The 1987 film Tin Men, set in the early 1960s and
starring Richard Dreyfuss and Danny DeVito as hapless salesmen of
aluminum siding, featured a recurring visual motif. Dreyfuss’s
character, bemused by his failures, would see a Volkswagen driving
by. What did it mean?
The Volkswagen, of course, symbolized the economic trends of the
future. In the 1960s, that future would include an OPEC oil
embargo, the near-collapse of the U.S. automobile industry, the
transformation of the American economy by imports, the exploitation
of American markets by (conspicuously) Japan (with the yen trading
at an even-then unbelievably weak 300-plus to the dollar),
inflation, President Carter’s “Meow Speech,” as Roy Blount called
it (inflation as “The Moral Equivalent of War”), and, oh, all sorts
of stuff.
If you could have anticipated those “secular trends,” as
investment analysts call them, you could have made yourself some
money. Salesman Dreyfuss could have gone to work for a Toyota
dealer, preferably in California, and maybe ended up owning a
dealership himself.
A decade or so later, with a similar crystal ball, you could
have bought stock in Intel or Microsoft, sat still for about 15
years, and ended up a multi-millionaire. What did I know? I bought
a Kaypro computer, taking the advice of an “expert” who had
actually published a book on the subject (Peter McWilliams), and
who had insisted that one should never buy a computer that didn’t
run CP/M. CP/M? Anybody remember CP/M? Then came the Internet
decade, cell phones, and so forth, and you get the picture.
What comes next? Something just as obvious as the Tin Man’s
visionary Volkswagen is driving by, right now, pointing the way to
the next big thing. As always, it appears every day, right under
our noses.
(Danged popup ads! Life insurance — no! Lottery — no! No, I
don’t want to look up my high school classmates, and no, darn it, I
do not want to buy discount travel …)
Wait a minute. Could it be? The next big thing? Internet
advertising?
Yes. To my way of thinking (which is worth what you pay for it,
as my wife always says), the economic signs all point toward
Internet advertising as the cash engine of the future.
Investor’s Business Daily’s list of 197 industry groups,
ranked by stock performance, shows “Internet — Content,” “Internet
— ISP,” and “Internet — E-Commerce” ranking one, two, and three.
They’ve ranked in or near the top ten for months. Stocks like
Yahoo, Amazon, and Ebay have shown spectacular gains; some of them
are even making money.
That is not advertising specifically, I know. But advertising
spending always lags a recovery, because it’s the last thing
companies spend on, and the first thing they cut in hard times.
Internet advertising has grown up. Today, even those reviled popup
ads all contain a response mechanism, making them the equivalent of
direct response print and broadcast advertising — a highly
quantifiable and precise medium. They work. And if you want to get
some insight into the audience they work for, go to a website like
www.cheatplanet.com, which
caters to the video and computer game crowd. You can hardly see the
screen for the blizzard of popups — the same ones you see on
websites for the Chicago Tribune, the Drudge Report, or
the New York Post.
Most non-advertising types have looked at the Internet as
something like television, and have tried to foresee the Web-based
equivalent of TV’s mass-market 30- and 60-second commercials for
beer or cars. That’s the wrong model. Instead, look to Ron Popeil
and his low-fat cooker infomercials or even further back, to
classic direct-response print ads like, “They Laughed When I Sat
Down at the Piano.”
What will the new Internet advertising look like? Hard to say.
But I bet you and I will find ourselves using it more and more,
surprised regularly by an advertising message that shows us exactly
what we’re looking for. Successful future Internet ads will hook
us, and we’ll find ourselves reading or participating in something,
actually spending time with it.
Now let’s look at the dollars. The Online Publishers Association
says Internet ad spending rose 41 percent, quarter over quarter,
since last year. Deutsche Bank Securities, pointing to paid-search
services like Ask Jeeves, says that paid-search ad revenues will
reach $4 billion by 2004, up from $1 billion last year.
Interest-related ads, like those that appear in the margins of a
Google search, are drawing more and more ad revenue, $2 billion
recently, a quarter of all Internet ad spending. A report in the
Economist quotes analysts who project that spending to
increase to $7 billion by 2007. Google is expected to go public
late this year or early next; its success in the market could prove
a breakthrough in the advertising-driven Internet boom.
And the major ad agencies all have Internet divisions, and
they’re too smart to ignore.
So how might you make money here? Don’t expect much help from
the conventional investing gurus. Most Internet companies that do
advertising also engage in an array of other businesses, making it
difficult to track who’s doing what. Tiny firms like CNET get
lumped with giants like AOL-Time Warner, and that doesn’t tell you
anything. Companies devoted to Internet advertising either haven’t
gone public yet, or trade at $5 or less.
But I’ll bet Apple didn’t look too spiffy way back when
either.
