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OCTOBER 14, 2004
By Sarah Lacy Fighting for Rich Media's Riches [Page 2 of 2] ESSENTIAL SERVICES. Some of the rich-media concerns are also nabbing business from packaged-goods makers, which are starting to shift some of their huge marketing budgets into online ads. PointRoll, for one, gets 40% of its revenue from consumer concerns, including heavyweights such as Procter & Gamble (PG ), Kellogg (K ), Kraft Foods (KFT ), and Nestlé (NSRGY ). The second edge the rich-media players have is technology. Each of them specializes in different ad formats, using more or less of their own proprietary media players and animation software. But each offers two essential services: The knowhow to make rich-media ads and the ability to measure how viewers interact with them. This service component is tougher to build than it seems, these companies contend. DoubleClick found that out the hard way. It admits that its late 2003 entry into rich-media advertising took longer than it would have liked. "We were a year late and still required substantial revision that took another year," says Doug Knopper, DoubleClick senior vice-president for ad management. "But we're a leader in the market and in it for the long haul." "PRETTY TRICKY." Indeed, DoubleClick has been making significant making inroads lately. It has formed relationships with the three portals, achieving a major milestone a few months ago when it was signed up by MSN. Unlike Yahoo, which works with dozens of vendors, MSN only uses a handful: Unicast, EyeBlaster, PointRoll, and DoubleClick, according to Eric Hadley, MSN's director of marketing. After watching DoubleClick's early stumbles, aQuantive decided to get a toehold in the market by acquiring Ad4Ever, an Israeli rich-media outfit. Says Karl Siebrecht, aQuantive's vice-president for marketing: "We felt to build [the business from scratch] would actually be pretty hard -- a lot of it is actually pretty tricky." aQuantive expects to release new rich-media products based on Ad4ever's technology in coming months. Despite the new competition, the rich-media pioneers are determined to remain independent. "We're becoming a big company of our own," says Eyeblaster CEO Gal Prifon. "This is a very sustainable business, and profitability is ongoing. We'll create our own new business opportunities." However, a shakeout seems inevitable over time, with smaller players and even some of the leaders likely to be gobbled up in mergers and acquisitions. PUSH TO STANDARDIZE. The wild card in determining who will survive is probably the three big portals. Initially, it was in their best interest to build a strong community of vendors. The new formats helped convince big brand builders that online ads can be as compelling as TV. Arguably, the portals could have created some of these formats in-house, but they needed third-party vendors so the same ads could run on multiple Web sites. MSN wouldn't run an ad made by Yahoo, for instance. But both can run an ad made by Eyeblaster. Increasingly, though, the portals (and advertisers) now want standardization, and that typically means fewer ad formats -- and fewer vendors. The rich-media startups all know that innovation is the key to their survival. "As long as they're pushing the innovation envelope, they're playing a valuable role in the market," says aQuantive's Siebrecht. That's why the industry's booming sales this year may not mean much over the longer haul. Companies that come up short on new ideas won't be around for long, regardless.
 Lacy is a reporter for BusinessWeek Online in Silicon Valley Edited by Thane Peterson
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