News

Ops, Advertisers Eye Rich Media on Net

1/17/1999 7:00 PM Eastern

Cable operators that offer broadband services see potential
over the long term for rich-media advertising via the Web to make a direct impact on ad
revenues. Short-term, this new genre of online advertising -- which was created
specifically for the broadband universe -- will generate little cash flow for operators.
But eventually, it could not only pull in more money, but forge closer ties with local
advertisers.

For the foreseeable future, however, it's a game for the
big boys. Rich-media ads -- which incorporate video, audio and interactive elements to
reinforce branding or to spur transactional activity -- are expensive to produce and still
unproved in their effectiveness.

Nevertheless, early indications are that they could grab
the attention of even online users who never click on ads, and big advertisers like First
USA, Bank of America, Toys "R" Us Inc. and others are testing the waters.

Both advertisers and broadband services have their work cut
out for them. Even with the rapid proliferation of banner ads on the Internet, most users
seldom click through, according to research from New York-based new-media market-research
firm Jupiter Communications.

Marc Johnson, Jupiter's senior analyst, online advertising,
said 20 percent of narrowband online users never click on ads, and the majority -- 51
percent -- rarely do so, looking at an ad maybe once in more than 10 online sessions. Only
28 percent click through at least once in every 10 sessions.

Advertising executives at broadband services @Home Network
and MediaOne Express believe that rich-media ads can improve those numbers in the
broadband world.

Theoretically, rich-media ads can engage users in such a
compelling way -- through humorous video clips or interactive games -- making them feel
like they are having an experience, rather than being targeted as consumers.

And unlike traditional Internet banner ads, rich-media ads
don't force users to link out of the Web sites that they are already surfing. Instead,
they pop up in "micro-sites," or self-contained spaces, eliminating one of the
big deterrents to click-throughs.

"Our tests showed time and again that users clicked on
rich-media ads twice as often, and also that they found them entertaining," said
Susan Bratton, director of advertising for @Home, which conducted rich-media-ad tests with
seven national advertisers last fall. "The ads always got high ratings."

The study reached about 3,000 broadband users with ads from
Johnson & Johnson, Intel Corp., Toys "R" Us, AT&T Corp., Levi Strauss
& Co., First USA and Bank of America.

The preliminary results, Bratton said, suggested that
consumers are about 10 percent more likely to remember rich media than other forms of
advertising.

To reinforce the early results, @Home plans to run a second
test, with a new crop of advertisers, in February and March, Bratton said. @Home
affiliates like Cox Communications Inc. and Comcast Corp. will use the test data as sales
and education tools.

User feedback will enable them to develop reliable
rich-media-ad models for both national and local advertisers, and strong numbers will help
them to sell the benefits and to fortify the message: "If you build it, they will
come."

The challenge is to develop ads that attract even the most
reticent consumers on the Net, noted Chris Smith, manager of strategic development in the
ad-sales department at Comcast Cable Communications.

"It's like the Super Bowl," Smith said. "You
watch the commercials because they're so much fun to look at. Rich media is probably more
effective than straight banners, but to what extent is probably unknown."

MediaOne Express hasn't yet begun to test rich-media
advertising -- it's focused instead on the launch of its rebranded joint venture with Time
Warner Cable's Road Runner service. But Kelly Ruebel, vice president of marketing and
sales for MediaOne Internet Services, said she believes that one rich-media ad can achieve
what now takes four ads in different venues to accomplish.

"If you look at any single medium in advertising, each
plays a different role," she explained. "Television ads show a product,
newspaper ads let you give a lot of detail, radio ads are high-frequency -- you hit a lot
of people a number of times, and cable reaches a highly targeted audience. In the
interactive broadband world, you can accomplish all of those objectives at once, instead
of relying on a series of handoffs."

STILL TOO FEW

While that's a powerful argument for rich-media
advertising, the quandary for national advertisers now, and for local advertisers later,
is the low penetration of broadband services delivered via cable modems, compared with
that of narrowband Internet services over dial-up modems.

In a report released in August, "Last Mile Strategies:
Broadband Access Will Fail to Pave the Information Driveway," Jupiter analysts
predicted that by 2002, only 20 percent of online households will have broadband Internet
access.

That translates into 11.2 million broadband subscribers
between cable-modem, high-speed telco and wireless solutions, versus a whopping 45.5
million dial-up homes. In the face of those numbers, rich-media advertising may be a hard
sell at the national level, and even tougher locally.

"We've yet to tap into the full potential of the
cable-modem business, because we don't have the numbers yet to make it viable," Smith
said. "When you get into the 50,000- to 60,000-subscriber range in a single market,
then it becomes viable."

At Cox Interactive Media, Debbie Campbell, vice president
of advertising sales, said the company sees rich-media advertising as part of an overall
package of local advertising that would also include Internet banners and local content
sponsorships.

"The audience for broadband is still too small,"
she said.

At the national level, broadband-service ad executives
maintained that it's not the quantity of subscribers that counts, but the quality.

'SWEET DEMO'

Broadband services deliver a "sweet demographic,"
Bratton said -- power Web-users who are also power shoppers. And initial advertisers are
placing their faith in that demographic. While they conceded that they would be spending
more money to reach fewer people, the audience is quite desirable.

Credit-card issuer First USA, for instance, went live last
month with its first rich-media ad, which uses audio and video to guide consumers through
a number of its credit cards, ultimately offering users the chance to apply online for
First USA credit cards.

Angel Carra, Internet-channel manager for the Wilmington,
Del.-based company, said she wanted to hit the Christmas season, when online shopping
peaks for the year, to see how well rich media performs in the real world.

Carra was unable to break down the creative costs of the
ad, but she said it was definitely more expensive than an Internet banner because there
were more elements to coordinate. But since First USA measures its success on a
cost-per-account basis, "if it lifts our response rate, it will be worth it,"
she added.

"The demographics [in broadband] are more affluent and
more creditworthy, so we can justify the extra time and effort that we spent if we get a
higher approval rate on the applicants than we would in the [narrowband] world," she
said.

If ads like First USA's and others prove themselves, and a
good cross-section of national advertisers jumps on the rich-media bandwagon, cable
operators said they will gain the needed credibility to make headway in their local ad
markets.

Tim Segard, advertising product manager for MediaOne
Internet Services, said he believes that local businesses, like restaurants and car
dealers, can benefit from rich-media ads.

A restaurant, for example, could produce an interactive ad
with a 360-degree view of the restaurant, online menus and reviews by local critics. A car
dealer could run video highlighting weekly specials on repairs or cars, along with an
interactive location finder.

At Cox, Campbell anticipates a trickle-down effect from the
national to the local level. National advertisers will want to place rich-media ads on the
national parts of @Home's service first, but later, they will likely want to localize
those ads for @Home's city sections. The revenues from localized ads would go to the
affiliates, and as localized national ads gain momentum, small local advertisers will
start to show more of an interest.

But at this point, "the local marketplace is not that
sophisticated yet" about the Internet, said Steve Becker, group vice president for
broadband marketing at Cox Interactive.

Local advertisers may be as many as two to five years
behind national advertisers, Smith noted. Car dealers, furniture stores and other local
mom-and-pop shops have yet to really get a handle on the Internet, on why they should have
Web sites and on how to create effective ones. But he expects them to ultimately follow
the lead of national advertisers.

The journey from national acceptance to local interest in
rich-media ads will require a lot of hand-holding from local operators, which must educate
advertisers and offer them production services. Cox Interactive has already begun training
its sales staff for the effort, and it plans to offer advertisers high-end production
services.

Such an approach can lead to increased ad revenue, both
from the package of services and from the ads themselves. Ruebel noted that operators may
be able to charge higher prices for the ads because -- in theory, at least -- they will be
highly targeted and they will engage user eyeballs for longer periods of time.

Despite the promising early results, Johnson said he isn't
so sure that the "If you build it, they will come" philosophy will bear out.
While he believes that rich-media ads can potentially increase clicking rates, he
cautioned advertisers not to forget a basic tenet of the Web.

"One of the primary advantages for the consumer is
that they have control over their experience online," Johnson said. "If
advertisers and broadband services make their rich-media ads intrusive to the point of
trying to take away consumer control, it will lead to backlash. They can be more in your
face and more engaging with rich media, but they must keep the consumer control high. So
much depends on the execution."

Want to read more stories like this?
Get our Free Newsletter Here!