U.S. TV Stations Discover the Dot-Com Gold Rush.

The Television Bureau of Advertising (TVB), the association of local U.S. TV stations dealing with matters related to advertising, has released a White Paper concerning Internet advertising for local TV stations. Indeed, online and Internet services represent a new gold mine for the U.S. TV industry. According to the TVB, Internet ad expenditures in all television (network, spot, syndication and cable) in the first half of 1999 reached more than $398 million. This compares to $323 million spent in 1998 and $173 million in 1997. By the end of 1999, total revenues for the U.S. television industry from online and Internet services are estimated to broach $1 billion.

The TVB papers point out that at a 1997 consumer marketing conference, the word "Internet" was barely mentioned. However, mature-media local stations see the Internet as having potential as opposed to posing a possible threat.

Total U.S. Internet advertising, estimated to have reached $2.8 billion by the end of 1999, is another revenue source for local television stations. Part of this new ad revenue will compensate for the erosion from traditional advertisers, like Proctor & Gamble, which to some degree are temporarily scaling down television advertising in favor of new media.

However, the biggest threat to TV stations might not originate from Internet companies, but rather from personal recording devices such as TiVo and Replay. These are digital television recorders that use a hard-disk drive enabling users to bypass broadcast commercials while permitting the service company's own advertising. According to Forrester Research, TiVo and Replay could cut broadcast TV ad viewing by up to 50 percent within the next decade.

Furthermore, the investment bank Veronis, Suhler & Associates predicted that the Internet will "cannibalize" retail shopping and leave people with more time for media. The Internet is redefining the retailers' "four Ps" approach to marketing: price, product, promotion and proximity. Grocery chains, for example, have always leveraged the convenience (proximity) factor. Now Internet users can find many companies offering lower prices, increased selection and closer proximity.

However, Web-based advertising strategies suffer from too small a pool of potential viewers to create brand growth. Many new and established sites now rely, at least in part, on traditional media. A recent study by Forrester reported that Web marketers currently spend almost 50 percent of their marketing budgets on traditional media. A different study found that 44 percent of Internet users visited sites as the result of traditional advertising. For example, for the online job-search site Monster.com, usage rate jumped from 500,000 over two weeks to 2.2 million in the 24 hours following its Super Bowl (American football) advertising campaign.

Many Web advertisers tend to choose low-cost, highly targeted media over higher reach alternatives. The major media beneficiaries of this strategy have been radio and lower-rated cable television networks. In addition to lower upfront media costs, one advantage to low-reach media is to avoid overwhelming the sites' server capabilities.

According to experts, when an Internet-based company does offline advertising, at least $15 million is needed to develop brand identity. On the other hand, portal advertising is less expensive than traditional media (at least $500,000 per year for one of the top five portals, and about $100,000 for the next five). But for branding and name recognition, traditional advertising media is more effective.

Naturally, TVB encourages local television stations to have websites in order to both complement and supplement on-air advertisers with interactive features; use its site as a promotional tool; expand cross-promotion capabilities; extend its accumulated audience beyond its signal reach to out-of-towners; and eventually, become a profit source on its own merits. For the moment however, most of the television stations' websites lose money according to a Web host service company.

Broadcasting station KATU-TV in Portland, Oregon, for example, airs its news anchors' e-mail addresses in order to build a database of viewer information, while providing personalized responses online. These databanks could be used for future tie-in promotions with sponsors. In effect, all TV stations would like to build their e-mail databases, whether it's to offer e-commerce or to provide on-air synergy with advertisers. As far as e-commerce is concerned, NBC is experimenting with selling tapes of its programs online.

In the U.S., as many as 64.2 million adults go online each month. American TV viewers tend to fall into different demographics from Internet users, who are typically younger and better educated with disposable income. More than 50 percent of U.S. college students surf the Net from their dorm rooms, while 84 percent access the Net from a central campus location. Nielsen Media Research reports that consumers tend to visit an average of 12 websites per month, just as consumers also are inclined to watch an average of 12 different television channels per month regardless of the number available.