Transcripts

Ad 2.0 - Part 2 (Using New Channels)

SUSIE GHARIB: Here's an interesting statistic to keep in mind next time you surf the Internet. Web advertising jumped 33 percent in the third quarter, hitting a record $4.2 billion. That explosive revenue growth is driving the growing stock prices of Internet companies as advertisers seek out consumers who spend time online. As we continue our series "Ad 2.0" New York bureau chief Scott Gurvey looked at the growing wave of advertising on the web. SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Where have all the eyeballs gone? That's what advertisers want to know. Wall Street thinks it has the answer. Eight years after it first went online, Internet search giant Google has a market cap of $130 billion. Google wasn't the first Internet tool to locate sites of interest, but it uses a proprietary methodology which has made it the most popular by far. You type in some key words and get a list of links to relevant sites. But that's not all you get. At both the top and along the right side, you get advertisements which are also relevant to your search. This new form of advertising is extremely effective and it has made Google extremely profitable.

EMILY REILLY, ANALYST, JUPITER COMMUNICATIONS: There are several different types of advertisers online and they all can use search brand advertisers, local advertisers, advertisers that want you to click and buy like a retail company, so search enjoys the fact that everybody can use that. And you also have the fact that people who go to search engines are in a research mode. They're ready to open their wallets and make a purchase and so you have a much better response rate on a search engine than you would as a banner advertiser on a content web site.

GURVEY: Which is not to say that banner advertising is dead. Banner ads continue to be attractive on content-oriented sites because they can be tailored to the audience and because their effectiveness can be measured, if advertisers take the time to learn the new technologies.

CARLA HENDRA, CO-CEO, OGILVY NORTH AMERICA: We're going to look at page views and clicks, but we also have to look at conversion rate and then we have to go through to, did we get a sale, if that was the objective or did we get the traffic into the showroom, if that was the objective or did we drive retail traffic? It all has to be objectives based. And this is a discipline that is difficult, I think. This is one of the new things that all clients are hungry for, they're interested in. They're trying to change their own organizations, but they really have to learn all over again how to measure.

GURVEY: Advertisers are also using new technologies to spread the word in ways which are more word-of-mouth than paid advertising. They go online themselves in blogs and discussion groups on popular sites like myspace, the social networking site which was purchased by Newscorp for $580 million. And they plant video of products, movie clips, and TV shows on sites like You Tube, the fast growing video blog site just purchased by Google for more than $1.5 billion.

MARY BAGLIVO, CEO, SAATCHI & SAATCHI NEW YORK: You don't buy the media. You just put the content out there on the site and off it goes. And then the blogosphere takes over and talk takes over and it becomes very popular. And then oftentimes traditional media starts to cover it, because it's become so popular by virtue of the blogging and the discussion.

GURVEY: Cell phones and other portable connected devices are another new advertising medium whose potential is just being realized. Many cell phones report their location, and these will allow for location-dependent ads to be sent to customers, asking, for example, for information on nearby restaurants, banking machines or gas stations. Still, while some advertisers are embracing the new technologies, others remain fearful, afraid customers are avoiding their messages.

ROBERT GREENBERG, CHAIRMAN, CEO AND GLOBAL CHIEF CREATIVE OFFICER R/GA: The biggest problem that I see with the industry is that the management of the big agencies and also production companies don't understand the so-called digital landscape. So how can you work on a big idea when you don't understand the full landscape? And this is where the customers are blocking out messages that they don't want. This is where the customers are thinking about which device they want to get their information experiences and messaging on.

GURVEY: Although the new technologies are generating a lot of buzz, they draw only 6 percent of total advertising dollars and traditional media is fighting hard to maintain its market share. We'll see what it's doing to meet the new competition in our report tomorrow. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.