Prepare for the Coming Web Ad Boom

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Think Web advertising has seen its best days? Don't tune out just yet.


While banner ad click-through rates may have hit rock bottom, new forms of Net advertising that promise to bring long-awaited value to advertisers and much-needed revenue to content sites are quickly becoming a reality. By 2005, online advertising revenue in the United States is projected to reach $32.5 billion, while network broadcasting revenue will account for only $19.2 billion, according to The Myers Group, New York. But it certainly won't be spent on banners.


Leading the charge toward advertising's new frontier is advertising through streaming media. Made possible by improvements in audio and video technologies and the spread of broadband connections, streaming media now can deliver broadcast-quality images and sounds over the Internet.


Marketers hope this emerging technology soon will provide the Web with the look and feel of television and radio -- commercials and all. Their hope is quickly becoming a reality. New software tools are being introduced to allow advertisers to seamlessly integrate commercial messages into online programming -- a system that seeks to equal the effectiveness and generate the revenues of traditional television and radio advertising, but with a twist: interactivity and targeted audiences.


While most television stations are unlikely to put their programming online, streaming audio content is already booming on the Internet. According to BRS Media, San Francisco, a multimedia e-commerce company, more than 3,500 audio stations -- including broadcast radio and Internet-only radio-type stations -- are streaming audio content over the Net. At the same time, as broadband spreads, video made for the Web and short movies are appearing. And as more radio stations and video Webcasters discover the value proposition of streaming advertising on the Internet, hundreds more are going online, creating vast new markets for advertisers. These markets are so fruitful that Jupiter Communications, New York, projects that streaming media advertising will reach $7.3 billion in 2003, or more than 63 percent of all online advertising.


Why are analysts so high on the prospects for streaming media?


To paraphrase an often-quoted truism, "It's the user, stupid!" Advertisers have learned volumes about consumer behavior online since the first banner ad was introduced in 1995. For one, they have learned that most consumers dislike advertising -- whether online or offline. But unlike with television or radio, consumers are more likely to ignore advertising on the Web. The reason can be summed up in a single word: context.


Most online users are there for a purpose. They have logged on to do something -- locate information, seek entertainment or make a purchase. The fundamental problem with the banner, the interstitial and even the sponsorship is that they are all meant to distract the user from the user's primary purpose and to sweep that user off to the hungry advertiser's Web site. For banner ads to be effective, this is what must happen -- the all-important click through. Users simply do not want advertising to pull them away from what they are doing.


Streaming audio or audio/video advertising within radio- or television-type streams changes the scenario in a number of critical ways. First, it delivers a message during an advertising break, much like traditional radio and television advertising. It is effective because users can "go about their business" and receive the messages in a context to which they have grown accustomed over more than 50 years. The user may pay attention or not, as he chooses. Unlike banner ads, streaming audio messages can provide a meaningful call-to-action, giving consumers the needed information and the means to act immediately. With streaming audio technology, however, this can be done without sweeping the consumer away to another site.


Another major reason for the limited success of banner ads is that it is nearly impossible to convey a message in a second -- no matter how creative the ad. In the streaming context, however, the creative team has 15 seconds, 30 seconds or more to do it -- time enough to convey the message. Having drawn the user's attention, the creative team then must create interaction that leaves the user in place but establishes the customer relationship. It is a tall order for sure, but that's why they call them "creative."


Perhaps the greatest advantage to streaming audio and audio/video advertising is the ability to customize messages to specific consumer groups. While traditional media advertisers can target audiences using broad-based demographic information, the Web enables advertisers to deliver highly personalized commercial messages to users worldwide.


Using voluntarily provided information such as the user's ZIP code, gender or age, advertisers can deliver messages to listeners about products or services they would most likely be interested in hearing about. For example, a broadcaster could deliver a message about the release of Ricky Martin's new album to one listener while it promotes Mariah Carey to another simultaneously, thus dramatically increasing the ad's value to the consumer, the advertiser and the station. If the ad is "talking" to a receptive listener for 15 to 30 seconds about something he is interested in, the listener is more inclined to respond when given the opportunity.


The ability to deliver highly targeted ads is particularly significant to local radio stations, which have yet to make online broadcasting a money-making venture. This is because online broadcasters typically have used only the same broadcast local ads used in their regular broadcasts. But with targeted audio ad insertion technology emerging, stations can customize ads to listeners in any market, removing local ads from the streaming content and replacing them with messages more likely to appeal to listeners in other areas. And here lies the boom for online radio stations.


Because the Internet provides the ability to reach listeners outside the local market, targeted ad insertion technology opens up a multitude of new markets and nontraditional revenue sources for radio stations. Not only can stations charge more for local ads delivered exclusively to their local online listeners, they can attract more national, higher-paying advertisers by participating as the Web component in coordinated national ad campaigns.


While streaming media is still in its infancy, early studies have shown streaming audio advertising to be far more effective than banner ads. In fact, according to Carton Donofrio Interactive, Baltimore, streaming media has a 70 percent response rate for content, a 60 percent response rate for advertising information, and a 49 percent "buy" rate for online merchandise.


Although banner ads continue to predominate with 56 percent of all online ads for 1999, their devaluation by the marketplace puts their future in jeopardy, and marketers realize they must move quickly to embrace an alternative. Clearly, by providing nondisruptive advertising that consumers expect to hear and may even wan to hear, targeted audio advertising inserted in music streams provides the best hope for advertisers and myriad new opportunities for online broadcasters. In the same mode, audio/video ads will surely follow.


• Robert Wolfe is founder and president of The MusicBooth LLC, New Rochelle, NY, an online advertising services and technology company. Reach him at rwolfe@musicbooth.com.
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