The Net Loves Old Media

Perhaps the gerbils being shot out of a cannon or the pack of wolves attacking the high school band distracted him. Because no matter how often Marvin Goldsmith has chuckled at these offbeat TV commercials for , an online computer seller, he's still not sure what the website does.

Goldsmith doesn't have to understand ads to profit from them. All he has to do, as president of sales and marketing at the ABC television network, is sell lots of 30-sec. slots. And now that dot.coms are caught up in a frenzied race to make their brands widely known outside cyberspace, his job has never been easier. "We're attracting people we haven't even heard of," says Goldsmith, who has raked in $200 million in Net-related ads this year. "You can't match the reach of network TV."

How ironic. Although network television loses viewers every year, ABC can still produce an audience of 18 million in a prime-time hour. Try to get that many visitors to your website in a day or a week. And cyberspace brands are not exempt from an old law of advertising that says share of mind leads to share of market. It's no wonder, then, that Web companies are widely dependent on the tube, as well as newspapers, magazines (thank you very much), radio and billboards, to imprint their brand names on as many brains as possible--particularly consumers who aren't online yet.

So as the e-Christmas season fast approaches, dot.coms, flush with cash from their stock-market offerings, are pumping money into old media and stretching the creative limits of Madison Avenue. "If you don't gain market share now, you're never going to get it," says analyst Henry Blodgett of Merrill Lynch. By the end of this year, e-commerce companies will shell out $2.5 billion on traditional advertising, according to PaineWebber. That may be just a fraction of the $80 billion U.S. ad market, but it's four times what Net firms spent in 1998. For the moment, dot.coms are actually spending a bit more offline than on their home turf.

Web players like and have already scooped up a quarter of the Super Bowl spots on ABC, pushing the going rate up to about $3 million for a precious 30 sec. This week the portal AltaVista, which until six months ago didn't even have a marketing department, will kick off a $120 million advertising blitz. You can't turn on business-news channel CNBC without seeing a barrage of online-broker ads, and broadcasts of the World Series and pro football are packed with obscure Web pitches, from to , an online horse-racing site.

In the 400-year-old publishing industry, dot.com advertising has been a stay of execution for some and a heady reinforcement of the power of the printed word for others. "It's the greatest opportunity and the greatest threat," says Scott Donaton, editor of Advertising Age. At the Wall Street Journal, where dot.coms flock to woo potential investors, ad revenues jumped 32% in the third quarter. And it's not just industry chroniclers like Business Week and Fast Company that are enjoying the windfall. Periodicals from the Austin American-Statesman to Successful Farming are also getting fat.

For the beleaguered television networks, the explosion of dot.com advertising is helping to push up rates 10% to 20% this fall. "It's created an unnaturally tight market," notes Jon Mandel, co-managing director of ad buyer MediaCom. The online magazine Salon recently rolled out a provocative $4 million TV campaign featuring digitally crafted odd couples, like celebrities Chris Rock and Linda Tripp, dancing at a dinner party. "We needed to cast a wider net," says Patrick Hurley, Salon's vice president of marketing. "We're not going to put our head in the sand and pretend that other media don't exist."

Instead of being beholden to powers like Procter & Gamble, the networks get to call the shots. For instance, they're insisting that many start-ups pay in advance. "Everything's sold out," says Fred Reynolds, chief financial officer of CBS, which in addition to its TV empire owns a vast collection of radio stations and billboards. Though most of the old media won't trade ads outright with the dot.coms - kind of bartering that takes place all the time in cyberspace--they will use the slots as currency. Rather than pay with stock or cash, CBS has swapped nearly a billion dollars in ads and promotional opportunities for sizable equity stakes in start-ups like , and .

Madison Avenue, while enjoying the skyrocketing demand, can barely keep pace with it. Agencies that used to take two to three months to craft a corporate identity are being asked to create a winning, edgy commercial in just over a week. Online brokers Ameritrade and E*Trade, which are both in the middle of hundred-million-dollar ad campaigns, have led the way in using irreverent humor to get their message across.