Interactive: Momentum Busters

INTERACTIVE: $1.8 BILLION

The dot-com swoon holds growth to 22.4 percent.

A dot-com frenzy pumped millions of dollars into Internet marketing during the first half of 2000 — then a Wall Street-driven backlash kicked in.

The shakeup sent what could have been another incredible year of growth for Internet spending to a skidding halt. Still, online advertising was hurt more than promotion. “Dollars that once went to banners were diverted to online promotions,” says Michael LeBeau, president of Web marketing shop Byte Interactive, South Norwalk, CT.

Internet-based promotion spending rose a healthy 40 percent to $1.3 billion in 2000, up from $926 million in 1999, per PROMO estimates based on industry sources. Other interactive promotions garnered $500 million in marketing dollars in 2000, down eight percent from $545 million in 1999

Brands are focusing on a handful of tactics and strategies. “Online marketers have realized they can’t spend wildly anymore,” says Joe Hartnett, chief integrated marketing officer with Phelps Group, Santa Monica, CA. “They need to find a way to leverage the Internet in the most cost-effective way.”

Let’s Get Together

Most marketers spent the year integrating Web activity into their general marketing plans. Many traditional brands struck strategic alliances with online companies: Target Stores, Minneapolis, and AOL, Vienna, VA, distribute AOL software in Target stores. Teen portal Alloy.com, New York City, and music chain Sam Goody, Minneapolis, last winter cross-promoted Goody goods online and Alloy content in-store. Norwalk, CT-based Pepperidge Farms hooked up with Cooking.com last fall to put the site’s discounts on millions of cookie and cracker packages.

“There is a lot to be gained by a well-aligned partnership,” says Greg Ahearn, vp-marketing and business development with Paramus, NJ-based Toysrus.com, which last summer hooked up with Amazon.com, Seattle, for online fulfillment.

The poster child for online/offline integration in 2000 was PepsiStuff.com. Pepsi-Cola Co., Purchase, NY, and partner Yahoo, Santa Clara, CA, flagged 1.5 billion soda bottles for a continuity program and registered three million participants — including more than one million in the program’s first month. Pepsi sales jumped five percent.

Internet spending funds many strategies from sweeps to loyalty programs. Menlo Park, CA-based E*Trade and Canada Dry, Plano, TX, ran a sweeps in Canada with soda labels dangling Web brokerage accounts. Atlanta-based Coca-Cola ran a teen-targeted continuity program for Sprite using online currency from Mountain View, CA-based Rocket Cash. One billion-plus bottles of Sprite carried codes under caps.

Kellogg, Battle Creek, MI, is running an Eet and Ern program that stamps cereal boxes with online points redeemable for a slew of rewards. Dallas-based Frito-Lay runs a similar program, where shoppers collect points called e-Ploids on-pack, then bid online for premiums.

E-mail newsletters continue to flourish as a cheap, fast targeting tool. The Sydney Organizing Committee for the Olympic games last fall launched an e-mail newsletter to 200 million consumers. Last May, New York City-based CBS sent 29,000 viewers a newsletter touting the premiere of Survivor; 25 percent opened the e-mail. “But remember,” advises Steve Caputo, senior vp at New York City-based Promotions.com: “It all starts with getting permission.”

Elsewhere, Webcasts and viral campaigns gained ground. And even product launches began migrating to the Web. Last fall, Volvo introduced a sedan for sale only on the Internet. And bellwether Procter & Gamble, Cincinnati, has promised to do most of its preliminary launch work exclusively online.

Out of the Spotlight

Telecom service suppliers lost business to their Web-based competitors, but phone marketing continues to be a viable tool, allowing for mass interaction with consumers who don’t have Internet access. Kmart Stores, Troy, MI, for instance, ran a sweeps that shoppers entered by calling a toll-free number and commenting on their in-store experience. Store receipts carried details.“Ninety-eight percent of the country has a phone,” notes Lisa Drago, president of Drago Promotions, West Islip, NY.

Meanwhile, wireless promos are coming of age. Pagers are still hot, especially for younger consumers. South Beach Beverage Co., Norwalk, CT, this month rolls out a $10 million promo handing pagers to shoppers, then paging them with trivia questions. Correct answers serve as sweeps entries.

Next up: Personal digital assistants (PDAs) and voice recognition technology. About 1.3 billion people worldwide are expected to have wireless phones by 2004. Some brands aren’t waiting for critical mass: Showtime, New York City, last summer began offering content and programming information to consumers via mobile phones. San Mateo-based wireless provider SkyGo earlier this year wrapped a pilot test in Denver, sending location-based messages to mobile phones.

SNAPSHOT:

• Interactive spending rose 22.4 percent to $1.8 billion.
• Spending on Web promotions jumped 40 percent to $1.3 billion.
• Integrating the Internet into marketing plans is top priority.
• Wireless is slowly coming of age.