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It's Been A Year of Mixed signals with some marketers investing in online media and marketing while others have pulled back. To assess "where the Web is," Advertising Age brought together a group of online executives for a tour of Web advertising. With Ad Age Reporter Tobi Elkin moderating along with Michael Zimbalist, executive director of the Online Publishers Association, the roundtable discussion included Kathleen Riordan, VP-Internet and E-marketing, Kraft Foods; Martin Nisenholtz, CEO of The New York Times Co.'s New York Times Digital; Philip Bienert, manager-CRM, e-business and future product strategy, Volvo Cars of North America; Neil Budde, publisher, Dow Jones & Co.'s Wall Street Journal Online; Alan Schanzer, managing partner, WPP Group's Digital Edge, New York; James Warner, president of Avenue A, New York; and Jeffrey Webber, senior VP-publisher, Gannett Co.'s

Advertising Age: We want to get a pulse-taking about what's worked over the last year and what hasn't, your most unexpected successes and what's failed.

Kathleen Riordan: We do believe [digital marketing and media] is definitely a powerful vehicle to deliver new consumer value. Just because of the growth of the number of consumers who are online in itself, it's something that we really do have to address and work with. We've found that it has been incredibly powerful to build brand loyalty. And I think the reason that that is working for us is that we're using it more as an evidence platform, and really trying to make sure that we design experiences that will build a dialogue with consumers. I think it's the difference between designing experiences that really allow the consumer to get a solution and get a service vs. delivering a message.

The thing that surprised me the most this year is that it's sort of like a "back to the future." While we see that there's a real specific role in terms of new consumer value, brand loyalty and actually also operational efficiencies, we're sort of taking a step back and saying, "Yeah, we do need these integrated planning tools. How do we deliver things by daypart? How do we do things that we sort of know work or at least believe work?" [As for disappointment,] our media strategists still do not understand this medium. I mean they view it as a risk. We spend a lot more time with our agency media people. We've had people from the industry, publishers, come in and actually do one-day sessions with them. We've had everybody from MSN to AOL to the niche companies to New York Times come and talk to groups of people. But I honestly, just to be really candid, I feel like we're re-creating what we did back in 1995 and 1996.

Philip Bienert: We've stayed online. We actually increased our online spend this year, probably close to 20%. And because we were one of the companies that have been willing to stick it out, we've been able to have some very successful programs. The new ad units do work. We've had some instances where just a single-day run of a certain ad unit--some of the more customized ones, home page, portal types of ad units--has come close to shutting down our Web sites because of the volume. So it seems like a surprise, but why should it be a surprise? The people are there. We've been advertising to them.

So I think another thing that's been a nice surprise this year is the ability to come up with these more performance-based contracts with the media companies. ... The refreshing thing is, about the environment for those of us willing to continue to spend is that the media companies are willing to do things now that they were never willing to do before. ...

We still haven't gotten a true integrated cross-platform campaign, which is really disappointing. Two years ago when AOL Time Warner had just merged and we had a fairly large deal with AOL at the time, we tried to put something together and they didn't even know how to respond to it. Today, at least they're starting to put together the teams who can start to put these deals together. But we're still not there.

We've had cross-platform, integrated campaigns, but really it's been the client and our agencies that had to put it together vs. the media companies helping us put it together.

Alan Schanzer: For us, the big success when we look back at 2002 is going to be the alignment going into the planning process between our digital specialists and our traditional media planners. In terms of cross-platform, we did a lot of stuff in the upfront this year, where we leveraged both online and offline dollars together, and really it wasn't about value-added opportunities. It was about everyone getting to the table together, the online sales folks and TV sales folks and the planning teams.

AA: Have any of your marketers been influenced by some of the reach and frequency and media mix studies conducted this year?

Mr. Schanzer: Absolutely, especially in the consumer package-goods category. Colgate-Palmolive Co. and Campbell Soup Co. are really embracing and participating in that research. They're really using that information to make decisions about budgeting for next year.

Neil Budde: It's been interesting. [Some] have chosen to take their video from their TV commercials and bring it online. For them, it's a great way to leverage the investment they've already made in creating those commercials. Particularly if there's something that people already have somewhat of a recognition of, when it starts playing online they're more likely to notice it and engage with it. So it shows that you're leveraging the two. ...

We've also done a lot more within our organization with print and online sales forces to find greater opportunities to work together. One is "e-pages." It's basically a way that an advertiser is buying something in print, can take essentially the same creative, bring it online in a large format that appears across our network of sites, allowing them to extend that reach from the print.

Martin Nisenholtz: Clearly, one of our biggest successes this year was Surround Sessions ['s new ad model where it offers an advertiser the ability to control all the ad positions on a page and for a set of subsequent pages]. It's gone from 0% of our revenues and will probably be 9% or 10% of our revenues this year. ... A second success is the resurgence of e-mail as a marketing channel. We're seeing probably an increase of 3% or 4% there this year. Last year it was about 5% of our revenues. It will be significantly above that in 2002.

I think the biggest disappointment for me continues to be the fact that I would just like to see better creative work on Web sites in general. We were so adamant about seeing that that we offered a contest with a $50,000 first prize called the Ad Innovations Award.

James Warner: I think the online medium and the daytime daypart is a huge trend. We did a study to measure the difference between people who use the medium during the day and those who are--what we call the at-work audience vs. the at-home audience. We've gotten some really fantastic results. And I think it was about 65% of people who use the medium at work are more likely to buy online, and I think 55% are more likely to shop online. The one disappointment is still the risk aversion of clients and how difficult it is to get people to take a leap of faith that it's going to work.

Jeffrey Webber: I think that we've seen some real successes in improvement in creative. Things like a sliding billboard that does--it's an elegant presentation of a marketer's message that resolves back to a smaller unit and then can be reopened by the consumer if they want more information. ...

I think the other success for the year is what I'm seeing as a differentiation of sites. There's beginning to be a real understanding that what we call quality journalism sites, or sites like USA Today, The Wall Street Journal, The New York Times are different. ... The biggest disappointment I feel like I had was just how slow the economy was. ... When you have this kind of economic environment, it just doesn't give marketers the chance to take chances.

Mr. Schanzer: We try to look at it in terms of how many divisions or products within a client organization are using the Web. We're seeing a lot of growth there even if the spending might not be what we want it to be. But when one division of Colgate is using it and they're finding success, and word is getting around the next division decides to use it for their products and brands.

Mr. Budde: We also tend to measure it as their spending on online advertising as opposed to what are marketers spending online in total, which includes the cost of their sites, includes all of the other things. And if you look at it that way, the amount they spend on online marketing--not online advertising--may be approaching the kind of numbers they spend on TV where it's only measured, or primarily measured, by the revenue to the media.

Mr. Schanzer: I think we're starting to see integration on the creative side, so that the creative teams at the agencies that are responsible for digital creative development are now part of the overall creative teams within the agencies.

AA: It does seem with the bigger ad units, you're having an experience with a brand ...

Michael Zimbalist: What can you do and what do you face internally with risk aversion in your organizations?

Mr. Bienert: I think that there's less skepticism among senior management.

Mr. Schanzer: This has been the year where it hasn't been "Should we or shouldn't we be online?" but "Help us understand how we can use this medium effectively." We're getting that from a very different kind of client now.

Ms. Riordan: It's definitely still a challenge. ... The way to growth for our company is by providing real solutions, real benefits. And the Internet has all of them. There is no other place where you can [get] the level of customization. ...We can really deliver convenience, it's 24/7, we can do the customization.

AA: Which of your brands have been successful online?

Ms. Riordan: We've been successful by bundling brands together. By marketing as a trust mark behind Kraft, we have been very, very successful.

AA: What are some of those products?

Ms. Riordan: Mac & Cheese--anything that carries the Kraft brand name. So the cheese businesses, Minute Rice, all of the what we would call [the ingredients businesses]--bundling all of them together.

Mr. Bienert: I think that one thing that we've discovered in terms of having effective online creative, while at the same time having a consistent campaign between online and offline, is it's got to start day one with the first idea sessions at the agency. [You need to think, "How's this going to work online?" ... Because otherwise, the creative is always going to be a challenge, because you're going to try to take an offline campaign, adapt it online, and then it's a mess. We have one creative team at the agency. It took a long time. ...

Planning is separate, but they sit next to each other to coordinate. But the key thing is the creative, because they have--I mean, even today with them all sitting next to each other, we still have times where they come up with something and you say, "Guys, great idea, but can you think of it like a 1-second spot?" [Laughter.]

AA: What is Internet advertising or media, per se? Or Internet marketing? Is segmentation occurring?

Mr. Warner: I think it matters because I think a lot of people--particularly the unsophisticated marketers--tend to think of it as banner advertising. And the thing we always hear is "Banners don't work. I'm not interested in online advertising. Banners don't work." And as you listed, Tobi, it's multiple sub-media within this channel.

Mr. NisenholTz: Like print. Print is direct response, print is Yellow Pages, print is newspapers, print is magazines.

Mr. Schanzer: We really look at it as digital marketing, not just online advertising. What you find across different clients and categories, across different campaigns, different mixes and different elements of those mixes work. And in other cases they don't work. And so you have to be somewhat experimental.

AA: Marketers often complain that media partners don't understand their business objectives for an online effort.

Mr. Bienert: First of all, as an advertiser, I don't go into a company and say, "I really want to do five e-mail campaigns." I go in and say, "OK, this is what I'm trying to do." And then I separate in the way I look at the planning as there are the smaller tactical deals, and then I firmly believe in having bigger, long-term, strategic deals.

AA: What about publishers?

Mr. Bienert: The smaller publisher deals tend to be more tactical. And a lot of it has to do with the focus. And tactical, meaning a good thing, because the publishers can offer a much more focused solution than the portals that have such a breadth of properties.

The advantage of having a longer-term deal is that you can put different milestones. We're launching an SUV next month, the first SUV ever from Volvo. ... We had a Web presence for it last December, so a full year before the car was launched. [After consumers opted in] it's about where we can actually get a lead to a dealer. [Then] it's time for us to do a couple of focused e-mails saying, "Hey, did you know you could go do this?" And then now that we're coming to the launch next month, we'll turn the knobs a little differently.

Ms. Riordan: We've used tracking studies. But to be honest, I've moved away from them because ... we have been able to show that by marketing online that we have been able to move brand preference and purchase intent, probably the two strongest measures. We're working to sort of marry the panel data and the offline sales with either our registered user base or with some of the companies to see if we can really, truly demonstrate that the packages are going off the shelves. We just need to figure out how to get Internet into that mix.

Mr. Warner: It's a challenge in your category particularly.

Ms. Riordan: It is, but again, because of the technology and because of the way some of the things are put together, I think we're getting closer.

AA: If Volvo, for example, is a print advertiser in The Wall Street Journal, do you have different sales forces? Do the sales forces ever pitch collaboratively?

Mr. Budde: We try to work our sales teams together as much as possible. They are separate in most cases. But they're paired together, so that the print rep who would have Volvo would have a counterpart on the online site. And whether that's putting together a package or putting together other kinds of things like research, that's the aim.

Mr. Webber: Our sales forces have had--our print sales group has had--online quotas for years, so they go out with a print and online component, typically we'll work with a print and online component. The problem is ... we have to still have that online sales person or rep. So right now it's a four-legged sales call.

Mr. Budde: The other thing we touched on earlier is that there is a different relationship where you're dealing, not just: "Here's what I want, here's what I buy." Increasingly, you want to be able to work with the media property to figure out, within that site, what part of their audience are you trying to reach? Are there different things you want to do? What new kinds of things do you want to offer? And that's going to be very difficult to do with a single-pointed contact.

Mr. Zimbalist: I think what I'm hearing is you want to see more integration and not have huge meetings.

Mr. NisenholTz: Let's differentiate between integration and sales. We would love to do more brick-and-click deals. I'll say it as openly and as clearly as that. I mean the fact is that in some ways integration is a two-way street. One of our best successes in integration I think was for "Lord of the Rings," which is a film where [New Line Cinema] was both in the paper and online, with very different experiences in both media. And planned together. But the fact is that the design of that program benefited from the expertise that came from the digital side of the business, as well as from the print side of the business.

Mr. Webber: There's also the complexity of working with the client on an integrated campaign and then being sent off to two different agencies.

Mr. Nisenholtz: Or two different parts of a single agency.

Mr. Schanzer: Speaking as an agency guy, I can tell you that agencies have demanded a lot of the media community, but we are still very dis-aligned internally in lots of cases, whether it be talking about online and offline or print and television, or planning and buying. And that's something the agencies need to fix.

Mr. Warner: We probably have a unique perspective--we're exclusively online. You would think that would be a disadvantage in working in integrated campaigns. But in some cases it's turned out to be an advantage because we're so focused on doing one thing well we can adapt ourselves to plug into different situations.

Mr. Zimbalist: Do you have formats that work for you that are because this has been an unbelievable year of experimentation?

Ms. Riordan: I definitely think we have what we need in a palette, but I'm so passionate about continuing to innovate in this space. I don't think we should necessarily assume that we can take that and just put it against another environment, another set of consumers.

Mr. Webber: I would think that we've been able to experiment and be able to pay for things. And if we can keep the mix right so that we're experimenting with a percentage, and giving you new ideas, new innovations.

Mr. Bienert: Do we need to continue to experiment with the ad units, or should we be experimenting in more creative things like contextual marketing?

Mr. Nisenholtz: There is enormous demand for certain areas of our site. And we're continuously sold out in those areas. So what we've said is: "We'll sell you those customers who have gone into the automotive site, wherever they go, in through the rest of the site. And if you want to target them by demographics or some other registration, then you can do that." We call it wide-angle targeting. But just behaviorally, we don't want to sell you a mass of users. We want to sell you those people who have evidenced certain behaviors. ...

What about interactivity? You've talked a lot about embedding interactivity ...

Mr. Warner: [Banners] are road signs for people to click on to come to your site. The goal is to get more people to interact with your brand on your site. I think we're finding now that there are site experiences that people don't want to leave.

AA: Will online ad spending, or your online sales, increase? By what percentage?

Mr. Webber: Internet advertising, online media will outstrip traditional media. [Laughter.]

Mr. Zimbalist: So you're saying actually the growth rate of online in 2003 will exceed most offline media?

Mr. Webber: Absolutely.

Mr. Warner: I'm optimistic. I think we don't look at the whole market in the same way that Jeff does. I think you're going to be seeing more and more information, statistics, research coming out that demonstrate the effectiveness of online in driving offline activity, whether it's sales or hopefully in consumer package goods, of being able to move products off of the shelf.

AA: So a year from now, another year of a lot of research?

Mr. Warner: More than research. I think a lot more case studies of people who have been successful in driving offline behavior from online advertising. And I guess I'd say, secondly, the just continued emergence of the value of the at-work audience. People trying to reach people--advertisers using the online medium as a daypart to reach people at work.

Mr. Nisenholtz: Well, two things I can guarantee. [Laughter.] One is that more consumers will be online around the world. There will be no diminishment of the growth of the medium. Second thing I can pretty much guarantee is that the sphere of influence with respect to our online journalism will increase. We now run regularly over 2 million unique users outside the U.S. every month. That will increase. Our global reach will increase.

AA: How about the industry as a whole?

Mr. Nisenholtz: I think that the industry will grow next year. I hope it grows more than 4% actually. I know we have enthusiastic clients at this table. And by no means typical. They're very much more knowledgeable and more aggressive than typical clients are. But if you take the temperature of this table, you would expect to see an adoption of this medium, even from those clients who several people have said have been cautious in the past. So I would hope to see a bigger number than 4%.

And I think the only other thing that these guys haven't mentioned is we have a very fragile geopolitical situation right now. And that to me, particularly in the first half of the year, is a huge wild card with respect to the economy. If there is a war, I think that all bets are off, at least in the short term.

AA: And the biggest development a year from now in the whole digital market space?

Mr. Budde: I would say you're going to see continued focus on more precise targeting by either the type of audience, by what their activity is, by what's going on or by the nature of the site. People are paying a lot more attention to how they reach a certain kind of audience and what kind of message they put in different contexts. I think to make that effective, what we all have to do is work at ways to improve the efficiency. It's always great to go out and get the million-dollar ad buys, and get it in such a way. But a lot of what people want now are more targeted, selective, smaller-size buys into different places. And I think we need to figure out ways at the publisher end, and the creative end, to support that at an efficient cost point.

Mr. Schanzer: In terms of growth, I think 0% to 5% is probably a pretty conservative, fair range. And I think the low end of that range and the high end of that range are driven by the economy. Certainly, planning tools will gain some momentum next year. I think by the end of next year we have to have some sort of standard there. And I think the growth of interactive television and PVRs as a real threat or opportunity for the television world is going to lead to a bigger focus on syncing to broadcast opportunities.

Mr. Bienert: I think overall things are probably going to be fairly flat next year, because the marketing budgets are not going up. So any growth that's going to be out there is going to be based on allocation, not on an increase in marketing dollars. I think that some segments--I know automotive is going up next year. I've seen what my competitors are putting just in their upfronts, and the increases in some cases are massive. I would say pure Internet ad spending will be flat.

Ms. Riordan: I'll establish five goals for next year. I will want to plan and/or do a multimedia plan for at least one brand next year. Hopefully, we will do that more enterprise-wide. We will definitely look to advance behavioral targeting. We will definitely be expanding our use of broadband applications. We will increase the number of brands that are marketing online. And we will demonstrate--at least I hope it'll be Kraft--someone will demonstrate offline sales impact.

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