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Wanted: Eyeballs

Web portals decide it's time to pursue surfers,not just attract them. Bring on the ad networks.

A recent rush by major Internet portals to buy ad companies and extend sales networks is a sign the business of being a one-stop shop for information and entertainment isn't what it used to be.

Gone are the days of emphasizing ways to attract and keep visitors - the way TV networks long have operated - by creating destinations with anything people might need for work, leisure or companionship.

Instead, those companies are more aggressively trying to follow Web surfers elsewhere - and bring lucrative ads to them.

As people increasingly turn to blogs, social-networking sites and other sources of user-generated media, Google Inc., Yahoo Inc., Microsoft Corp. and Time Warner Inc.'s AOL have spent more than $10-billion collectively this year to acquire companies and technologies to extend online advertising networks.

So instead of relying solely on being portals for consumers, the major companies are creating one-stop shops for advertisers, who are increasingly wanting to buy ads centrally and place them where the eyeballs are. The networks take care of feeding the ads to smaller sites.

"We're not interested in building yesterday's portal," said Ron Grant, AOL's president and chief operating officer. "Consumers are finding what they are looking for is coming from more and more fragmented places. We need a way for advertisers to take advantage of that fragmentation."

That shift is important for the major Internet businesses to grab a substantial share of the marketing dollars expected to flow at the expense of television and print.

For consumers, the development means greater freedom and a further erosion of artificial walls designed to keep visitors from leaving sites.

According to comScore Media Metrix, the U.S. audience for the four major Internet brands grew over the past year. But the time spent at Yahoo and AOL dropped about 10 percent, while Microsoft's MSN-Windows Live services saw an 8 percent decline.

In other words, these sites are attracting more people, but are keeping them for shorter durations as users find what they need elsewhere.

Google was the exception, with a 57 percent jump in time spent, but even the company recognizes that "no individual property will have all those products and services" a user might want, said Tim Armstrong, Google's head of North American ad sales.

"The Internet is basically being built and scaling (faster) than any one property on the Internet is," Armstrong said. "Companies in the Internet space are changing their business models to have models which are consumer-driven, not property-driven."

That's not to say the major Internet destinations are ceding their properties.

In a few cases, the large companies have bought wildly popular sites. Google spent about $1.76-billion last November to absorb the leading video-sharing site, YouTube. It owns the blogging service Blogger, while Yahoo has the photo-sharing site Flickr.

They are also innovating. AOL revamped its video search site in August, while Yahoo retooled its core search engine this month to try to make it more engaging and lure back those who had defected to Google.

"Everyone still wants to be your home page. They are always going to battle for that," said Nick Nyhan, CEO of market research firm Dynamic Logic. "But they have to think beyond that. Consumers aren't going to just take your stuff."

A look at 2007 deals in online advertising

Google Inc.

- The Internet search leader kick-started the dealmaking on April 13, when it agreed to pay $3.1-billion in cash to acquire ad-management technology company DoubleClick Inc. Google makes billions selling small, text-based ads linked to search terms, but DoubleClick would expand its ability to deliver multimedia display ads. A combination would extend the size of Google's ad network. The deal is pending U.S. and European regulatory approval. Critics have complained Google would have too much control over online advertising and personal information collected on users. Yahoo Inc.

- Two weeks after the Google-DoubleClick announcement, the No. 2 search provider agreed to snap up the 80 percent of Right Media Inc. it did not own. The cash-and-stock deal was worth about $650-million by the time it closed in mid July. The acquisition gave Yahoo an exchange designed to make it easier for Web publishers to show what they have to sell to online advertisers.

- Yahoo announced plans on Sept. 4 to buy online advertising network BlueLithium Inc. for $300-million in cash. Besides operating a large ad network, BlueLithium provides tracking technology, known as "behavioral targeting," that identifies Web surfers with particular interests so the ads they see will be more interesting to them. Microsoft Corp.

- The world's largest software company made a May 18 announcement that it was buying online advertising firm aQuantive Inc. for $6-billion. The cash deal closed in August. The company has ad-serving technologies and tools for tracking online ad campaigns.

- Microsoft announced on July 26 plans to buy for an undisclosed amount AdECN Inc., a stock market-like exchange where networks representing Web sites buy and sell ad space. The deal closed Aug. 13.

- The company also announced in May an agreement to acquire European mobile ad firm ScreenTonic SA. The deal closed July 2.

Time Warner's AOL

- AOL, which owns Advertising.com, said July 24 it would buy Tacoda Inc., which delivers ads based on browsing habits. The deal closed in September.

- AOL said May 16 it bought a controlling interest in Adtech AG, which owns the Helios IQ ad serving platform.

- A day earlier, AOL said it bought Third Screen Media, which connects advertisers, Web sites and mobile phone carriers.

[Last modified October 9, 2007, 22:30:50]