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AUGUST 20, 2004
By Sarah Lacy On the Web, Branding Is Back Big advertisers see real promise in video-style ads. Trouble is, in this niche, results can be hard to quantify Like most auto makers, Honda Motor is a big buyer of online advertising. It's continually hawking low prices and special offers in banners and click-through ads on popular auto sites such as Edmunds.com. But last year, it witnessed the power of online branding. To augment a TV campaign that showed Honda owners who look like their cars, visitors to Honda.com were invited to post photos of themselves and their automobile doppelgangers. It was so popular that Honda (HMC ) produced a separate Web commercial featuring the submissions. "We got thousands of responses," says Tom Peyton, senior manager for national advertising at Honda. "It started driving traffic there that was completely different than [visitors] coming to the site to see a car." Honda's experience is being played out all over the Web, prompting experts to predict a rebirth in brand advertising online. These ads -- which are generally rich media, meaning they include video or animation -- are aimed at creating an image for a company or a product. They're not expected to result in an immediate click-through sale. It's the kind of advertising that fattened sites like Yahoo! (YHOO ) during the boom, only to disappear once the New Economy crashed. PORTAL BOOST. Experts predict the brand-ad rebound is more sustainable than the boom that buoyed dot-coms in 1999 and 2000, in part because it's being led by the offline world's big brand builders -- including Coca-Cola (KO ), Nike (NKE ), and Visa. While paid search advertising, where companies buy placement in search results from sites such as Google (GOOG ) and Yahoo, was all the rage in 2003, online branding is gaining steam this year and may become the strongest growth story of Net advertising in 2005. Yahoo called attention to this trend at its May 13 analyst day, noting that its top 200 brand-advertising customers had spent 38% more on branding ads in the first quarter of 2004 than in the year-earlier period. Of that group, 85% renewed contracts with Yahoo. In its second-quarter earnings, Yahoo wouldn't break out specific brand-advertising numbers, but it had 45% year-over-year growth in overall ad revenues, not counting acquisitions. Microsoft's (MSFT ) MSN doesn't break out the numbers either, but a spokesman said they also were up. The growth in rich-media advertising, which is where the bulk of brand-ad dollars are going, is expected to outpace growth in paid search this year and continue at a faster clip through 2006, according to researcher eMarketer. It's still a fraction of search advertising, though: Total online ad dollars going to search in 2005 are projected at just under $5 billion, vs. $1.5 billion for rich media. CLICK AND PLAY. Brand advertising is an altogether different animal than paid search and other types of online pitches. It's back in vogue primarily because of the Internet's endless expansion. At the same time that the Web audience is getting bigger and broader, the TV audience is becoming more fragmented even as the costs of TV spots are going up. Add in the speedy adoption of broadband, which makes viewing TV-like ads online a better experience than on slo-mo dialups, and brand-building has a new mass audience to target. Companies such as Unicast Communications are making this easier. The New York-based outfit launched a product in the first quarter of 2004 that allows video ads to load quickly and run smoothly, regardless of the end user's connection. It also permits interactive features to be included with the pitch. In Honda's ads, for instance, viewers can look up different car colors. The technology is being used in some 90 campaigns on sites including ESPN.com, Reuters.com, Weather.com, and E! Online, says Allie Savarino, senior vice-president at Unicast. Branding's comeback is also due to the overall surge in online advertising. Year-over-year, it was up nearly 40% in the first quarter of 2004, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. In 2003, online ad revenues reached $7.3 billion, up from $6 billion in 2002. In fact, 2003 represented the first four quarters of consecutive revenue increases since 1999.
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