SHOULD THERE BE AN UPFRONT FOR ONLINE ADVERTISING?

The IAB Floats a New Debate

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NEW YORK (AdAge.com) -- Can the Internet advertising market support the kind of upfront ad space auction
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Reader Reaction Not Yet Clear

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that has long been the business model for TV?

The idea is now sparking lively discussion among some sellers of Internet advertising as more marketers consider the use of online elements as a routine part of their overall advertising campaigns.

'An efficient process'
"An upfront provides an efficient process for people making long-term buying decisions for [inventory] that isn't going to be around," said Greg Stuart, president-CEO of the Interactive Advertising Bureau. The industry trade association that has been aggressively promoting the reach and power of online advertising.

"Although there is a lot of ad inventory in the online space, there is scarcity in some categories," Mr. Stuart said, adding that automotive and pharmaceutical marketers have already begun making upfront commitments, and that he expects travel and financial to be the next categories to embrace it.

Getting onboard early
The premise of an online upfront is that prime Web real estate, including home pages, section fronts and high-profile sponsorships, tend to sell out quickly so that advertisers looking to lock in must reserve early.

Not everyone agrees with this.

"We've certainly looked at [the upfront concept], but this is a very young medium; we're 8 years old," said Wenda Millard, chief sales officer of Yahoo! Ms. Millard said it's "too soon" for an upfront, citing industry issues including the need to improve upon measurement standards, tune up creative and gain a better understanding of where online fits in the media mix. Yahoo! has dabbled with the upfront concept in the entertainment category where studios book far in advance.

Other executives maintain that as much as the industry would like marketers to think that inventory is scarce, in reality the demand levels fluctuate wildly. Others question whether flexibility, a hallmark of the Internet, is compromised by the idea of an upfront.

"We don't need more upfronts, we need better integration," said Peter Gardiner, partner and chief media officer of Interpublic Group of Cos.' Deutsch, New York, whose clients include Revlon, MCI and Novartis.

Internet spending down
Interactive industry executives are hard-pressed to put a figure on the size of a hypothetical upfront given elastic pricing and other factors. According to Taylor Nelson Sofres' CMR, marketers spent $5.7 billion in the U.S. on Internet media in 2002, down 11.9% from $6.5 billion in 2001.

AOL Time Warner's America Online had a mini upfront last year for its entertainment category that raked in an estimated $20 million in commitments from seven studios. AOL sees potential in holding individual upfronts for the auto, computing and personal-finance categories.

Tech publisher CNET Networks conducted a pilot upfront in the fourth quarter 2002 and will do one again this year as tech demand increases late in the year. Online auto marketer Autobytel this year will book 80% of its total media upfront. It began booking upfront in 2002 for 2003 to the tune of $10 million in commitments.

'A little more valuable'
"What we found is that each year the media gets a little bit more valuable for the manufacturers as they migrate more money online," said Jeffrey Schwartz, president-CEO of Autobytel.

Weather.com staged a mini upfront in selected categories in fourth-quarter 2002 for 2003 programs where 40% of expected ad revenue was sold, said the company's chief revenue officer, Paul Iaffaldano.

Adam Gerber, senior vice president and director of media strategy of the Digital Edge, New York, agrees with Yahoo!'s Ms. Millard and Mr. Gardiner: "In most cases, I would never want to recommend to one of my clients to commit large portions of their general online media during an upfront. Pricing is elastic, ad-unit sizes are constantly changing. ... Where technology is evolving, it's not, in most cases, the prudent thing to do."

Work with other media
"I would suggest that having a separate online upfront in the absence of other media isn't nearly as effective as working simultaneously with other media," said Riley McDonough, vice president of sales, ESPN.com. "It's time that the industry conforms more to the cycle of planning and buying that other media adheres to."

"I still feel like the market is a couple of years away from fully embracing" an online upfront, said Greg Mason, executive vice president of sales for CNET Networks.

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