The 2004 Models

Dec 12, 2003

December 2003 Issue

      Bookmark and Share

It took a depression in ad spending across all media to help ad clients cut through the Web's own youthful hype and see more clearly how this medium represents a uniquely efficient and accountable marketing tool. With Q1 revenues up 11% over the previous year period ($1.692 billion, according to the Interactive Advertising Bureau), the Internet is slowly but surely carving its share of the media spent on TV and print, both of which are suffering audience declines and severe fragmentation. For the major content brands on the consumer side, the picture is even rosier, as the Online Publishers Association reported that its members enjoyed a 40.7% ad revenue hike in Q1 over the same period in 2002. In 2004, the ad money will finally follow the eyeballs to the Web.

The proven effectiveness of rich media branding campaigns are attracting Web newbies like McDonalds, which vowed to double its online commitment this year. More important, publishers say that the bigger brands not only are buying in but doing so for longer contracts, not just test or spot buys. This brings a level of stability and predictability to content business models that has never been there.

The staggering growth of search engine advertising is fueling the renaissance, and many content sites will benefit in 2004. Google, Overture and others are running out of inventory, and so they are buying into publishers' sites where they place contextual text links near relevant content. The jury is still out on the effectiveness of these placements, but for the next year at least we can expect money to flow (or dribble) from the search engines to publishers.

Laser targeting is here, so line up your sites. Back-end technology and databases are finally merging so newspapers like Belo Interactive's DallasNews.com can track recent visitors to their auto or travel sections and serve ads that are relevant to these interests no matter where the user goes on the site. Audience management technology from companies like Tacoda Systems, Belo, and Tribune Media are delivering extremely high ROI to ad clients who will come to expect these kinds of super-efficiencies.

While the fee-based model isn't likely to succeed online as well as it has off, publishers must place a clear value on their content. "The folks who charge in print probably should be charging online; I don't think it is viable in the long term to charge in one medium but not another," says Jonathan Lewin, CEO of eMeta, which helps power the paid content areas at the likes of NYTimes.com and Hoovers.com. His coffers are filling fast with major brands that plan to place content behind some kind of subscription wall.

Perhaps the most interesting hybrid ad/fee-based model this year, the sponsored day pass to Salon Premium, will break out to other high profile sites in 2004. Ultramercial is the ad technology company that invented this format, which gives users access to fee-based content in exchange for watching an elaborate rich media ad. The model preserves a wide audience that can be sold to advertisers but at the same time elevates the perceived value of the "fee-based" content. According to Salon publisher Michael O'Donnell, the Ultramercial day pass has been quite successful for him and the ad clients. As for Ultramercial, the company has to remain mum about the many specific companies it has attracted. Suffice to say that you'll see the day pass concept roll out at some of the most venerated media brands by the time you read this.

While richer, creative, and precise advertising as well as more innovative fee-based packaging will be the key revenue drivers of 2004, there is always hope that two perennial hopefuls will start to ramp up as well. Portals like MSN and broadband ISPs have begun to recognize that they need quality content to differentiate themselves in the market and are offering content providers more attractive partnerships. Unlike the old days of paying portals carriage fees, some publishers are sharing revenues with these gateways on the subscriptions or sales the additional traffic generates.

And finally, will 2004 be the year content is sold in smaller, one-off packages with micro-payment solutions that really work? Certainly, the success of Apple iTunes' $.99-per-song model seems to validate the nickel and dime model, but in fact, most iTunes buyers are purchasing bundles of songs and albums for more substantial sums. Likewise, other content publishers who have tried packaging article archives and small downloadables often report minimal consumer interest. Don't bet more than a buck on this approach.

The reality of 2004 is that the Web may have changed a lot of things, but it did nothing to revolutionize business models for consumer and business content. Online advertising has to work for this medium to survive, and subscription fees generally sweeten, but don't fill the pot.