I recently saw a report (I forget where) that many radio
stations are now generating up to 40% of their revenue from
".com" advertisers. As little as 18 months ago it was very rare
to hear or see an ad for an Internet business. In North America
at least this holiday season brought a flood of TV, radio and
print advertising from Internet related businesses.
From a business and investment perspective, the Internet is
HOT. Over the past two years especially, many new Internet
startups have received a lot of financing. Unlike traditional
investments in the past, these investments have been excessive.
These new ".com" business are now at the stage where they need
to perform. Awash in cash, they have turned to traditional
advertising in order to make their mark.
It is not surprising that the rush to the Internet is often
compared to the gold rushes of the 19th century were people
would spend exorbitant amounts of money to stake a claim in
California or the Yukon. Without being cynical, there are
many lessons that could be drawn from the idea of throwing a
lot of money into a hole with the hopes of getting rich.
Just how effective will traditional advertising be for these
".com" startups and what is the significance for other online
business without the deep pockets? It is probably too early to
tell but it is not too early to speculate. Speculation is of course
what any new business is about and Internet business even
more than most.
With this in mind, here is my two cents worth. Take it with as
much salt as you like.
1. Many existing big Internet advertisers will be out of
business or significantly reduced in size and purpose
within the next 12 to 18 months. I have used the example
of an online Wine Merchant several times in the past and
it works quite well here. For book merchants, music
distributors and wine merchants, the Internet offers a
great new delivery mechanism for their products. What it
does not do is increase their consumption. People are
going to drink approximately the same amount of wine,
read the same number of books and listen to the same
amount of music with or without the Internet. Somebody
has to give when there are too many distributors for a
fixed number of customers.
2. Not too many Gold Rush parallels should be drawn with
the Internet. Although the hope of getting rich quick by
striking the mother-load does exist in the form of a
successful IPO, unlike gold fields it is unlikely the
Internet is ever going to dry up.
3. Traditional advertising works. TV, radio and print
advertising has existed for a long time because they have
proven their worth to advertisers. Internet advertising is
the new kid on the block that has yet to prove itself.
Banner ads in particular have failed to live up to their
hopes. Traditional advertising however, is very expensive.
The fact is that a lot of ".com" advertisers are going to
discover that they can not justify the cost of traditional
4. There is plenty of opportunity for small Internet
businesses with limited budgets. In the final analysis,
small under funded Internet businesses will probably
generate greater returns than the big profile IPO financed
corporations. The reason is that they have little to loose
and a lot to gain. Unfortunately there will be a lot of
losers for the few big winners. But that is what
entrepreneurship is all about.
5. Successful traditional businesses that are able to adapt to
the Internet will be the biggest winners. The reason is
that they already understand their core business which
will give them a significant advantage over a business that
is new to the Internet and new to their core business.
6. When it comes to the Internet nothing is carved in stone,
least of all these observations. If you have a new idea you
could be in luck.
Next week I will discuss some traditional advertising options
that are available to the small Internet entrepreneur. If you
have any personal experiences that worked or failed for you,
please let me know. Promotion is the life blood of any
business whether they are on or off the Internet. We can all
benefit from each other's experiences.
"IMS Web Tips" ISSN 1488-7088
© Copyright 1999 Virtual Mechanics
"IMS Web Tips" is a weekly news letter for all web site managers regardless of experience who are looking for detailed information on
creating, maintaining and promoting their web sites.