Online advertising: Strategy shift in order

By Helen A. Jimenez, Senior Reporter
Business World Online, January 7, 2002

Like most businesses affected by the global economic downturn, firms that rely on online advertising as a major source of revenue look to the new year with guarded optimism, at best.

The dot-com crash has shown that Web sites cannot survive by simply attracting page views.

Information portals and search engines have also realized the hard lesson that they cannot sustain their business by relying on banner advertisements.

As if things weren't bad enough already, the September 11 terrorist attacks on the US mainland -- and their global reverberations -- forced businesses to hold on to their advertising budgets for other more critical expenditure.

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Yet, some industry analysts say online advertising remains a promising, cost-effective alternative to traditional ad media.

Despite the decrease of total ad revenues, Internet analysts in the US welcomed signs that the decline was already slowing down.

Gartner G2, a research service of Gartner, Inc., said in a recent report that online advertising in the United States is expected to become an US$18.8-billion market by 2005, up from $7.9 billion in 2001.

The Interactive Advertising Bureau (IAB) also reported that Internet advertising in the US "held steady" in the third quarter of 2001, totaling $1.792 billion, down 4.1% from Q2's $1.868 billion.

The first nine months of 2001 online ad revenue stood at $5.55 billion, down by 8.4% from the $6.06-billion earnings for the same period of 2000.

Despite the decrease of total ad revenues, Internet analysts in the US welcomed signs that the decline was already slowing down.

Philippine Internet search engine Yehey! admits that the four-year old dot-com firm has realized that online advertising is "not a viable source of revenue", said Yehey! chief executive officer David R. De Leon.

While Yehey! used to rely heavily on banner advertising, Mr. De Leon said the local search engine has started to explore other sources of revenues, including e-commerce services.

However, Mr. De Leon clarified that the company is not completely ruling out online advertising. Yehey will still maintain it but not rely on it as heavily as it used to for the company's revenues, he explained. "We are just managing it," he said.

He expressed optimism that online advertising will "pick up" as Internet users in the Philippines increase and as more advertisers realize the value of advertising online.

As alternative to online advertising, Mr. De Leon said Yehey is continuously tapping strategic partners who can provide complementary services for its users, particularly in the area of e-commerce. Last year, for example, Yehey partnered with BancNet for online payment of bills.

Mr. De Leon, however, noted that online commerce is still largely dependent on the number of credit card users.

In the case of the Philippines, he said there are not too many people that own credit cards as compared to those with ATM (automated teller machine) bank cards. "That's why we are exploring other means of payment (for online transactions)," he said.

Yehey! boasts of over six million pageviews each month, with the site providing links to over 16,000 Philippine-related Web sites.

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