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Intel corp.'s Web ad co-op program has boosted PC advertising on the Internet, but many PC marketers still aren't entirely sold on the new medium.

The result is that "Intel inside" on the Web-in which the chipmaker pays up to 75% of PC makers' interactive media buys-hasn't yet delivered the volume many sites had anticipated.

"It just hasn't happened as fast as people had expected," said Dan Rosensweig, president of Ziff-Davis' ZDNet. "It has the potential to be a major factor in Internet advertising, but I don't think it's been that yet."

PC Web advertising is growing fast, if off a small base. Dell Computer Corp.'s Web ad spending more than doubled this year and "that's true of most of our competitors," said Bill Morris, senior marketing manager for Dell Online. "I think Intel co-op dollars are driving a lot of that growth because it takes a lot of fear out of that advertising." Mr. Morris declined to say what Dell spends.


Intel opened its print and broadcast co-op program to the Web with a special promotion last September, formalizing the program in January to allow PC makers to put up to 10% of Intel's estimated $750 million annual co-op spending into Internet ads. That can pay for half the price of ads on most Web sites, and 75% of ads on a group of Optimized Content sites that agree to promote Intel technology.

The opportunity was clear: "Intel co-op could bring $150 million to the Web," said an Ad Age headline one year ago (AA, July 28)-$75 million from Intel and matching money from PC makers.

That still could happen-next year. PC Web ad spending this year likely will be far below that.

"I don't think it has quite lived up to forecast, but I think it's ramping up," said Jason Fischel, CNET's managing director of sales operations. Holiday spending will decide this year's fate. "Whether it's going to be a gold mine for everyone in the fourth quarter remains to be seen," said Shelley Morrison, VP-advertising at Buena Vista Internet Group, producer of ESPN SportsZone and


Intel, sites and PC makers identify various reasons why much of the Web co-op money hasn't been spent. Some no doubt is being hoarded for the fourth quarter. Another key point: PC makers are still largely in test mode, convinced the Web is part of their future but not convinced they have figured out the formula.


PC marketers, facing tight margins and intense competition, are inclined to bet on what they know works. Mr. Morris said the most effective tool to drive traffic to Dell's Web site is direct mail, followed by print. Web ads "are probably a distant third-but gaining ground like crazy. That's the key."

Claudine Ryan, Intel's worldwide interactive marketing manager, said she underestimated the amount of education PC makers would need.

Intel has encouraged PC makers and sites to present ideas to make the fledgling program more successful. It recently did a test using co-op money for a promotion to get Dell site customers to trade up to more powerful chips.

The chip giant caught flak early this year from some media companies that took issue with the Optimized Content program, in which Intel offers 75% reimbursement for ads on sites featuring content that runs best on the flagship Pentium II chip. International Data Group, notably, complained about tailoring rich, multimedia content for the minority of high-end Pentium II users and argued the program encroached on sites' editorial freedom.


Intel contends it's not trying to influence sites' editorial, and more than 30 sites-including IDG rivals Ziff-Davis, CMP Media and CNET-have readily "optimized" their sites. Advertisers like the deal: Sixty percent of Intel-subsidized Web advertising is going to optimized sites.

Said Philip Lemmons, editor in chief of IDG's PC World: "Most Web sites have seen the program as simply a way to grab lots of money."

It appears Intel's Web program is becoming part of the Internet and PC ad landscape. "I've got nothing to say but good things," said Nick Pappas, senior media planner at Gateway. "It really is kind of a win-win deal."

Three-fourths of Intel's top PC customers are participating. Said Ms. Ryan: "We have absolutely helped to accelerate our [customers'] acceptance of Web advertising."

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