Changing focus adds new life to Web ads
By : Celia Barnes
If 2000 is remembered for one thing, it will be the spectacular failure of the Internet's ability to generate advertising revenue not only in Poland, but around the world.
The vast wads of cash that were expected to roll in from companies keen to flash their colorful company banner ads on the Web just never materialized.
Ahoj and Globopolis were two Polish victims of the dotcom crash removed from cyberspace as a result of low advertising revenue and skittish investors.
And during the first half of 2001, business is still far from booming. Just like the Polish economy, and advertising budgets across the board, many of the country's interactive agencies the term for companies that create all things Web, from ads, to sites and CD-ROMs are finding times tough.
"The years 2000 and 1999 were very promising," said Katarzyna Komorowska, operations manager for German-owned interactive company Argonauts (http://www.argonauts.pl). "It was an Internet boom and all the companies started to prosper. Now the market has decreased, but I think we have also achieved stability. Now it behaves as a normal economy.
"Before, expectations were too high," she said. "There were more promises than real achievement. Growth is just as it should be not hectic, not that big, but stable."
But in spite of last year's dotcom crash, optimistic pundits believe that because Poland's Internet ad industry is still in its infancy, it has so far managed to avoid a huge drop in value and will grow by about 100% during 2001.
But what this spectacular growth figure really means is that Internet advertising in Poland will increase from an approximate 0.4% of total advertising expenditure, to around 1%. And the growth will only become apparent soon, now that most advertising agencies should have finalized annual budgets and creative campaigns for their clients.
"Of course, following the dotcom crash, this bad atmosphere did have an impact on the attitude of advertisers," said Krzysztof Golonka, Internet sales director for CR Media (http://www.cr-media.com.pl), a media broker and consultancy firm. "Last year, dotcoms accounted for up to 30% of Internet ads. This year nothing.
"But now it's changing and it's a little better, and we see it in the number of requests that we've had. The beginning of (2001) was very bad."
According to CA IB Investmentbank (http://www.ca-ib.pl) analyst Ted Kozaczynski, Poland's total advertising market in 2000 was worth zl. 8 billion ($1.82 billion). Internet ad sales accounted for around zl. 20 million ($4.5 million) of this not including barter advertising, where companies exchange goods and services for advertising, rather than cash. Bartering, according to some industry players, could push the value of the market up to as much as zl. 40 million ($9.1 million).
Kozaczynski believes the Internet ad market will grow to zl. 36 million ($9 million) by the end of this year, driven mainly by a rise in Internet penetration and the growth of the ad market. At best, by 2005, he estimates that Polish Internet advertising will be worth zl. 344 million ($86 million), or 2.5% of total advertising expenditure.
Changing tack
But behind these figures is the change in the way companies approach the Internet as an advertising medium to reach their prospective customers. The days of putting a few ads on the net to drive traffic to a Web site are over. Internet users have become adept at ignoring ads. The click-through rate (CTR) a measure of how many people actually click on an ad is falling. Web monitoring company Nielsen NetRatings estimates that in March 1996, the CTR in America was about 3.05%. By March 2000, it had dropped to 0.39%. As a consequence, the number of banner ads posted on the net (which can come in the form of horizontal banners, vertical "skyscraper" banners, or smaller "buttons") is decreasing worldwide.
Instead, companies and their ad agencies are seeking more sophisticated Web campaigns, which aim to use the Internet's strengths: to communicate one to one with target clients; to provide vast amounts of information; and, using new software innovations, to provide real-time feedback about client behavior and preferences. In a word, the Internet should be approached more as a marketing tool than as straight advertising.
"I think this is a special moment for Internet advertising," said Artur Urbanski, co-founder and chief creative officer of Lodz-based interactive company, AMG.net (http://www.amg.net.pl). When his company started five years ago, it had a staff of three. Today, he employs 60 people.
"Many think there is a crisis at the moment because clients are fed up with poor results and they are angry," he said. "Agencies or media houses cannot show them the results the final results of how (Web advertising) improves the brand and how it improves commerce.
"I think what needs to happen is advertising must change its focus because it's got the technological tools to change the way of thinking from say, television advertising where we are showing images, and that's all to more complicated methods where we get new customers and keep them."
New advertising options are being devised to draw internauts' interest. Viral marketing is one such option where ads that are humorous or shocking are downloaded from Web sites by users, and emailed to their friends. Other companies are choosing to run competitions or games online: They can gain valuable marketing information about their customers, who in turn win prizes.
Chat rooms and pop-ups
Another option is sponsoring a chat room, or paying for the top position on search engines when someone searches the Web for a topic, a company can pay to be at the top of that search engine's resultant list. Pop-ups are also evolving when additional windows appear on your screen. Another factor being measured is the idea of "impressions" that is, the idea that online advertising will have an effect on internauts even after they turn off their computer.
The industry buzzwords are all about building brand awareness and "CRM" or customer relationship management. In the not too distant future, third generation phones and WAP technology will see mobile phones used in conjunction with Internet advertising campaigns.
"And these campaigns on the Internet can be moderated or changed during the campaign," Urbanski said. "For example, after two or three days, it appears that some creatives work much less than others, so we change the media plan; we change the creatives, just to maximize the effect for our client."
On a general market level, Urbanski estimated that companies are spending anywhere from zl. 50,000 for a two-week Web ad promotion, up to zl. 1 million-zl. 3 million ($250,000-$750,000) for a year-long campaign.
Another area where change is predicted is the notion of portals vs. vortals. There are about 14 portals in Poland, including the big three Onet (http://www.onet.pl), Wirtualna Polska (http://www.wp.pl), and Interia (http://www.interia.pl) which provide internauts with links to all sorts of topics from politics to cosmetics. Vortals are specialized sites that provide information on everything from the state of the economy at Biznespolska.pl (http://www.biznespolska.pl) to Poland's emerging hiphop music scene at hiphop.pl (http://www.hiphop.pl). Some industry players are predicting that the competition between portals and vortals for Poland's limited advertising will heat up.
According to Interia President Tomasz Jazdzynski, portals still attract around 60-70% of all Polish Web ads (with telecoms and financial institutions being the biggest spenders), while the 300+ commercially viable vortals pick up the rest.
Interia, which was floated on the Warsaw Stock Exchange (WSE) on Feb. 2, relies on advertising for 95% of its revenues. In the first quarter of 2001, its revenue amounted to zl. 1.86 million ($468,750) a 33% decrease on its fourth-quarter 2000 results and it posted a net loss of zl. 2.6 million ($650,000). Jazdzynski estimated that Interia will start turning a profit around 2003-2004.
To entice advertisers, rather than saying the cost of placing an ad on Interia has dropped, Jazdzynski prefers to put a different spin on it, saying that the site is now offering better value for money. Clients can buy new advertising options, which Jazdzynski said reach a larger audience because more people are visiting the Interia portal.
However, even with decreasing revenue figures, vortals will not be taking potential ad revenue away from portals, according to Jazdzynski.
"It's much easier for an advertiser to base its campaign on the two or three major portals than on 25 vortals," he explained.
On the other hand, CR Media's Krzysztof Golonka said he has been buying vortal ad space for his clients ever since the company landed its first customer in April 1999.
"We use vortals because of their narrow topics it's easier to plan," Golonka said. He said that vortals will become even more important to advertisers in the future, which is fortunate because CR Media owns 49% of Ad.Net a company that acts as the exclusive sales representative for about 95 Polish vortals.
"As people become more familiar with using the Internet, there will be less searching through portals," said Ad.Net (http://www.adnet.pl) Managing Director Ivan Jones. "People will know what they want and where to get it and so niche sites will develop and gain market share.
"Certain portals have the resources to support the vertical parts of their portals, but the vortal owners are specialists, and that's more critical. There's more of their own money involved in their business; they are more emotionally attached and they are experts in their chosen area."
Jones said that advertisers are also able to target more specific audiences via vortals and niche sites.
"The target audience on the net is very good for advertisers: It's young, educated, urban and tends to be more upmarket," Jones added.
But according to Interia's Jazdzynski, the crucial thing for the future success of Internet advertising in Poland will be the arrival of the world's biggest advertisers, brands such as Coca-Cola, Colgate toothpaste and Persil laundry powder.
"They are coming to the Internet, but not as much as people thought last year; they were not on the Internet at all," Jazdzynski said. "There is a new Coca-Cola campaign on TV and radio, and we've been trying to persuade them to advertise with us, but they don't have a global Internet strategy yet. We are waiting for that to happen, and then they will come. And it will be a good day for Internet advertising; for companies like us."
