Dot-Com Ads Bring Bonanza To L.A. Media.

New media might be the best thing that ever happened to the old media.

As venture capitalists and Wall Street pour billions of dollars into dot-com companies, those firms are spending a large portion of their war chests on advertising - mostly in traditional media like newspapers, radio, television and billboards.

The result is a tidal wave of new business - much of it unexpected - for local media companies, many of which are breaking records for advertising revenues.

"At the end of the day, you need to be one of the top three players (in a given online niche) if you're going to be successful," said Bruce Silverman, executive vice president and managing director of the Pacific region with Western Initiative Media Worldwide. "The key for these companies, really, is brand building. Whoever ends up with the strongest brand wins."

Internet/e-commerce companies spent $14 million on radio commercials in the L.A. market in the first half of this year, according to Competitive Media Reporting, a 164 percent increase over the first six months of 1998 (third-quarter numbers won't be available for another week or two).

"Internet advertising is clearly accelerating. I would say that virtually every stop set (commercial break) has at least one e-commerce ad," said Mary Beth Garber, president of the Southern California Broadcasters Association.

Radio is especially popular because ads can be produced more quickly than a television commercial -- and fast turnaround is critical for the dot-coins. Internet advertisers also like the tight demographic control they get from radio, since stations tend to appeal to a narrow target audience. Cost is a big factor, too.

"In general, the cost of a rating point in radio is less than a rating point in television," said Silverman.

Starting from practically nothing just a year or two ago, Internet ads are now the sixth largest out of 20 advertising categories in local radio, making up 4.5 percent of total ad revenues for local stations during the first six months of the year. They also are the fastest growing of all 20 categories, and Garber is certain they will make up a considerably bigger piece of the pie when the third-quarter numbers are released.

Overall, ad spending in L.A. radio was up 11.6 percent for the first six months of this year compared to the like period in 1998. Year to date through September, it was up 14 percent.

A similar picture emerges on the print side, with many locally based papers reporting double-digit increases in ad revenues so far this year.

Internet companies spent $4.9 million on L.A. newspaper ads during the first six months of 1999, according to CMR. That compares to $1.4 million in the first half of 1998.

At Investors Business Daily, ad revenues were up 39 percent in September, according to spokeswoman Kathy Sherman. She couldn't provide year-to-date numbers. "We feel the primary reason for the increase is because of Internet and computer advertising," Sherman said.

Times Mirror Co. reported last week that its total newspaper ad revenues through Sept. 26 were up 10 percent. The company doesn't break out t ad revenues for individual papers or individual categories, but ad volume -- total inches of advertising copy -- was up 9.9 percent at the Los Angeles Times through Sept. 26 over the year-earlier period.

At the Business Journal, ad revenues year-to-date are up more than 20 percent over last year -- a lot of that increase coming from new media. Publisher Matthew A. Toledo says 10-15 percent of total ad revenues are coming from dot-coin companies or traditional companies advertising their new Internet services.

Television stations generally don't divulge information on ad sales, but one local TV station executive said Internet firms are expected to spend 10 times more this year than they did in 1998. CMR says Net companies spent $7.4 million on spot TV in L.A. during the first half of the year, compared with $2.3 million in the like period last year.

Don't forget billboards -- Eller Media is expecting 20 percent revenue growth for the second half of this year Southern California, according to George Manyak, president and general manager of Eller's Southern California regional office. That would make 1999 Eller's best year ever -- and Manyak says most of the growth is coming from Internet companies.

This bonanza may not last forever.

"We believe the spending is going to accelerate: We also believe it probably won't last," Silverman said.

Spending will accelerate because there are still a large number of well-funded Internet firms coming along that are anxious to build instant name recognition through advertising. But it will also drop off as the category matures, Silverman says.

For example, there aren't too many new online bookstores jumping into business because the likes of Amazon.com and Barnes & Noble have already dominated that category. As the industry matures, more and more categories will be dominated, meaning less players entering the business -- and spending a pile on ads.

Silverman, whose Western Initiative has 50 Internet clients accounting for $500 million in U.S. media spending this year, expects aggressive growth in the category through the first half of next year, slowing down in the latter half of 2000.

Despite that outlook, more optimistic media executives believe the gravy train will never end. Sherman of Investor's Business Daily says that based on company research and the opinions of founder and Wall Street expert William J. O'Neal, the dot-coms represent a whole new category of advertiser that will never go away. In the future, the advertising dollars will simply come from more mature, bigger Internet companies rather than startups.

"We definitely don't think we're going to see a slowdown," Sherman said. "It's going to get bigger, better, more efficient. We expect tremendous growth in the next few years."