Online ads moving beyond pop-ups

SAN FRANCISCO -- Jarvis Coffin moves through the crowded aisles of AdTech, an advertising trade show, like a union boss at the annual picnic. He greets every other person by first name, clasping hands and promising phone calls and e-mails; others wave at him from across the crush.

Coffin is the chief executive and one of the founders of Burst Media in Burlington, a broker of online advertising that has been around since 1995. (The very first Web ad, a banner promoting AT&T, appeared one year before that.) The company's arc, from instant ignition to near flame-out to recent resurrection, has closely traced that of the entire online advertising industry.

Now, thanks to Google's clever method of placing pithy and relevant text ads next to your search results, and an array of flashy new ad formats, advertisers are making the Net a serious part of their marketing strategies. Online ad sales totaled $9.6 billion last year, according to the Internet Advertising Bureau, and are expected to hit $12.7 billion in 2004, based on estimates by the research firm eMarketer. Morgan Stanley analyst Mary Meeker, who gave a talk at AdTech, observed that online advertising still represents only 3 percent of total US ad spending, calling the Internet ''the most underutilized advertising medium that's out there."

If 1994 to 2000 were the experimental days of online advertising, with marketers pouring money in to see what worked, and 2001 to 2003 was an interregnum where many dot-com companies vanished and Fortune 1000 companies stepped back to reevaluate their online strategies, then 2004 and 2005 represent a resurgence. Consumers are spending more time on the Internet -- hours that tend to be stolen from television -- and they're increasingly connected at high speed. Advertisers have discovered formulas to make Internet advertising pay off, and in the next five years, some of the same companies that developed technologies for delivering and measuring Internet ads will sneak into your TV set, to manage the ads that appear on your TiVo or through your video-on-demand service.

''I think we've finally arrived on the opposite shore after 10 years of practice," says Coffin, who once sold print ads for Business Week and USA Today. ''There was a long period of educating advertisers about what online was, and what it could do. And we also had to realize that the Internet hasn't fundamentally changed how consumers respond to advertising. A hundred percent of the people who see an ad aren't going to click on it." (The text of the very first banner ad on the Web asked users, ''Have you ever clicked your mouse right here? You will." Which didn't entirely prove an accurate prediction.) Burst Media is a rep firm, selling advertising for a network of more than 2,000 niche-oriented websites. Burst places the ads on those sites, and then helps advertisers manage and measure the campaigns. The company raised a total of $18 million in venture capital, including $15 million from Boston-based Summit Partners, in January 2000.

''We registered to go public in March of that year," Coffin says. ''We had $450,000 in losses, which was nothing compared to other companies going public at that point." The company also had more than $15 million in revenue. But the IPO never happened; Burst pulled its S-1 form that fall, and proceeded to watch many of its best advertisers disappear.

''Our revenue was down 60 percent," Coffin recalls. ''It bottomed out in 2002." The company cut its staff in half, to 45 employees. For most of the online advertising industry, 2001 and 2002 were drought years.

But Burst managed to get back on its feet. Revenue grew 70 percent last year, and in 2005 Coffin expects the company to rack up record income. (And Burst has been profitable since 2003.)

Coffin says that Google's 2004 IPO, and its spectacular ad revenues, helped put online advertising back into the spotlight. But so have an array of new advertising formats. Companies like PointRoll and Eyeblaster have introduced Web ads that respond when a cursor floats over them. A banner for the TV show ''Caesars 24/7" can expand into a larger mini-site, offering video clips from the show, a guide to the characters, and a way to send a reminder to your cellphone to watch the show when it airs. (This type of ad is called an ''expandable banner.") Another format, the ''dogear peelback," features a dog-eared ad banner that takes over the bulk of the page when the mouse touches it.

And some advertisers aren't content to simply appear on other people's websites. They're commissioning their own video games. Skyworks Technologies, a New Jersey company, has created a 3-D billiards game to promote Oreo cookies and a Texas Hold 'Em game for Lincoln-Mercury that allows players to chat with their competitors. For now, says Garry Kitchen, CEO of Skyworks, these ''advergames" are mostly played on the Web. But soon, they could be played on cellphones, PDAs, and gaming consoles. ''These are ads that people come toward, not run away from," he says. ''How quickly do you close a pop-up when you see it?"

Lycos, the portal site based in Waltham, will unveil this summer an ad tool called Bid Manager. It's aimed at helping advertisers manage the bids they place to have their ads shown when users search for certain keywords. Bid Manager will assist advertisers who want to bid for keywords across many different sites, including Lycos, AOL, Google, and Yahoo, and analyze how effective those buys are.

Video-on-demand advertising was also a hot topic at AdTech. Sometime soon, commercials that play during cable VOD programming might be rendered clickable, allowing interested viewers to jump into extended footage about a newly released movie, for instance. One question is how targeted these ads can be, before they start to seem creepy. If you watch a lot of cooking shows, can your cable company start serving up lots of Williams-Sonoma ads? How about Viagra if you're a regular ''60 Minutes" viewer?

At the AdTech show last week, Coffin was upbeat -- despite the fact that among AdTech's estimated 5,000 attendees, there didn't seem to be a lot of actual advertisers. The audience seemed to be dominated by vendors like Burst, Eyeblaster, and Skyworks.

''We're very excited about our prospects," he said.

The lesson: Hang in there long enough, and anything's possible.

How small is nano?
The Massachusetts Nanotech Exchange holds its first major event Thursday, the Nanotech CEO Summit. Ranch Kimball, the Commonwealth's secretary of economic development, is speaking, as is Museum of Science president Iaonnis Miaoulis. The Nanotech Exchange, created last year, is an arm of the Massachusetts Innovation and Technology Exchange.

You'll have to be crafty to get in: It's invitation-only, for 120 executives whose businesses have some relation to nanotechnology. There's no Web page yet for the event, or even for the Massachusetts Nanotech Exchange itself. Apparently, like nanoparticles, the group is too small to be seen by the unaided eye.

Also this week is the Nantucket Conference on Entrepreneurship & Innovation (disclosure: I'm on the advisory board), which this year has an ''East meets West" theme, with several Silicon Valley figures on the agenda, including Google CEO Eric Schmidt.

Scott Kirsner is a contributing editor at Fast Company. He can be reached at skirsner@verizon.net.