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Web Efforts Open Revenue Streams

Dec 6, 2004  •  Post A Comment

When a Boston advertising agency asked Peter Hennessey to come up with ideas to promote the local launch of Toyota’s Scion brand, Mr. Hennessey, the director of sales at Boston ABC affiliate WCVB-TV, knew immediately the Internet would play a prominent role.

Deploying what he described as “smart bombs,” Mr. Hennessey and his team developed a plan that would augment 30-second television spots with five-second spots directing viewers to a link on WCVB’s Web site, where they could get more information on Scion models, select options for their car and arrange to be contacted by a local Toyota dealer about a sale.

“It’s a connection between the end user and the customer, and in this case the automobile dealers were able to connect [to viewers] through our Web site to get customers’ name and address and what they are looking for,” Mr. Hennessey said. “With the Web, we reach them, send them to our Web site and then send them to our customers.”

While television remains the most efficient way to get a message to as many people as possible, Mr. Hennessey acknowledged that when it comes to connecting advertisers with consumers, TV spots still have a way to go. That is where the Web comes in. By promoting on WCVB’s Web site a link to a Web site run by Boston-area Toyota dealers, Mr. Hennessey said, he is providing the sort of connection that enables a consumer’s interest to translate into a sale for the advertiser.

The initiative hatched by Hearst-Argyle Television-owned WCVB is one of a number of Web-based strategies being explored by the nation’s station groups as they come off a period of advertising revenue growth and prepare themselves for what many believe will be a tough 2005.

Thanks to robust political campaign spending, coupled with Olympics-related revenue at NBC affiliates, many station groups in 2004 reported strong revenue growth even as core advertising categories continued to struggle at the local and national levels. But with 2005 lacking the Olympics and any material political spending, a lot of stations are scrambling to uncover new revenue streams that could eventually smooth out the even-year-to-odd-year revenue fluctuations.

Web-based initiatives are part of a host of initiatives being introduced as station groups look for more stable sources of revenue to insulate themselves from the volatility coming from a number of core advertising categories, such as automotive, retail and fast food. Identifying steadier revenue streams could in turn goose station stocks, which have struggled amid the uncertainty over advertising growth and the state of deregulation, station group executives said.

“Our vision is to develop other revenue streams such as the Internet so it will minimize the overall importance of political advertising,” said Gary Chapman, chairman and CEO of LIN Television. “If we have these initiatives it makes the political revenue smaller in comparison with the total.”

Online advertising appears to be best poised to achieve just that. After imploding following the tech-sector bust a few years ago, online advertising has regained its luster and is shaping up to become a real business. According to research company eMarketer, total online advertising is set to reach $9.3 billion in 2004, after rising 20 percent last year to $7.3 billion and falling 16 percent in 2002 to $6 billion. What’s more, in a sign of the increased demand for online ad spots, prices for online spots are rising, with major portal sites like Yahoo! charging upwards of $300,000 for a 24-hour space, versus less than $180,000 a year ago.

Station groups are using a variety of tactics to take advantage of advertisers’ renewed interest in the Web. Some are using strategies similar to that of WCVB-developing ways that existing advertisers can leverage their presence on television to create a similar profile online.

Others, including LIN’s stations, are tapping advertisers who are interested in running spots on local stations but are put off by the prices 30-second spots command. One solution LIN offers is “Ask the Expert,” in which an advertiser signs up for a 12-month commitment to run 10-second spots directing viewers to the “Ask the Expert” section, where the advertiser can offer advice and information relevant to its business. Mr. Chapman said that particular product is ideal for eye surgeons, tax preparers and lawyers, among others.

LIN is also targeting automotive classifieds, which account for a large percentage of a market’s advertising revenue pie and represent a segment that is dominated by newspapers.

“That’s the target and right now we get zero,” he said. “Our message is that when you combine Internet with television you get greater reach and a younger audience. Not everyone buys the newspaper.”

All of the interest represents a change of heart for a number of station groups, which were slow off the mark to jump on the Web bandwagon, failing to recognize the opportunity for brand extension, let alone advertising revenue.

Timur Yarnall, CEO of Broadcast Interactive Media, one of handful of companies building Web sites for television stations, said interest has definitely picked up, especially now that the presidential election is over.

“Now that 2005 has no political or Olympics, many people are asking, `How can I find new revenue streams?”‘ Mr. Yarnall said. He added that the topic has become so popular he can “go into a station and not have to sell [his services] uphill.”

Reid Johnson, founder and CEO of Internet Broadcasting Systems, which provides Web site development and maintenance to stations owned by NBC Universal and Hearst-Argyle, said the new attitude reflects a realization of the Web’s potential as an extender of a station’s brand.”Over the last 12 to 24 months there has been a realization industrywide that the World Wide Web is a much more significant player for [stations],” he said. “Until a year ago, almost all broadcasters were looking at the Web as a Web site. What we are seeing now is a fundamental change in which it is less of a novelty or promotional device and more an extension of their business in order to reach their audience during a very different daypart.”

Indeed, that’s how NBC Universal Television Stations President Jay Ireland views things. “The Web has provided us with an alternative platform, not just revenues, for viewers to access us,” he said. “We find that a majority of viewing on the Web happens during the workday, opposite of our TV ratings.”

Mr. Ireland noted that as people visit his stations’ Web sites to check weather and traffic, it creates opportunities for advertisers to buy space and extend their brands-something he said is compelling for advertisers looking for alternative platforms, such as cable.

To be sure, no one expects online advertising to help stations offset the shortfall likely to come next year with the absence of political spending. However, some projections have online advertising accounting for a material portion of a station’s overall revenues as soon as 2010, driven by further acceptance of online advertising by station group executives as well as the continued penetration of broadband, which has enabled TV stations to stream video on their Web sites-an advantage many executives think will fuel further Web site visitor growth at the expense of newspaper Web sites.

“It’s a market they missed out on in the early days of the Internet and ceded to the newspaper companies,” said Sean Butson, a station group analyst at Legg Mason in Baltimore. “Having said that, [station groups] have done an admirable job catching up [to newspapers], and in some markets the TV station Web site is viewed more than the newspaper Web site.”