Editorial: Hard times can't dull Net's future

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Revenue at the top 100 interactive agencies fell by nearly a third last year, but they still generated an impressive $2.1 billion in marketing-services business. It's a tangible sign that Net business is real business. More significant, many old-name ad agencies are seeing interactive growth as once-hot Web shops flame out.

Since the Internet stock bubble burst in the spring of 2000, the number of U.S. consumers who actively use the Web at home has grown: up 31% (to 105.2 million) from April 2000 to April 2002, says Nielsen/NetRatings. More than ever, they use the Internet for commerce, for communication, for information. That translates into opportunity for marketers and interactive shops.

That's not to say all is well. Internet advertising, for example, hardly seems the threat to old media-or the opportunity for agencies-that boosters once claimed. Web ad spending fell 12% last year, the Interactive Advertising Bureau said. It slumped another 12% in this year's first quarter, despite turning up in March, according to Taylor Nelson Sofres' CMR. But there is more to interactive marketing than banner ads.

For another perspective, look at Ad Age's i-shop ranking (AA, May 27) and see the growth last year for the interactive arms of a number of traditional ad agencies, including Euro RSCG, Grey Worldwide, J. Walter Thompson Co., DDB Worldwide, Deutsch, FCB Worldwide and Rubin Postaer & Associates. The Internet complements, but doesn't replace, other marketing; it's logical and appropriate for marketers to turn to their existing agencies to integrate the Net.

Prospects remain tough for many standalone i-shops. True, three of the top five publicly held interactive agencies made a little money in the first quarter-as in a couple cents a share. But auditors have raised substantial doubt about the future of two big shops, Scient and Razorfish. The good news is standalone shops now must operate as real businesses, focused not on pipe dreams but on reality.

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