Greybeard AltaVista aims to burnish image

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Four months into its nine-month, $120 million ad campaign, there are definite signs that AltaVista is growing. But questions still linger about whether the effort is too much money too late for what many view as an also-ran, second-tier portal.

Bounced from owner to owner--Digital Equipment Corp. created it in 1995, Compaq Computer Corp. bought it in 1998 and then sold it last August to Web holding company CMGI--AltaVista had never done a major campaign.

Yet this thinking person's search engine-cum-portal almost always ranked among the top 15 most-visited properties on the Internet, according to Media Metrix.

PUSHING THE METER

AltaVista Co. has its first real sign of momentum since launching its campaign via Wieden & Kennedy, Portland, Ore., in October.

In January, it ranked as the No. 9 most-visited site on the Internet, according to Media Metrix data for traffic from home and work PCs, its highest ranking in a year. Some 13.4 million people visitied the site during the month, up 16% over December, when it ranked No. 12.

Internal AltaVista figures, put its growth higher: up 28% since the relaunch, with 7 million new unique users in January alone.

With an initial public stock offering in the works--it plans to raise as much as $340 million--AltaVista wants to buff up its image.

AltaVista's ad sales have been growing rapidly, though off a small base. Revenue from ads, sponsorship, search services and other services grew to $82.2 million for the 10 months ended Oct. 31, already double that for all of 1998.

But if traffic and ad sales have been growing, so have losses. AltaVista had a loss of $268 million on revenue of $52.6 million for the quarter ended Oct. 31.. AltaVista has never turned a profit.

The company began limited advertising in late 1997 and then late last October announced a $120 million ad blitz running through the fiscal year endingJuly 31.

'WE HOPE TO BE RIGHT'

"We are the only Internet company of its caliber in the top 10 that has done basically no marketing in the history of its company," said Charles Rashall, AltaVista's VP-worldwide marketing. "We are definitely playing in a market that is a very competitive market. All we've been trying to do, and what we have done, is be focused," he said, adding, "Over time, we hope to be right" in our strategy.

Though the ad campaign has raised the company's profile and helped it ink deals with outside content providers, such as Women.com and FoxSports.com, AltaVista still struggles with what it is.

In its October launch announcement, AltaVista called itself "the first ever dynamic Knowledge Portal on the Internet." Mr. Rashall, when asked to describe what that means, says it means AltaVista is a place where people can come to get information that is valuable to their lives.

"We can bring you the best of the Web," he added. "We're the brand that makes you smarter."

Hence the "Smart is beautiful" tagline. Humorous ads show ways average people outsmart authority figures by using AltaVista.

BEATING THE ODDS

Jim Riswold, the Wieden copywriter who penned the ads, said the brand premise is to offer consumers a way to "act smarter in everyday situations and use information as a benefit and a tool."

One spot shows a boy stumping chess great Garry Kasparov. Another shows a woman who's been stopped for speeding; she bewilders the officer by reeling off everything she knows about radar guns.

AltaVista has been fighting an uphill battle almost from the beginning. Created to showcase the processing speed of Digital's high-powered (alpha) chips, AltaVista was slow to get into advertising or the portal game. It didn't begin accepting ads till the end of 1996 and didn't launch its own ad campaign till November 1997. Today, much of its content seems cobbled together.

It inherited its e-commerce search service, Shopping.com, from Compaq. In December, it acquired a financial site, RagingBull.com, from CMGI, the Andover, Mass., Web holding company. Many other services come from CMGI companies, including its free Internet access and e-mail. But a non-CMGI company, DoubleClick, is AltaVista's prime ad seller, generating nearly 80% of the site's ad revenue. DoubleClick's main competitor is Engage Technologies, a CMGI company. (The DoubleClick contract runs through 2001; AltaVista has been building its own sales staff, rising to 35 people as of December.)

AltaVista, based in Palo Alto, Calif., is closely tied to its faraway parent in other ways, too. CMGI acquired about 81.5% of the company in August (Compaq retained the rest) and still will own about 74% of AltaVista even after the IPO. As a result, CMGI can make high-level decisions--even to sell the company--without approval of AltaVista's shareholders.

CMGI has also been highly involved in AltaVista's ad campaign. Bill White, CMGI's exec VP-marketing, participated in the agency review and has oversight responsibility for marketing.

"We've seen some great results," Mr. White said. "We're very confident we've set in motion the right combination of marketing."

NEW ADS GET SPECIFIC

The first flight of TV spots ended last month, and AltaVista and Wieden are working on new executions appearing "in the near future," Mr. Rashall said. The second round of ads will show specific ways people can use AltaVista.

For example, spots might show how someone can use AltaVista to find video images to put in a PowerPoint presentation, or how a child can use it to translate homework.

While offline media accounted for 60% to 70% of AltaVista's fall ad spending, that ratio will diminish with the next flight of ads, Mr. Rashall said. Without citing specific dollar amounts, he said the future online budget will be set at "at least twice the level that we spent at the launch."

Digital Pulp, New York, handles online creative; Mass Transit, New York, handles online ad-buying.

As AltaVista prepares to go public, the question is whether it's got enough momentum to challenge other portals as a standalone venture. If $120 million in ad spending can't do it, then AltaVista's investors may need to search for another solution.

Contributing: Alice Z. Cuneo.

Contributing Editor Debra Aho Williamson writes the monthly Inside the Web report. Send Internet case study ideas to debbie@milestone2.com or Editor Bradley Johnson at brad@adage.com.

Copyright March 2000, Crain Communications Inc.

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