IBM Corp. is gearing up a major advertising push that could rocket it into direct competition with Microsoft as the Web's top spender.
And, in a twist that will be watched closely by both Internet and traditional media reps, the funds for the Web campaign are said to be coming directly from the marketer's print budget.
A DISTANT THIRD
IBM closed out 1996 as the No. 3 Web advertiser, with $7.2 million in spending ($5.9 million for IBM products and $1.3 million for IBM's Lotus Development Corp.), according to Jupiter Communications. That was right behind AT&T Corp.'s $7.3 million, though far below Microsoft's $13 million.
IBM, whose $700 million global ad budget makes it the world's largest computer print and TV advertiser, will increase Web spending at both the corporate and divisional levels.
"I think there's a recognition for corporate that the Web is growing stronger as a medium," said J Sandom, senior partner and head of interactive at IBM agency Ogilvy & Mather, New York.
Marianne Caponnetto, IBM director of media strategy and operations, told media companies and repeated in a talk at Internet World last week that the Web is "a defining medium" for the marketer.
Microsoft also is intensifying its efforts on the Web. But Joseph Gillespie, VP of Ziff-Davis Publishing Co.'s Media Network ad sales group, said it's conceivable IBM will sweep past Microsoft to be the top spender.
"It will take a lot for IBM to be the No. 1 spender, but I can see them doing it, absolutely," Mr. Gillespie said.
IBM spending this year could reach $20 million, estimated another Web ad sales executive.
IBM doesn't release budget figures, but a spokesman said: "We are going to increase [Web] spending significantly and have much more of a presence there."
A good question may be why IBM isn't already the top spender. The company's product line includes Internet solutions for business customers; the Web is an efficient medium to deliver sales, service and support; and advertising on the Web helps create a perception of Web leadership.
BIG BLUE BURNED
One answer may be that IBM doesn't want to get burned-again. Big Blue got a black eye last summer when its technology suffered embarrassing glitches at the Summer Olympics. Web watchers say IBM wants to make sure any Web promotions help rather than hinder its image as an Internet leader.
In May, IBM (http://www.ibm.com) puts its technology to the test with a major promotion carried live on the Web: The second match of world chess champion Garry Kasparov vs. an IBM computer. Mr. Kasparov won last year's event, which drew hundreds of thousands of visitors to a special IBM site.
Lon Otremba, exec VP at Web media company CNET, said he's working with O&M on a pending interactive advertising deal.
"Based on early commitments, they're doing significantly more [spending] than they did in 1996," said Mr. Otremba.
IBM also is negotiating with Softbank Interactive Marketing, which sells inventory on Ziff-Davis' ZDNet and other sites.
"We are in conversations with IBM about sizable spending," said Andrew Batkin, SIM president.
Web reps say O&M has told them IBM will shift funds directly from its print budget.
The IBM spokesman said print spending this year "will be in about the same ballpark as 1996 . . . within a couple of points either way." The rise in Web spending is not connected to changes in print budgets, he added.
IBM last year spent $105.9 million in U.S. computer and business publications, down 15% from 1995, estimates tracking service Adscope. Spending in January plummeted 49% to $3.5 million, though February spending edged up 6% to $5 million, according to Adscope.
SMALLER PRINT BUDGET
"There's no question, the print budget is smaller," said a media exec familiar with IBM's print and Web efforts. However, the exec questioned any correlation between the huge print and still comparatively small Web budgets.
IBM's Internet spending is a significant vote of confidence for the Web as an ad medium, however.
"They think the Internet buy is providing them with the same audience that the [magazines] are providing," a Web ad sales executive said.
Shifting money out of print wouldn't necessarily hurt the publishers since IBM probably will place most of its Web dollars in computer-oriented Web sites. IBM, for example, is one of the largest advertisers on ZDNet.
Contributing: Debra Aho Williamson