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Major Brands Are Slow to Move Their Sponsorship to the Web

By Peter Whoriskey
Washington Post Staff Writer
Wednesday, June 18, 2008

One of the nation's leading sponsors of online media, Rob Wrubel lays out as much as $20 million a month for Internet ads. Over time, his firm's ad buys have supported a wide spectrum of Web content, from video clips of rock bands to coverage of the Iraq war, and an array of online names: Facebook, Google, Yahoo, CBS, MySpace and CNN.

Wrubel manages ad spending for the University of Phoenix, a for-profit college that paid more for online display advertising in the United States than any other business over the past year, according to statistics from TNS Media Intelligence.

"We are, in fact, everywhere," said Wrubel, who is chief executive of Aptimus, the online ad outfit owned by the university's parent company. He compared their spots to "carpet bombing" and said that "someone once calculated we accounted for 1/64 th" of all online advertising.

Yet the fact that the University of Phoenix, a relatively small player in the world of advertising, ranks at the top of Internet sponsors also highlights what for many online media businesses is a grim economic reality: The biggest U.S. advertisers, which have long supported other formats -- television, radio, print -- have not fully embraced the Web.

So while print and video outlets face enormous pressure to transfer their wares to the Internet, many in the industry wonder where the money to support online content will come from.

The nation's largest advertiser, Procter & Gamble, which spends nearly $5 billion a year on advertising, devoted less than 2 percent of its measured ad spending online, according to figures from the 2007 Advertising Age list of leading national advertisers. The company spent most of its vast ad budget on television.

The University of Phoenix and its parent company, Apollo Group, by contrast, spent $278 million on advertising last year, most of it on the Web.

"While spending on Internet marketing has been growing dramatically over the past decade, the top 50 or 60 brand marketers are very much underrepresented," said Randall Rothenberg, president and chief executive of the Interactive Advertising Bureau, a trade group. So far, the online industry has been "growing by grabbing the low-hanging fruit."

As with television, radio and other media, advertising dollars will shape what is and what isn't available on the Internet.

There are, to be sure, billions to be garnered from online advertising -- about $21 billion last year in the United States, according to the Interactive Advertising Bureau. And analysts expect that figure to double or more in the next decade.

Yet for all the growth in online advertising, there are some doubts that the advertising revenue available is enough to pay for the kind of content -- articles, videos, etc. -- that Internet visionaries have predicted.

For one thing, the largest chunk of money spent for online ads is in search advertising, those little text ads that run beside search results. These ads do not directly benefit companies putting information online. Instead, the money from search advertising is reaped by the search engines -- Google, Yahoo and Microsoft -- that run them.

Often, most of the money a big brand spends online is for search rather than display advertising, said Kevin Kells, who handles consumer-packaged-goods advertising, both search and display, for Google. Display ads are the graphic or pictorial ads that many content sites rely on for revenue.

Search advertising allows advertisers to capture consumers' attention "at a moment of relevance," Kells said, meaning when they were looking for a product. A person searching for "fuel economy Toyota," for example, is likely to be receptive to auto ads.

"We literally buy millions of search terms," said Betsy Lazar, executive director for corporate advertising and media operations at General Motors, the nation's third-largest advertiser. " 'Chevy Detroit.' 'Chevy.' 'Fuel-efficient vehicles.' If you talk to Google, it's not that unusual."

For companies that provide Internet content, the largest source of advertising revenue is display. Such advertising accounted for 34 percent of all online ad dollars last year, according to figures from the Interactive Advertising Bureau. Search advertising is 41 percent of the total, with classified, e-mail and other categories rounding out the list.

To draw advertising revenue, online publishers and advertisers are constantly experimenting with new formats to grab attention and to better target audiences.

YouTube, which shows user-submitted videos, experimented with video ads that ran before a selected clip was shown and then opted for overlays that allow viewers to choose to watch a video ad. Facebook and MySpace, the major social networks, try to sell advertisers on the idea that their sponsored messages can spread via members. Beer companies and others post what they hope will become "viral videos" -- comic ads made to look homespun that get passed along from friend to friend.

But many online companies are looking to the big advertisers, which just haven't shown up yet, at least not in force.

The reasons are complex.

In part, many observers said, the advertising industry and its workforce are more accustomed to creating and presenting 15-second television spots or magazine ads than they are to arranging an online campaign.

Penry Price, Google's vice president of North American advertising sales, noted that while it is relatively easy to do demographic targeting in other media, it is more difficult to get precise information about online audiences for a given Web site. Consider, for example, an advertiser trying to reach young women interested in fashion.

"We know they're online, and they may be online more than they are watching TV or reading magazines, but there's no easy way to find them right now," Price said. The process of adapting to online media is "a fundamental challenge for the entire advertising industry."

In part, too, the reluctance of big brands to move online is because they have more to lose.

"If you are responsible for a brand that has been around for 50 years, you clearly are more cautious," said Kelly Twohig, who manages digital investment for Starcom, a media agency. "You have less license to innovate."

Aptimus's Wrubel, a Web veteran who was chief executive of AskJeeves.com, said he thinks that the big advertisers will soon make the transition online. The possibilities of the medium have yet to be fully explored, he said.

"We are now going to see large advertisers do what they did with television in the '50s -- to get behind programming," he said, offering that the advertisers are likely to capitalize on the Internet's social and interactive aspects. "The medium offers a fundamentally different experience for consumers."

Although the University of Phoenix continues to shell out a large sum of money on selling itself -- it spent more on advertising last year than it did for faculty compensation, according to its annual report -- Wrubel is focused on changing how its story is presented.

Like other companies marketing online, the University of Phoenix is considering and adopting new Web advertising strategies, some of which blur the line between advertising and programming.

Being everywhere on the Web, after all, is not the same as being understood or valued.

Wrubel wants to encourage faculty members to have blogs so that when a person searches on a given subject, the results might lead them to the University of Phoenix. He speculates that the company could produce reality-TV "webisodes" involving people going back to school -- a way to find and engage the target audience.

And the company has recently initiated a partnership with the young folksinger Kate Voegele, the first artist signed to MySpace Records.

Voegele is taking University of Phoenix classes online, and a MySpace page with her music includes a Web video diary of her touring and making time for studies.

"It's better than blasting them with banner ads," Wrubel said. "It's the purest form of advertising. It's testimonial. Rather than just remember our banner ads, people can remember our story."

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