Ad:tech Celebrates Industry Revival

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NEW YORK -- Online advertising executives celebrated the rejuvenation of their industry from its dormancy following the dot-com bust, yet warned that marketers need to tread carefully in how they communicate with consumers.


Speaking to an overflow audience at the opening session of the ad:tech conference here yesterday, AOL vice chairman Ted Leonsis said the online industry is poised for sustained growth after the "mania" of the Internet boom in the late 1990s.


"This is becoming a real business," he said. "This is becoming a way of life for consumers."


Leonsis opened the conference, which held an air of confidence that online advertising was on the upswing. Ad:tech chairperson Susan Bratton said paid attendance at the event was up 40 percent from a year ago to 7,000. The conference Web site listed more than 150 exhibiting companies.


"Our industry has continued to heal itself and get better and better," said Bratton, who is also senior vice president of sales and marketing at Maven Networks, an interactive video ad firm. "We consider ad:tech to be a bellwether of the industry at large."


She said ad:tech would add to its New York, San Francisco and Chicago shows with conferences in London and Shanghai in 2005.


According to the Interactive Advertising Bureau, online ad revenue in the first half of the year totaled $4.6 billion, up 40 percent from the first half of 2003. Search marketing led the way, accounting for two-thirds of the industry's growth.


Charles Buchwalter, an industry analyst with Nielsen//NetRatings, said 2004 would be viewed as a turning point for the industry. The growth in search marketing has paved the way for even greater gains in display advertising next year, he predicted.


"This is the year where large traditional advertisers took online seriously," he said.


The resuscitation of AOL's online advertising business is an example of the industry's health. The Internet service, which rode the Internet boom and felt the full sting of the downturn, has begun to share in the growth rates shown in the past year by industry leaders Yahoo and Google.


AOL's ad revenue fell sharply in 2002 and 2003 as long-term deals struck during the boom expired. While it continues to lose subscribers, AOL's ad business has picked up. AOL last week reported its second consecutive quarter of growth in online ad sales, which rose 44 percent from the prior year. AOL is launching an AOL.com site for non-members to create more online advertising inventory. It spent $435 million in June to buy Advertising.com, a direct response online ad network.


The risk to this upturn is the online industry allowing aggressive, intrusive marketing to alienate consumers, Leonsis warned. He cited the backlash against pop-up advertising and spyware programs.


"We're working very hard at keeping the trust of our users," he said.


Leonsis noted AOL's decision to cease pop-up advertising. The online service also said last week that it would give its users anti-virus tools to better protect them from spyware and other intrusions.


"Consumers hate companies that trick them," he said.


Tim Smith, CEO of TV Talk and founder of interactive agency Red Sky Interactive, echoed Leonsis' thoughts about the changing dynamic between marketers and consumers, joking that in the old model consumers were treated as "sheeple."


Now, consumers armed with TiVo and blogging software are turning the tables, acting as their own publishers and initiators of interaction with marketers, he said.


"You're a guest, advertiser, behave like one," Smith said. "If you're not relevant, you're out."


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