Semel's footprints evident in Yahoo's move south. (Up Front).

In setting up a new sales office in Santa Monica, Yahoo Inc. is trying to make good on the promise brought by Terry Semel, the former Warner Bros. chief who replaced Tim Koogle as chief executive last spring.

The Sunnyvale-based portal's move is seen not only as an effort to boost advertising by the studios but as a means to gain a foothold for a potential move into video-on-demand.

It's also indicative of Hollywood's increasing acceptance of the Internet as a way to get people into theaters.

"Before Terry arrived we were working with the studios," said David Mandelbrot, vice president and general manager of Yahoo Entertainment. "But he has given us an extraordinary amount of momentum because of his relationships with the studios."

Yahoo ran promotions for five of the 10 top-grossing films of 2001 from three different studios.

The timing may be right. There are signs of an advertising pickup in broadcast and print media, and while Internet ad sales remain soft, Fox Filmed Entertainment and Yahoo earlier this month announced Fox's largest advertising commitment ever to an online media company. Terms of the deal were not disclosed.

Sony Corp. made a similar pact with Yahoo last fall and Sony Pictures Entertainment currently is pitching "Panic Room" on Yahoo.

Denise Garcia, director of media research at GartnerG2, the research arm of Gartner Inc., said the handshake between movie studios and the Internet is overdue.

"It's an excellent idea' Garcia said. "Finally, the movie studios and the entertainment industry at large understand their own Internet strategies. They're starting to understand how they can use (the Internet) as their own distribution mechanism."

Garcia said Internet advertising for movies and videos has more than doubled since September. Studios bought 27,920 Internet ads in January -- up from 12,548 in September, according to GartnerG2 research. The most ads, 2,109, were placed for "Blackhawk Down." The Jan. 25 DVD release of "TRON" was second with 1,801 ads placed.

Artisan Pictures Inc.'s promotional success with the "Blair Witch Project" Web site was a motivational experience for the studios, Garcia said.

Data mining

Sean Black, vice president of interactive media at Grey E. Media in New York, said advertising budgets for releases by his client, Warner Bros., have increased five-fold in the three years he's been working with them. He said studios are starting to find new and creative ways to mine the Internet for demographic information.

And that is a big part of Yahoo's pitch.

"We're using our research and data to really prove to the studios that online is an excellent way to promote their product;' Mandelbrot said.

The research and data are confidential items Yahoo won't discuss, but Mandelbrot said the Web portal has opportunities to insert movie openings in its calendar, characters in its chat engine, and banner and popup ads to get studio messages to targeted audiences.

Yahoo is not the only site taking advantage of the studios increasing love of the Internet.

The Flipside Network, a group of four gaming sites owned by Vivendi Universal, has ran more than 30 promotional campaigns for studios in the last 18 months, according to Flipside's Michael Streefland, director of marketing. Where studios once were spending money on their own sites, they now are turning to established a Web presence with advertising money.

"What we're finding is we're receiving more RFPs" from studios, Streefland said. "They want more integration. They're going to the Internet and trying to capitalize on what's inherent about it."

Adam Stein, executive vice president of ad sales at iFilm Corp., said the increasing advertising revenue from movie studios comes after years of badgering. He said movie ads now make up between 40 percent and 50 percent of iFilm's income. That could increase as technology improves the quality of ads.

"Certainly, the technology and broadband penetration allow the studios to see their messages are being conveyed in ever-richer media," Stein said.

Mandelbrot said Yahoo learned from Launch Media, an online music site in Santa Monica that the portal bought last June for an estimated $12 million. "Part of why they were so successful is they were firmly entrenched there in Santa Monica where the music companies are," Mandelbrot said. "We wanted to make sure we established a beachhead there."

Yahoo also is looking monitoring the evolving VOD market and how it might become part of the Internet marketplace, though industry experts say that's still three to five years off. For now, Yahoo's new office is more about advertising.