Home Depot, Wal-Mart sell vendors web ads

But some say practice is tantamount to slotting fee

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In a bid to position themselves as "media companies," Wal-Mart Stores and Home Depot are quietly beginning to push suppliers to buy ads on their websites. But some see it as a potential slotting fee.

Home Depot believes its site offers traffic that can't be found in TV and print. "It's not a random set of eyeballs," said Harvey Seegers, president of Home Depot Direct, who six weeks ago began asking suppliers to pay for ads on "microsites" at HomeDepot.com. "On a website you already have a customer that is there because there is an expressed interest in the category of merchandise on that page."

Wal-Mart confirmed it has begun selling ad space on its site but would not discuss its programs or rates. A spokeswoman for Walmart.com called the ads "a cost-effective online-marketing vehicle," comparing it to the retailer's in-store ad network, Wal-Mart TV. Plans call for enhancing suppliers' online ads, but no details were given.

Two of Wal-Mart's biggest suppliers, Unilever and Procter & Gamble, look to be the first to jump on board. A Crest ad promotes a dental-care bonus pack, and an ad from Sunsilk pitches an in-store event for the hair-care brand.

Benefits aside, Kurt Peters, an analyst with Internet Retailer, warns the new advertising vehicle might not be viewed positively by all manufacturers. "Suppliers may feel forced to advertise on these sites if they want to get decent placement online. It's just another way chains can use their clout," he said. He added that retailers also could use the ads as quid pro quo for better placement in stores for brands. "It's almost like another slotting fee."

Retailers might be taking a risk offering ads online, according to Jeffrey Grau, a senior analyst at eMarketer. "Retailers could lose customers if they go from the microsite to a manufacturer site," he said. "In doing that handoff, you don't want to lose your customer."

no direct links

Home Depot is mitigating that risk by restricting vendors' advertisements from containing direct links to their websites, a spokeswoman said.

Home Depot's Mr. Seegers said he's already signed up nearly 15 brands for the remainder of 2006, including Moen and Ryobi, and said hundreds are planning to buy space in 2007. The chain is touting the traffic on its site-200 million visits in 2006-and pricing the ads based on cost per thousand impressions but would not disclose rates. Brands will only be charged when someone actually clicks on an ad, which could include interactive demos, streaming video and in-depth product content.
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