Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (76360)	9/2/1999 8:49:00 PM
From: Glenn D. Rudolph	Respond to of 164684

By Greg Farrell, USA TODAY NEW YORK -- It's a network TV executive's worst nightmare: What would happen if Anheuser-Busch or Miller Brewing paid for a TV commercial only on the basis of how many beers the spot sold? A new report from Forrester Research predicts that's exactly what's going to happen on the Internet. In the next four years, the Web will shift from the advertising model on which most off-line media are based -- the cost per thousand impressions (CPMs) -- toward a pay-for-performance standard. While research from Forrester predicts that Web ad spending will explode in the next few years, from $2.8 billion in 1999 to $22 billion in 2004, the shift toward performance-based deals means Web publishers must earn their profits. "The soft underbelly of the Internet advertising market is that it's performance-based," says Jim Nail, senior analyst at Forrester. "If you're a publisher, unless somebody takes some action, you don't get paid anything. Instead of a handoff of ad dollars, the media site has to become a marketing site." "You're going to see a rise in performance-based pricing," says Marissa Gluck, an analyst at Jupiter Communications, "whether it's cost per click, cost per sale or cost per lead." The Internet has already given birth to a hybrid ad model, a combination of CPM and pay-for-performance. The Internet Advertising Bureau puts about 50% of current ad deals into this category. In this model, advertisers get a break on a Web publisher's CPM rates -- say, 25% off -- but the publisher gets a bonus of 7%-8% of any sales directly traceable to a banner ad or sponsorship. "It's a win-win for media companies and advertisers," says Rich LeFurgy, chairman of the IAB. The reason that pay-for-performance is so popular is that the medium is so accountable, says Greg Smith, director of strategic services at Darwin Digital. "Pressure is being put on clients by investors, on agencies by clients and on media by the agencies," he says. Still, even the most dedicated pay-for-performance types don't think it's wise to abandon the CPM model entirely. "You stifle volume if you do that," says Chuck DeSnyder, senior VP at Strategic Interactive Group. "If you are rigid as a negotiator and ask for performance-based pricing, you can limit your volume opportunity because many sites won't play that game."