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A year ago, Procter & Gamble Co.'s Denis Beausejour, then VP-advertising, told an enthralled @dtech conference crowd that his company could spend 80% of its $3 billion ad budget on digital media -- if only it were effective.

His remarks -- and the subsequent P&G-hosted FAST summit in Cincinnati last August -- focused attention on an issue close to the hearts of Internet media sellers everywhere: the lack of big-brand spending on Internet advertising.

Although companies such as Miller Brewing Co., Nike, Campbell Soup Co. and McDonald's Corp. were among the builders of the first marketer Web sites, they're simply not big Web advertisers.

Restaurants spent more than $2.3 billion on measured media in the first three quarters of 1998, but only 0.03% of that on Internet advertising, according to InterMedia Advertising Solutions, the Competitive Media Reporting unit that tracks Internet ad expenditures.

Department store marketers devoted just 0.07% of their $1.73 billion expenditure to Net ads.


In fact, of the 17 industry categories that spent more than $1 billion on measured media in the first nine months of last year, only five categories -- computers and software, direct response, financial, local, and media and advertising -- spent more than 1% of their total expenditure on Net ads. Seven of the 17 spent less than 0.25% of their spending to the Internet.

That's much like 1997, when only four of the 20 $1 billion-plus measured media categories devoted more than 1% of their expenditure to Net ads, and 11 spent under 0.25%.

Last year, P&G's Mr. Beausejour listed three reasons why major marketers didn't spend more on Internet advertising: lack of compelling creative, lack of reliable measurement and lack of effective ad models beyond banners and buttons.

Fast-forward to this May and it's clear that, while progress has been made in all those areas, big advertisers haven't followed suit. Net ad spending doubled to $1.9 billion in '98, according to the Internet Advertising Bureau, but the categories that spend and those that don't are essentially the same.

"We're still waiting for a lot of Internet reluctants to come online," says Rich LeFurgy, chairman of the IAB and chairman of FAST. "It's been difficult for [some marketers] to conceptualize how [Internet advertising] works for them."

That's despite the fact that the IAB has sponsored educational seminars to woo advertisers, commissioned studies measuring the branding impact of Internet ads and taken a leadership role in recommending guidelines for privacy, ad sizes and more.

Some marketers, such as BMW of North America, believe -- after a few years of experimenting -- their best use of the Internet isn't advertising at all.


"We're not sure the way to go is the traditional model on the Internet -- banner advertising," says Baba Shetty, manager of marketing communications. "If I have a dollar to invest, I'd much rather invest it in the [BMW] site." He declined to discuss BMW's Web budget.

Though Mercedes-Benz USA (recently renamed from Mercedes-Benz North America) will still buy some banner ads, this year's focus is on providing customized content to partners such as the ATP Tour men's tennis circuit, says William Hurley, manager of new media and relationship marketing.

Mercedes created part of the tour's Web site (www.atptour.com) and expects to launch similar content arrangements with other sites in the second half of the year, Mr. Hurley says. He declined to discuss Web budgets as well.

For Pert Plus shampoo, it took an extensive, database-backed program from Giant Step, Chicago, to get the brand to commit to online ad spending. The campaign, launched in February, includes measuring consumers' response to in-banner sampling, sponsored online entertainment, e-mail marketing and online sweepstakes.

"The only way P&G is going to believe this is [if we] demonstrate that this is working to drive their business," says Giant Step CEO Eric Heneghan.

P&G was the No. 30 Internet advertiser in 1998, with $4.4 million in measured spending. It was the only package-goods company among the top 50.


Though banners remain the dominant Internet ad vehicle, media sellers must offer something better to convince the laggards to play.

One area to watch: what the IAB's Mr. LeFurgy calls "advercommerce" deals -- ad packages sold not on the basis of banner impressions or performance, but on some measure in between, such as number of registrations generated. Such deals accounted for more than half of 1998 Internet ad revenue, the IAB says, and will likely grow.

These hybrid deals could attract more reluctant advertisers, says Richy Glassberg, chairman-CEO of Internet ad sales company Phase2Media: "This isn't a

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