Chat gives marketers something to talk about
Real-time chat is about to become big business on the Web, for consumers and marketers alike.
While chat is estimated to generate between 30% and 70% of total revenue for commercial online services, Web chat is just starting to take off. Marketers, anxious to engage consumers in a new way, are drooling at the potential for targeted eyeballs.
"Chat creates a very sticky customer--they stay longer and come back often," said Emily Green, a senior analyst with Forrester Research, and author of a recent report on chat. "Marketers will really get to know who's coming to their sites. ... In fact, within 18 months it'll be hard to find a powerful Web site that hasn't somehow integrated chat into its content."
7.9 BILLION HOURS OF CHAT
By 2000, chat is expected to generate about 7.9 billion hours of online use, leading to $1 billion in advertising revenue, according to Montgomery Securities.
While commercial online services generate revenue from the increased connect fees driven by longer periods of time consumers spend chatting, Web sites have no such capability. So advertising support becomes doubly important.
WebGenesis, creator of Web community the Globe, has signed athletic shoe company K-Swiss as first sponsor of a Web chat room. The Globe is an online community that creates content, forums and chats that appeal to the 18- to 30-year-old market. From Aug. 26 through September, K-Swiss will sponsor a U.S. Open chat room featuring tennis discussions, guest speakers and post-tournament promotions.
MARKETERS LOOK FOR TIE-INS
WebGenesis is also in negotiations with a liquor company to sponsor another area. "A lot of the chat will be free-form, but we will at times try to tie our products into the subject," said Dave Nichols, who works in new business ventures at K-Swiss. When sponsoring chat, marketers can typically frame the screen with their brands and logos, place hotlinked ad banners on the chat screens and even direct chat discussions that would allow them to sneak promotional messages right into the chat threads.
AD PRICING BASED ON VISITORS
Ad pricing is a twist on the cost-per-click model. K-Swiss will pay WebGenesis based on the number of unique users who enter the sponsored chat area throughout the month. iChat, an Austin, Texas-based company, today rolls out an updated version of its chat server software. Starting at about $2,000, the software not only allows event moderation for sponsored chats, but it also permits banner ads to be rotated on the screen while the chat is occuring.
"Cycled ad banners really will let marketers and Web sites exploit the power of chat, which typically gets more loyal users who stay at the site for a longer period of time," said Andrew Busey, chairman and chief technology officer for iChat. In addition to marketing its chat server software to major content providers, sites and publishers on the Web like EarthLink, iChat is also in negotiations with ad management software companies, measurement companies and browser companies to bundle the chat software with various interactive advertising and publishing tools.
UP NEXT: VIRTUAL CHAT
In addition to text-only real-time chat, virtual or 3D chat using avatars is another way companies are looking to exploit the market. "You can create an entire world and have it be sponsored by a company--create a virtual bar, wear virtual clothes, etc.," said Greg Brown, manager of non-traditional media for Zenith Media, which is developing a chat report for its clients. "Sponsored chats can defray the online cost for consumers, but there still remains a fine line between acceptance and intrusion. And that fine line is always shifting."
Copyright August 1996 Crain Communications Inc.