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.
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