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June 1, 2000

Commitment Is 'In'

Not a Cheap Date, Long-Term Sponsorships Now Add Up to $1B a Year
Lisa Hamm-Greenawalt

If banners are the dates of the Internet, winking and flirting from the top of Web pages, then sponsorships are the marriages. They're not as flashy. They require a long-term commitment. Both sides have to invest a lot of time, money, and energy to make the arrangement work.

Everyone knows that casual dates can be fickle - here today and gone tomorrow, leaving you waiting by the phone for a call that never comes. A successful marriage, on the other hand, can bestow enduring benefits.

The same theory applies online. Heavyweights such as Ford, Honda, Nestle, and Charles Schwab have discovered the benefits of that enduring institution called sponsorship, liberally investing their resources to break through the clutter of ubiquitous banner ads. Indeed, sponsorships accounted for $1.2 billion in 1999 - about 27 percent of the $4.6 billion that the Internet Advertising Bureau tallied for all types of online ads last year. It's far less than the $2.6 billion spent on banners in 1999, but well ahead of other formats, such as interstitials and e-mail ads.

Andrew Susman, president of Studio One Networks, a sponsorship-supported Internet syndication studio, likens banner ads to "a low-flying pilot's view of outdoor advertising."

"You can accomplish a whole lot more with a sponsorship," says Jim Nail, an online advertising analyst at Forrester Research. "The Web is so flexible that advertisers can design a sponsorship to any marketing objective, with a whole range of different capabilities."

A company that pays to sponsor content on an Internet site can limit its involvement to a simple tag line (for example, "This section is brought to you by the Ford Motor Co."), add a banner or two, provide content for an entire section, or go all-out and create an entire Web site. Arrangements vary widely, depending on whether it's an exclusive deal or a joint sponsorship, how much of the site is included, how involved the sponsor gets, and what it hopes to accomplish.

Sponsorships help advertisers build brand awareness in a particular niche market. To maximize their reach, companies usually choose major sites and portals that draw large numbers of visitors, such as Amazon.com, iVillage, ESPN, and America Online. Sponsors can work directly with a site through an ad network such as 24/7 Media or DoubleClick, or with a third party such as Studio One.

The Value-Add
The secret is to go where your customers are already spending time, and provide content they're interested in, says Susman. And never forget that Internet customers, who tend to be task-oriented and pressed for time, are looking for valuable information - not for sponsors' commercials.

"One of the oddities of the Web is that although everything is only one click away, consumers are reluctant to do that," Nail says. But with a sponsorship, a company can build its own content section within a familiar site, which presents "less of a psychological barrier for a consumer to enter." On the other hand, Nail warns marketers not to risk alienating consumers by trying to conceal the sponsorship within the content. Sponsorship, in its highest form, is about "visibly supporting good works," Susman says - and then soaking up the accompanying goodwill.

"It's not about clicks and trying to drive traffic with banners," explains David Blair, vice president of sponsorship at iVillage, which hosts a number of sponsored sections, including a women-targeted area sponsored by Ford. "We take a corporate initiative and tailor programs for specific marketing objectives. We can bring a benefit to the users of iVillage and a benefit to the sponsor."

Mediconsult, which runs a number of health sites online, stopped selling banners last fall, because they had proved less cost-efficient than sponsorships. "Banners don't really drive value for our client or for ourselves," says president Ian Sutcliffe. "It's basic mathematics." He feels that banner clickthrough rates were too high for the number of conversions generated.

Studio One's Susman, who was with Time Inc. New Media's Pathfinder site in 1997, says banners generated clickthrough rates of 25 percent when they first emerged, but today average just 0.3 to 0.5 percent. Mediconsult's Sutcliffe points to a site his company helped create for the pharmaceutical company Novartis as an example of the type of useful content that a sponsor can bring to a Web site. Novartis, which makes the Habitrol nicotine-replacement patch, calls the site the Habitrol Stop Smoking System and says that it offers a "complete program of interactive support" for smokers trying to quit, including a three-month customized stop-smoking program, daily e-mail, and numerous opportunities for community support.

This particular site is a success on its own, Sutcliffe says, drawing 6,000 to 10,000 registered users a month and generating $1.2 million in annual revenue. But it and sites like it with similar levels of functionality and community-building could also be good traffic drivers for sites that feature them as sponsored content.

One of the greatest advantages a sponsor has over buying a banner advertisement is control over the environment in which the company's name appears. Although a marketer can design a banner ad and choose where to place it, only a sponsor that provides its own content can completely influence the atmosphere surrounding the message.

But sponsorship, like marriage, is more complicated than casual dating. Unlike banner ads, which can be created and put online in a matter of weeks, Web sites - except those that are seasonal or event-oriented - often demand a one- or two-year commitment from sponsors. That's both because they want to give their visitors consistent content, and because that's how long it takes to determine a company's marketing objective, come up with the best strategy, implement it, get feedback, and then make adjustments, says iVillage's Blair.

"You generally pay a premium, because the site gives you a preferred customer position," often including exclusivity, says Ron Kovas, president of i-traffic, the online marketing division of Agency.com, an interactive advertising agency.

Sponsorship pricing varies greatly, depending on a deal's structure and the sponsor's level of involvement, says Forrester's Nail. For instance, if a site does a lot of technological or creative development, the sponsor will have to pay for it. There may be a monthly fee, often in the tens of thousands of dollars, to run the site, plus a performance charge for specific programs, such as cost per e-mail or for samples distributed. If the sponsor provides original content, factor in editorial costs.

Susman says that cost arrangements with Studio One can range from a simple cost per thousand on the low end, to a flat fee for a high-end editorial customer that wants to have a complete site or section built around its sponsorship. In some cases, syndication costs can enter the picture.

Measuring Results
Clearly, gauging the effectiveness of a sponsorship is more complicated than counting impressions, clickthroughs, and conversions. Specific tools such as surveys and database information need to be developed, depending on the sponsor's goals. Susman says Studio One, working with the Advertising Research Foundation and American Demographics magazine, is developing a "Sponsorship Effectiveness Index" that will supply sponsors with higher-order data, such as top-of-mind awareness, persuasion, recall, attitude shift, and loyalty. Such data could, for example, reveal that people visiting Ford's "Driving Today" site at iVillage are on average three times more likely to consider a Honda than a Ford when shopping for a new car.

Often, banners and sponsorships are used together as part of an overall marketing strategy. However, Susman says, "It's becoming clear that sponsorship is playing a bigger and bigger role. While banners will remain, sponsorships offer a complementary alternative to advertisers when a banner isn't enough."

Marketers who want people to notice them through the pervasive clutter of blinking banners should consider finding a suitable Web partner and getting hitched.

Copyright 2000 by Internet World Media, A Penton Media, Inc. Company.

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