Net ad industry issues first-ever guidelines

The largest advertising trade organization in US is taking up leadership of the industry by setting guidelines and overseeing research--first steps of becoming a professionally operating organization.

The chief trade group of the $8 billion online advertising industry is taking steps to improve its image and buttress the ailing companies it represents--moves critics say are long overdue.

The Internet Advertising Bureau (IAB), founded in 1996 to embody the newest ad medium in nearly 40 years, on Monday issued its first new guidelines for Internet ads in five years. It also recently hired its first-ever chief executive in a push to graduate from a volunteer group to a professionally operating organization.

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By most accounts, these actions are viewed as positive--albeit belated--moves for the trade group, which collects annual dues of up to $5,000 from each of its 300-plus members, according to its Web site. But underneath the optimism, some industry insiders say that for the last couple of years the IAB has largely been asleep at the wheel, leaving the nascent industry open to attacks on its image as the ultimate one-to-one marketing channel.

"The primary purpose of any trade group is to stick by its members through thick and thin. Everybody volunteers when it's a good-times networking organization, but the real value is proven when the chips are down," said Andy Sernovitz, president of GasPedal Ventures, which salvages dot-coms and provides them with networking opportunities.

"When your member companies' stock goes under a $1, where was the IAB defending the industry? Where were the press releases? When times were tough, where was the IAB?" he asked, referring to such member companies as Snowball, AllAdvantage.com, 24/7 Media and Quokka Sports, which have been forced to cut staff or close because of the advertising slowdown or the change in market conditions.

Looking for leadership

Although Sernovitz may have an ax to grind, partly because he created and ran a rival trade association for interactive media that he later sold to the Direct Marketing Association, his thoughts are echoed by others in the industry.

Insiders say that the IAB and the industry on the whole haven't done enough to prevent today's problems, questioning why the nonprofit hadn't hired a chief executive sooner or even scheduled regular member meetings over the last year.

"It's a shame that an organization that represents an $8 billion industry doesn't have a meeting in a year and a half--especially with the business getting into crisis mode," said one source who asked to remain unnamed, pointing out that the group has never had a formal address in its five years. Instead, the IAB has been operated on a part-time basis through one of its founders' offices.

Robin Webster, the IAB's new chief executive, could not give the exact date for the last all-member meeting, but said it's been "a while." She said that there had been one within the last year and a half, however. The board currently meets once a month.

Executives agree that the IAB has always been well-intentioned, if haphazardly run. But some say it has failed to accomplish much of its intended tasks.

"They wanted to bite off too much early on but couldn't get action items going. We're playing catch up now," said John Messina, director of ad agency relations for AOL Time Warner's America Online, who recently started working with the group. "We need to do a better job of promoting our own industry."

The IAB overhaul comes at a crucial time for the industry, which more than ever needs to develop common standards aimed at improving response rates without alienating the Web audience.

The online ad industry began to fall on hard times last April when many Net businesses started to die off and take their free-flowing marketing dollars with them. The market was further hobbled by an overall slowdown in ad spending later in the year, along with disgruntlement about the shrinking performance of the ad banner. Cutbacks in earnings estimates at Internet companies such as Yahoo also showed that the earlier swells of advertising dollars had run aground.

In addition, online advertising faces a potential consumer backlash over new tactics aimed at commanding more attention from Web surfers. Companies are experimenting with larger ad formats, animation, sound and other features that are making pitches harder to ignore and easier to hate.

Some also say the industry is suffering from a case of hubris. Online advertisers early on touted unique benefits of Internet marketing, such as absolute accountability owing to the Web's ability to measure and quantify response rates. That's proven to be a double-edged sword, however, creating much higher standards for online advertisers than their offline peers.

"It takes a lot of work to prove that you can do everything and prove all the metrics. Look how many different pages, places and sizes advertisers can buy. It's not like buying a page in Sports Illustrated," Messina said. "Getting that across is difficult, and the IAB is realizing it, now that is has a big project ahead of it in the way of educating," he added.

But critics complain that more could have been done in the past to educate advertisers about the benefits of online advertising. Two of the key tasks of the IAB, according to its Web site, are "fielding research to document the effectiveness of the online medium and educating the advertising industry about the use of online and digital advertising." Some say the group, widely cited for its ad spending figures, has lacked real commitment in these areas, along with the many companies in the market.

"My complaint about the IAB and other people selling advertising on the Web is the lack of persuasive case histories of how dynamic this medium can be when it's properly focused," said Andrew Jaffe, former editor of Adweek. Jaffe now produces an ad industry award program.

Like Jaffe, many industry executives are angst-ridden about the treatment of online advertising, saying it has been misrepresented as a failure and that measurements such as the number of times consumers "click through" to a site has been given more weight than necessary.

Significantly, the IAB reported the industry's first-ever consecutive drop in ad spending during the last three months of 2000. The announcement was a blow despite figures that highlight year-over-year positive results.

But if the IAB was sitting in the back seat before, it's hopping up front now. IAB's Webster said advertising numbers show "it's time to retool and figure out what we need to do right now."

Formerly operated as a volunteer organization by Chairman Rich LeFurgy, a partner at WaldenVC, the IAB is becoming professionally run with Webster's appointment.

"What the IAB was missing was infrastructure and staff," said Webster, who hails from a six-year stint at the Association of National Advertisers. "We're at a new stage at IAB, which reflects the age of the medium. It's time...to develop more products and services, and move the industry forward."

She declined to discuss the group's budget in detail. According to the IAB Web site, the organization offers a two-tiered membership. For a $5,000 a year general membership, companies get the right to participate in committees and vote. A $3,000 a year associate membership with limited participation rights is also available.

Webster said dues have been spent on tracking reports for ad revenues, among other things. The group's 300-plus members include AOL, Yahoo, Snowball.com, New York Times Digital, DoubleClick, Excite, the Microsoft Network and CNET Networks, the publisher of News.com. Most of these companies are testing some of the newly approved ad formats, and some say the group has been reinvigorated.

"Where we're trying to go is to have this medium as a bigger part of a marketing mix. As the trends and the user habits change over time, this medium becomes more of a viable marketing option," AOL's Messina said.

Apart from issuing new ad standards, the IAB is planning to help create an ad model that lets agencies essentially compare other mediums such as television and print to the Web. It also plans to become more active in the local advertising industry and further broaden its scope to include all forms of digital advertising. To this end, it established the Wireless Advertising Association last year.

"It's rallying. It has been a volunteer organization for some time, and everybody has had full-time jobs. Now the industry is going to the next level to assist with any turmoil," said Kate Everett-Thorp, chief executive of Lot21, one of the group's original members. Webster, who said her walls are lined with to-do lists, plans to wrestle with the issues that stop traditional advertisers from spending money online. Steps include developing better ad models, setting easier methods for buying and selling ads online, and creating terms and condition standards for insertion orders.

"It's not sexy, but it's very important," said Webster, adding the IAB is in the process of hiring formal staff and has signed on a representative in Washington, D.C., to monitor the 20 bills related to privacy.

Webster said her goal is "to see interactive ad revenues to go sky high, and for advertisers to understand when to use it, how to use it, and to know it works."