Taking Stock

Have Net riches caused companies to confuse big ad budgets with good ideas?

Officially, the theme of this IQ is branding. As our first annual Interactive Marketing Awards indicate, the ability to gain customer awareness--and satisfaction--in the world's most crowded medium is more important than even.

But from our vantage point, we think the most successful online marketers have eschewed the traditional advertising tactics that many of their fellow dot-com companies still rely.on.

This issue of IQ also has a sub-theme: Internet valuations, or the steady drumbeat of Wall Street, now part of every Internet discussion. One can't talk of Yahoo!, for instance, without mentioning its stock and how once its wildly successful management team becomes fully vested, it may affect the decision of those very managers to move on or stay the course.

And stock has had a significant effect on The New York Times' recent decision to spin off its Internet holdings into a separate unit. In this issue, we even examine whether the publicity generated when a company launches an IPO qualifies as a form of marketing, as the buzz seems to be affecting not just audience but sales.

Reminder: Things change. Always. At some point, Internet riches will be harder to come by, and then, when ad expenditures wane and adding a simple ".com" to the end of a company name or spinoff unit isn't enough to turn heads on Wall Street, we may finally learn what constitutes successful Internet marketing.

Of course, this in no way denigrates our marketing winners. As reporters, we'd love to think the companies that we chose have eternal smarts, and we enthusiastically applaud the one thing they have in common: their marketing unorthodoxy. Take mega-auction site eBay, which started out distributing flyers at flea markets, employing nothing more than the warhorse of modern office technology: the copy machine. Or Victoria's Secret and its multi-pronged blitz. We didn't honor the lingerie company for its Super Bowl spot-any deep-pocketed company can shell out the cash to reach a mass audience-but for the total marketing concept that put the company in front of the financial markets and the popular press in addition to TV's largest annual audience.

But, too many Internet companies, it seems, are depending on big-budget advertising campaigns-for as long as they have the money lying around-to replace marketing ideas.

Every day, some new $5 million or $10 million ad budget from an online startup goes up for grabs (budgets that have even been credited with network TV's record-breaking 1999 upfront). But those campaigns, except for the true creative standouts, seem destined to become just more commercial white noise. Meanwhile, some site that centered its budget-conscious marketing around, say, putting its URL on the umbrellas at outdoor cafes all summer long, will become a household name.

One need look no farther than the marketing campaigns of the two biggest brands in cyberspace, Yahoo! and America Online, to see how well out-of-the-box efforts can work. (Coincidentally--or maybe not--they are about the only two Internet stocks that qualify as blue chip.) As is detailed in Jeffrey O'Brien's comprehensive piece on Yahoo!, the company has about a $30 billion market cap, but still won't sign off on even a $10 million budget. It has chosen its own route to Internet ubiquity, entering into everything from a co-branded magazine with Ziff-Davis to plastering its name in sports arenas.

And, then, of course, there's AOL, which arguably has the worst IV ads of any major Internet brand. But does it matter? Not at all.

Here's a company that could easily spend a nine-figure sum on a flashy image campaign. Instead, they choose another route: painfully cheesy ads. AOL even prints an 'As seen on TV" stamp on the packaging that contains their ubiquitous disks without a tinge of irony.

But the success of its marketing strategy speaks for itself. AOL currently has 17 million users-more than any other Internet service provider.

What a concept.

COPYRIGHT 1999 BPI Communications, Inc.
COPYRIGHT 2000 Gale Group