Web Ads' New Spin

Believe it or not, Google (GOOG) and Yahoo! (YHOO) don't always benefit when companies advertise online.

Increasingly, huge advertisers ranging from Dunkin' Donuts to Anheuser-Busch (BUD) are trying to lure consumers directly to their own sites with content and promotions -- potentially bypassing the largest search engine and top Web portal. Both companies are eager to capture more spending from brand advertisers.

Though Google and Yahoo! are too huge to ignore entirely, the incentives for marketers to try and lure consumers on their own are increasing. Space on the top Web sites is becoming increasingly scarce, and rates for banner ads and video content are rising.

"Everyone has the same nut to crack," says Ted Page, chief creative officer of the online ad agency Captains of Industry, in an interview. "How do you keep people entertained in the age of the Internet and TiVo (TIVO)?"

The answer for some companies is to entertain Web surfers by themselves. For example, Page's agency created a site for Dunkin' Donuts where people can send humorous video cards. McDonald's (MCD) is running a contest to pick models to appear on its cups and bags, while Pepsi (PEP) has as a video game where users can pretend they are stealing bases in a baseball game.

"More traditional companies are continuing to invest more aggressively online," says Scott Kessler, an analyst with Standard & Poor's, who follows online companies. "The reason this is happening is that they want to reach folks that may be difficult to reach."

Rates on top sites such as those owned by Yahoo!, Microsoft's (MSFT) MSN and Time Warner's (TWX) AOL jumped by about 20% between the third and fourth quarter of last year, according to emarketer.com. That's the latest information that's available. Advertising executives and analysts say rates are continuing to rise at about the same pace. Some companies now have to plan their media buys on the Web as long as year in advance.

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