Internet Changes Everything

Rival Portals Want Share of Ad Budgets

Yahoo! News - Rival Portals Want Share of Ad Budgets

Sat Mar 27, 7:39 AM ET
By Lisa Baertlein
REDMOND, Wash. (Reuters) - The major Internet portals must both compete and cooperate if they are to take advertising revenues away from more established media, including television, Yahoo Inc. (NasdaqNM:YHOO - news) Chief Executive Terry Semel said on Friday.

Both Yahoo and Microsoft's Internet unit, MSN, which uses Yahoo's Web search and search-based advertising services, are hoping to gain a bigger share of large companies' advertising budgets.

Major companies now devote only a tiny fraction of their budgets to the Web -- with estimates ranging from around 1 percent to 3 percent.

But the Web portals see an opportunity to raise that share sharply, partly at the expense of American television networks, which face a fragmenting audience.

"We have a common goal. That goal is to take a greater and greater share of (the) market," Semel told attendees at an online advertising conference hosted at Microsoft Corp.'s (NasdaqNM:MSFT - news) headquarters.

"Not only do I welcome the idea of doing things together, I think it is absolutely critical," Semel said. "There is no such thing as a major marketplace for advertisers ... if there is only one network to talk about."

"What we have here is a very powerful marketing vehicle," Microsoft CEO Steve Ballmer told conference attendees on Thursday, noting that he would like to see large advertisers putting 8 percent to 12 percent of their ad budgets toward online campaigns in 2005.

Internet advertising, which suffered a major blow during the dot-com collapse, has rebounded with the help of Web search advertising.

According to Internet research company Embarked, U.S. online ad spending is expected to grow to $8.6 billion in 2005 from $6.9 billion in 2003.

Semel, a former Hollywood studio head, compared today's online advertising industry to the early days of network or cable television.

The future of Web advertising depends more on the establishment of better practices and standards, and less on technology, as it has in recent years with the growth of lucrative Web search ad services popularized by Yahoo division Overture Services and Google Inc.

"Unlike the technology world, where if you own the secret sauce you will dominate with that secret sauce, this requires strong competitors who have, if not equal, similar personalities and similar opportunities," said Semel.

Yahoo last year spent more than $1 billion to buy Web search players Into and Overture Services, while Microsoft has promised to roll out its own Web search technology this year.

March 27, 2004 at 10:57 PM in Portals | Permalink | TrackBack (16) | Top of page | Blog Home