement, he said.
"Link-selling, rather than direct advertising," he said.
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Copyright (C) 1999 CMP Media Inc.
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