Yahoo! Could Strike It Rich With broadcast.com's Ads -- Eventually

But the Internet is far away from the full impact of video advertising.
Author:
Publish date:

Yahoo! (YHOO) has the audience, but for advertisers, the show might take a little while to get started.

With its acquisition of

broadcast.com

(BCST)

, which sends audio and video over the Internet, Yahoo! is betting that its more than 60 million monthly visitors will prove an appetizing audience for what's known in the Internet trade as "rich media advertising" -- ads that include audio, video or more interactive graphics.

But in its effort to build up audiovisual advertising on the Net, Yahoo! has plenty of work ahead of it. Along with the usual issues Yahoo! faces in absorbing another company, the situation illustrates how Yahoo! will have to break new ground once again if it wants the payoff from the broadcast.com acquisition.

"This is very much an acquisition based on positioning, rather than current market demands," says Nick Rothenberg, a partner at online marketing firm

USWeb/CKS

(USWB)

. He adds, "Rich media advertising has minimal market penetration or user acceptance, currently."

Audio or video advertising -- radio or television thrust into the Internet arena -- is only one subset of rich media advertising. Other formats include HTML banners, which allow Web surfers to, for example, select options from a pull-down menu that is integrated into an advertising banner, and interactive banners, which allow users to do things such as print from a banner or play a virtual piano inside it. Interactive banners are constructed with technology like the Java computer language, HotMedia from

IBM

(IBM) - Get Report

and/or Enliven from

@Home

(ATHM) - Get Report

.

Rich media advertising accounts for less than 10% of Internet banner advertising. But if you're looking only at streaming audio/video advertising of the type that broadcast.com focuses on, then that segment is difficult to estimate.

"I'm not saying it's not a growth area, but it's infinitesimally small," says Gerard Broussard, director of media metrics and analytics for advertising firm

OgilvyOne

.

That's not to say there isn't interest in rich media advertising.

"Everyone would like to do more rich media," says Kevin Ryan, president of advertising sales firm

DoubleClick

(DCLK)

. It's perfect, he says, for a car company that wants a picture of a vehicle driving across the screen, or a Caribbean resort that wants to give people a view of a beach. "It obviously works best for advertisers who have something that needs to be shown in a video form," says Ryan.

Another Internet advertising sales firm,

24/7 Media

(TFSM)

, says that focus groups it conducted among media buyers earlier this year suggested increasing demand for rich media among agencies and clients. "We see a lot of momentum building," agrees Bob Filice of

AdKnowledge

, which markets systems that agencies use to plan and execute online advertising campaigns.

"The real constraint is bandwidth and consumer experience," Ryan says. "The reality is that it's still difficult to do on the Internet, and people are impatient. We're doing five times more than we did a year ago, but it's still a small base."

Rothenberg says Internet advertising technology moves more slowly than people expect. "A year ago, the buzz around the Internet ad community

was interstitials would be the next big thing." But interstitial advertisements -- marketing pitches that show up after a Web surfer has left one page but before a new, requested page loads -- haven't become the next big thing, he explains, because of hurdles such as "user tolerance." In other words, Web surfers find such ads annoying.

There's also some skepticism about the effectiveness of running an audio or video ad as broadcast.com currently runs it -- just before it starts streaming the requested program. "It seems to me it's unlikely that the viewer is going to see that ad and want to click and go off to the marketer's site," says Jim Nail, senior analyst at

Forrester Research

. "And that's really what marketers are interested in using the Web for."

But advertisers are interested in them because they work. For example, USWeb/CKS's Jerry Quinn, media supervisor for the firm's online campaigns, says when the company runs clients' ads on broadcast.com, audio banners get a response that's two to four times better than it gets from conventional animated banners in the same spot.

That may work fine for broadcast.com. But the issue remaining for Yahoo! is how quickly it can change its users' habits and expectations. After all, Yahoo! limits the size of advertisements on the site to ensure a speedy page, and it is primarily a text-heavy site that people visit for quick access to information, not multimedia entertainment.

Yahoo! President Jeff Mallett explains the plan is to drop appropriate bits of audio and video into different parts of Yahoo!'s site -- a stock-market audio update in Yahoo!'s Finance area, for example, or relevant information in the site's news, sports or shopping areas. People who don't want this information, he says, will be able to block it out using My Yahoo! personalization features. And the company will be, as always, responsive to what users want, he says.

Revenue from streaming advertising won't be major initially, when streaming media gets integrated into Yahoo! by the end of the year, as expected. But Mallett says the business should pick up by the end of 2000.

That schedule may prove optimistic. "The reality is true broadband forms of entertainment that have significant market share could be five years off," Rothenberg says.

Can Yahoo! handle it? Probably.

"Yahoo! has done a really good job of integrating a lot of services in their portal," says Quinn of USWeb/CKS -- for example, adding chat and email after the creation of Yahoo!'s Web directory. "We're going to see the same thing with the audio programming that broadcast.com provides. ... I think people will think of it the same way they think of chatting at Yahoo!"