Big impact may be in scatter market

By Dave Lindorff

      Internet companies are pushing up ad rates in the upfront market, but they may have an even more powerful impact on pricing later in the season, ad executives and research analysts predict.
     These new companies are buying a lot of TV time in an effort to introduce themselves and their online products to consumers, and perhaps more important, to build name recognition among a broad audience that is for the most part still new to the worldwide web.
     And they are spending freely. ‘‘It's possible that they are pushing rates up significantly--especially on some shows that really hit the markets they want to reach,’’ says Lynn Fava of Competitive Media Reporting, a New York   research firm.  She notes that while the internet companies' estimated $400 million in network ad spending this year is dwarfed by the more than $2 billion the auto industry is likely to lay out, ‘‘you don't sneeze at several hundred million dollars, no matter what.’‘
     Jerry Solomon, president of national broadcast for SFM Media,   says internet companies ‘‘tend to be overpaying’‘ for their ad time and not just because they are relatively free-spending. Says he: ‘‘They don't have a base, so the networks tend to overcharge them.’‘
     But Solomon believes the new internet advertisers’ real impact won’t be felt until later in the season. ‘‘Because they're new companies, they aren't able to buy the long-term contracts the networks want to sell,’‘ he explains, ‘‘but they'll be a much bigger factor later on in the scatter market, where rates in 1998 were 25-30 percent higher than in the upfront.’’
     There were 33 internet companies advertising on the networks during the first two months of this year, compared to just 5 a year ago, and they rank among the big spenders in terms of ad dollars versus revenues.
     While the average American company spends about 4 percent of revenues on advertising, Monster.com, an internet company with revenues expected to be under $100 million this year, plans to spend $36 million on advertising, to cite one example.
     Last year, HotJobs.com, with revenues of only $4.2 million, spent $1.6 million on a single Super Bowl ad. HotJobs.com just this month raised $16 million in private financing from a consortium of venture capital firms and plans to spend three-fourths of that on advertising, starting with the $400,000 it reportedly paid for a 30-second spot on the season finale of ‘’Frasier.’’

Dave Lindorff is a Philadelphia-based writer.