Web Ads' New Spin

Some big advertisers are bypassing Google and Yahoo! as prices soar.
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Believe it or not, Google (GOOG) - Get Report and Yahoo! (YHOO) don't always benefit when companies advertise online.

Increasingly, huge advertisers ranging from Dunkin' Donuts to


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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


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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.


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is running a contest to pick models to appear on its cups and bags, while


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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!,


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MSN and

Time Warner's


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.

"Demand is increasing significantly," says Wenda Harris Millard, Yahoo!'s chief sales officer. "It's because there are more advertisers spending more money so it's far more competitive."

Google, the largest search engine, is eager to capture more brand advertising dollars. The company has recently added new features, such as business news, to entice readers to stay on the site longer in hopes of attracting companies buying display ads. More details on Google's plans should be unveiled at its upcoming press day.

The huge increase in Web ad prices isn't just helping Yahoo!. Sites of the top newspaper publishers, which are struggling to retain print readers, are sold out, says Colby Atwood, a senior analyst with Borrell Associates.

Brand advertising can be far more profitable for Web companies than search, since they can charge higher prices for it. This is why Google is trying to expand beyond search by offering new features such as business news. More details of Google's plans to capture more brand dollars are expected at this week's press day.

"The good-quality inventory is indeed tighter," says WR Hambrecht analyst Denise Garcia. "It does put more pressure on the advertisers. It requires them to lock in their prices at an earlier date."

Agencies such as



are encouraging their clients to look into other sites to reach the same audience.

"We're not having trouble getting inventory and getting inventory for our customers," says Brian McAndrews, chief executive of aQuantive, which on Monday posted first-quarter earnings that beat Wall Street estimates.