US Report: The online ad market matures

As the online ad industry convenes in New York today for the @d:tech conference, top of the agenda is how Internet commercials can be improved to be more noticeable and more direct. And, according to industry leaders, that could mean TV-style ads on the Web and multimedia e-mail ads in your in-box.

As the online ad industry convenes in New York today for the @d:tech conference, top of the agenda is how Internet commercials can be improved to be more noticeable and more direct. And, according to industry leaders, that could mean TV-style ads on the Web and multimedia e-mail ads in your in-box.

"As part of the general clutter of the media in people's lives, the banner ad on its own is having moderate to no success," said Roger Black, president of New York interactive consulting agency Interactive Bureau . "You might as well put up Burma Shave signs -- they're too far off the road to notice. But as long as the Internet continues to prove the assumption that people don't want to pay for [online] information, advertising is going to have to pay for it," he continued.

In the lead-up to @d:tech, industry players painted a picture of an industry that is consolidating rapidly while it searches for ways to make advertising messages reach users, and to accurately measure their effectiveness. Only a couple of years ago, Internet advertising was limited to tech-related companies, many bartering for their ad space. But while ad spending is growing exponentially -- from $800 m (£473 m) last year to $1.5 bn (0.8 bn) this year, and $2.4 bn (£1.4 bn) in 1999, according to the Yankee Group -- advertising technology has not kept pace; most banner ads of today are hardly more compelling than those of two years ago.

That could mean trouble, because most Web sites -- from the most popular, Yahoo! (Nasdaq:YHOO), to niche-interest Web 'zines such as Feed or Word -- count on advertising for at least part of their revenues. "There's no big bang that is suddenly going to enable this incredible investment from the marketing community," cautioned Rich LeFurgy, chairman of the Internet Advertising Bureau, an industry association. "While that would be nice, what we're going to see is a series of small victories on the privacy front, on the advertising model front, on the measurement front ... that are going to raise the level for the entire industry."

In general, the players working on next-generation Internet ads fall into two camps: Those using the model of direct marketing, and those taking after television. The interactivity of the Web is adding a whole new dimension to direct marketing, which seeks to establish a one-on-one relationship with potential customers. Take, for example, Enliven technology from Narrative Communications Corp. Banners for Barnes & Noble, created with Narrative's system allow users to purchase a book without ever going to the bookstore's Web site -- the entire transaction takes place within the ad.