Cyberspace For Sale : From Madison Avenue to Silicon Valley, Companes Are Rushing to Market Products Over the Internet

For most of its 25 years of existence, the global computer network known as the Internet has been about as welcoming to corporate advertising as a Communist Party newspaper would have been in the Soviet Union at the height of the anti-capitalist era.

But that is now changing--and fast. A medium once viewed as being the overly technical province of academics and computer whiz kids has in the past year become the next big thing in marketing.

From Madison Avenue to Silicon Valley, companies are scrambling to take advantage of a medium that some predict will do nothing less than change the nature of advertising itself. They’re putting up video pages on Internet’s World Wide Web, buying space on electronic magazines and frantically trying to figure out what interactive advertising is all about.

“It’s like the Wild West out there,” observed Mark Green, the executive in charge of new media for Zenith Media, the media-buying arm of the Saatchi & Saatchi advertising agency. “There’s a gold rush going on. A lot of people are going to lose money on the Internet, but there’s the potential to make fortunes.”

IBM, MasterCard, Coors Brewing Co., MCI, Ragu foods and Club Med are among the national corporations that have already set up camp on the World Wide Web, the rapidly growing, easy-to-use graphics part of the Internet. There are now an estimated 10,000 commercial sites on the Web, from simple corporate logos to locales with cyberspace bells and whistles. More companies are hanging out their corporate shingles on Web “home pages,” as the sites are known, practically every day.

Even Nielsen Media Research, which delivers the ratings for broadcast TV, is now joining the fray: the company announced last week that it is forming a partnership with ASI Market Research and Yankelovich Partners to develop research services to measure the on-line audience.

“The Internet is a whole new medium for selling goods,” says Ed Hogan, senior vice president of MasterCard International. “I believe it will change entire industries and the way they market their products.”

The only problem is, with all the high expectations, no one knows exactly what kind of “commercial” will work on the Internet today.

Internet users are not captive consumers. They go only to the sites they choose, and this “Field of Dreams” is a beguiling maze with many doors. What will induce Internet users to point and click to a commercial?

Judging from a survey of experimental sites on the Internet and from interviews with a variety of new-media marketers, it appears likely that--out of necessity--advertising on the Internet will be very different from the glitzy hard sell used in most media today. To succeed, cyberspace commercials are likely to break down the traditional wall between editorial and advertising, closely linking the sales pitch and the story.

“I think you’ll see entertainment and advertisement merging together in ads on the Internet,” said Robert Allen, one of the partners in Modem Media, a Connecticut-based agency that has created Internet advertisements for a number of corporate clients. “Users will interact with commercial messages, and it will become more difficult to differentiate between editorial content and commercial message.”

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That the Internet would be the focus of all this commercial attention and marketing experimentation comes as a surprise even to those who follow the latest new-media trends. It was supposed to be interactive television, featuring couch potatoes talking back to the TV set via remote, that would usher in a new era.

But interactive TV and some other new media have developed more slowly than anticipated. Meanwhile, the Internet has caught the imagination of the millions of consumers who are now buying personal computers for the first time. There are an estimated 30 million Internet users worldwide today, and that number is expected to more than triple over the next three years. And the demographics can’t be beat: young, upscale computer users who are considered open to new products and new ideas.

So today, the Internet is buzzing with advertising experiments. Some marketers hope to position themselves as underwriters of the new medium, not just the guys doing the ads but as the wonderful folks who are helping to expand the Internet into your living room. The notion horrifies old-time Net-surfers, but many believe there will be sponsored programming on the Net, just as there are sponsored programs on television today.

One place to see this new form developing is at the Web site for Zima, a clear-malt beverage that is aimed at Generation Xers. The ad aims to associate Zima with cyberspace cool and a feeling of belonging to a hip, exclusive group (Tribe Z) that surfs the Net.

By pointing and clicking around “The Fridge,” a virtual refrigerator, visitors can access Zima product information, send an e-mail message to the company or download materials (games, posters and graphic icons), some of which relate to the Zima logo and some of which do not. From here you can click onto other “cool sites” on the Web--a city-by-city restaurant guide, for example--that have no direct connection to the product.

Zima’s Net tour guide is Duncan, a fictional Generation Xer whose life and loves are detailed in a cyberspace soap opera of frequently changing installments. The intent, says creator Allen, “is to build a relationship between Zima and its target audience.”

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At one stop on the Zima site, the consumer has to surrender some personal information. If you want to join Tribe Z and see what’s inside, you have to give the company customer data (name, address, age and drinking habits) that can then be followed up with additional consumer surveys.

Rather than resisting the Zima site, at least some Web users seem to have embraced it. About 8,000 people registered to join Tribe Z while it was still under construction, and users have answered surveys about their favorite TV shows and other topics. The site gets between 7,000 and 10,000 visitors per day, as many as some electronic magazines.

For advertisers, the hope is that an audience raised on MTV and steeped in the culture of commercials on broadcast television will view cleverly produced, entertaining “advertorials” in cyberspace the way they view TV commercials they like: not negatively, as mere advertising, but positively, as entertainment.

“There already are news forms on the Internet, sponsored by the TV networks, where people can talk about their favorite TV shows,” noted Stuart Ewen, a professor of media studies at Hunter College in New York. “Is that advertising or editorial?”

The little research that has been done on consumer attitudes toward advertising in the new media yields contradictory results. When Advertising Age, a trade publication, recently asked 1,000 adults whether interactive services on television and home computers should have advertising, two-thirds responded negatively. But, in a recent Roper poll, when people were asked if they wanted information about specific products and brands over the new media, over half said yes.

“People on the Internet are opposed to the hard sell, but they will go for a soft sell,” said Mark Pettit, a spokesman for MCI International, the long distance phone company which recently agreed to invest $2 billion in News Corp. and has big plans to expand its Internet presence. The company has done focus groups on Internet advertising, and it also asks people for feedback via electronic mail on their Web sites.

“What we’re finding is that you have to be both entertaining and informative in ads on the Internet,” Pettit said. “If you’re not, word gets around quickly: ‘DGT,’ which is shorthand for “don’t go there.”

MCI is operating a popular home page on the Web, offering programming that includes news feeds from the Reuters news agency and an on-line fashion show. In addition, the network has a second site that features a cyberspace version of its current broadcast TV campaign. That site--which sells an MCI software package--stars a cast of characters at a fictional publishing house, Gramercy Press. Visitors can enter employees’ offices and send them e-mail--all the while using a simulated version of the MCI software package.

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According to MCI, the software site has had more than 1 million visitors since it opened five months ago. There are some 150 e-mail messages to the fictional characters per day, and Darlene, the receptionist, has received numerous marriage proposals.

“I’m not quite sure why people are proposing to a fictional character,” Pettit mused. “But there’s no question that the site is helping us sell MCI. We’ve already sold several thousand software packages directly, via an 800 telephone number posted on the site. And we believe that our presence on the Internet has helped us sell MCI services in general.”

Mark Lee, the Zima brand manager, also is pleased with the results so far. “The impressive thing about the Internet is that it allows you and your consumer direct, instant communication,” he said. “People are talking to us about the product and their lifestyle, and they’re spending a lot more time with us here than they do watching a 30-second TV commercial.”

Yes, but does it move the goods? “I believe it is selling product,” Lee responded. “We’re only beginning to gather research data on the site.”

Advertising on the Internet could present some challenges for federal regulators. The Internet--which began as a network among academic institutions--is essentially unregulated in terms of content, and many people want to keep it that way on First Amendment grounds.

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But, in terms of an advertising category such as cigarettes, is cyberspace like magazines, which accept cigarette advertising or like broadcast television, from which cigarette advertising has been banned since 1970? The question is unresolved.

“Cyberspace clearly represents a convergence of several technologies, telephones, broadcast media and other media,” said Christine Varney, a commissioner at the Federal Trade Commission. “Any advertising on the Internet is subject to the current law on deceptive or fraudulent advertising. But whether cyberspace should be considered more analagous to print or broadcast media remains to be seen.”

The FTC has brought only one consumer-protection suit so far against a cyberspace advertiser, a credit repair firm that allegedly advised customers in an ad distributed on America Online to take illegal measures to protect their credit rating.

The agency, which has opened its own home page on the Net, recently held a workshop on consumer issues and the new media, from advertising to questions of privacy in financial transactions. But Varney said in an interview, “I don’t anticipate any regulations [regarding Internet advertising] that the FTC will issue in the near future. There are big questions here, but I think our first step should be to talk to everyone involved . . . not to set up a new set of guidelines.”

With the FTC wary of hamstringing a new medium before it develops, it is likely that there will be a lot of commercials in place on the Internet before the public realizes it. While some lament the transformation of the Internet into a commercial medium, others advance a traditional pro-advertising argument: only major advertisers, proponents say, bring the kind of cash and clout needed to expand the Net into a mass medium readily accessible in homes across the country.

“The scaling up of activity [and programming] on the Internet is going to have to be paid for somehow,” noted Anthony Rutkowski, director of the Internet Society, a nonprofit organization.

In its new site on the Internet, MasterCard International uses folk tales from around the world to try to establish the corporation as a citizen of the World Wide Web. The site offers a changing variety of folk tales, with links to the home pages of the related foreign countries; users are invited to submit folk tales from their own countries as well. To help newcomers, the site also offers a tutorial in cruising the Web.

The indirect pitch for MasterCard comes in the form of accessible information about credit card use, from the location of cash machines in West London to the future of making credit card transactions on the Internet. MasterCard executives report that thousands of people, from Europe to Japan, are visiting the site every day.

Beyond establishing a presence, the site has another objective: getting users accustomed to the idea of making financial transactions via the Web. “We want to be on the Web because we want to be anywhere where there are millions of people,” said Hogan of MasterCard International. “But this is also an opening wedge for the day when there will be a lot of shopping on the Net.”

Several companies are working on security systems for the Internet that will allow users to make private financial transactions. “If users can become comfortable with buying goods over the Net,” Hogan said, “merchants will be able to sell to their ever-loving heart’s content, from grandma’s cookies to mail-order catalogues.”

“Advertisers are attracted to the Internet because it offers the chance to ‘micro-target’ your audience, to reach them at the site of their own interest,” adds investment analyst Michael Parkekh, who studies the new media for the Goldman, Sachs investment firm.

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But, despite its advantages, the Internet also presents plenty of problems for advertisers. “In broadcast advertising, the problem is commercial ‘clutter,’ ” said Stuart Ewen. “On the Internet, it’s how do people find you in cyberspace.”

The World Wide Web holds part of the solution to this problem by making it possible to build hypertext links, which provide single-click access to related sites. The quick proliferation of Web-browser software--now offered by two of the three major on-line services as well as by smaller Internet providers--is helping users navigate cyberspace without knowing specific Internet addresses. MasterCard has hypertext links with Wells Fargo. Zima advertises its site with a hypertext link in Hotwired, the electronic version of Wired magazine, and the company also prints the Internet address in print ads and on the Zima bottle.

What will be the future of advertising on the Internet? A key question will be how much tolerance Net surfers have for ads in the middle of programming. Net surfers are an independent group, and they communicate their views readily.

For their part, advertisers and other entrepreneurs are dreaming of new ways to reach--and measure--the Internet audience. There already are several new companies offering software designed to measure usage of Internet sites, and the Nielsen joint venture will aim not only to count the “viewers” but also do market research on the on-line audience.

One new company offers free e-mail service to customers in exchange for viewing an advertisers’ message. And some new-media marketers predict this cyberspace quid pro quo will be used in other ways on the Internet. “There’s no reason why you couldn’t have the cyberspace version of ‘Murphy Brown’ offered in two versions, with and without advertising,” said Mark Green of the Saatchi agency.

Still, despite the promising results--at least from an advertiser’s standpoint--of the current experiments in merging advertising and editorial, the Internet remains something of a mystery to those who would tame it for commercial use.

“The Internet is shifting from an indigenous, grass-roots popular culture into a commercial medium,” noted Ewen of Hunter College, “and it’s difficult to predict exactly how that will play out. Advertising on the Internet is like the discovery of electricity: It will take awhile before people figure out how to harness that energy.”

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Advertising on the Web

Here are addresses on the World Wide Web for companies mentioned in this article:

https://www.mastercard,com

https://www.zima.com

https://www.internetMCI.com

https://www.mci.com/gramercy