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The First Stages of Internet Advertising. In the early 1990s, the biggest American advertisers were primarily consumer products companies, such as General Motors, Procter & Gamble, Philip Morris, Chrysler, Ford, Sears, Roebuck, and Walt Disney. In the very first years of the Web, advertising expenditures on the Internet were generated by portals and ITbased companies, such as Microsoft, IBM, Excite, Yahoo!, Netscape, Infoseek and Lycos. By 1997, however, major national advertisers were joining the game in droves, including auto manufacturers ( GM, Toyota, etc.), telecommunications ( AT&T, Bell Atlantic, etc.), and many others.

 

The rise of integrated marketing communications toward the end of the 1980s had precipitated the coming changes in Madison Avenue, in particular the shift of bargaining power toward buyers--consumers and advertisers rather than ad agencies.

 

Indeed, many of these were investing significant amounts of capital in the business-to-business markets (intranets, extranets) where expenditures were hard to track. Still, Web advertising remained top-heavy: with more than 900 sites selling advertising on the Web after the mid-1996, the top ten highest grossing revenue sites accounted for 57% of total Web ad revenue. Also, many of these leading Web advertisers--mainly portals and browsers and content/aggregators--were also among the biggest recipients of Web advertising revenue.

 

Estimates of Internet advertising varied, but directional significance was relatively clear (Exhibit 2-2). Between 1996 and 2000, subscriptions revenues were expected to rise from $120 million to $966 million; advertising revenues from $312 million to $5 billion; and transactions from $518 million to $6.6 billion. The contemporary media executives shrugged off such figures as insignificant, but such gestures reflected only strategic signaling and maneuvering. Certainly, it was true that, in comparison to mainstream ad vehicles and media pipelines, Web advertising was miniscule. In 1996, direct mail accounted for $34.9 billion, TV networks more than $13 billion, and radio almost $2.7 billion--as against the Internet's $312 million. In the long term (and even in the not-so-long term), what really mattered was that every media had to start its rise from zero--and that, historically, the Internet was growing faster than any other media. Around 1996 and 1997, many observers expected the Internet revenues to top the radio ad revenues by the year 2000.

 

strokes on the keyboard. 63 In this sense, its aggregator function and content production anticipated later developments among the online service providers, in particular America Online. By the mid-1980s, Prodigy conceived business models and audience uses that would become familiar only in the mid-1990s (for its graphic interface in the late 1990s).

 

Led by former IBM executive Theodore Papes, the company marketed itself as a household shopping and banking service for busy women. In 1989, it changed its name to Prodigy and made its national debut a year later. Concurrently, it went online. In 1991 followed the added new services. As its then-corporate parents IBM and partner Sears, Roebuck recognized the potential for bringing the information revolution to consumers, Prodigy Services Co. offered push-button access to an sorts of information, an electronic shopping mall, and e-mail ("for just $9.95 a month!"). In two years, a million people signed up.

 

Prior to the commercialization of the Internet and the creation of the Web and the first browser generation, Prodigy adopted advertising as a revenue source. At the time, rival online service providers shunned Internet advertising. It was alone in experimenting the new arena. Although CompuServe had gone online in 1979, it sold its first sponsorship only in 1995 when AOL made Web advertising a part of its strategy. Prodigy had some 200 different advertisers on its network and many sold products online.

 

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