Adware under the microscope

Adware providers know well the weaknesses of their new niche and are working to address them. They say the next generation of adware will be able to target individuals more accurately--and it will perform far more sophisticated functions than merely redirecting shoppers to a competitor's site. Moreover, future adware could migrate from the Web to text messages and instant messaging applications, extremely popular with teenagers and expected to become as important as e-mail as teens age. Dubbed the "ICQ generation" by online marketers, today's teens have shown far fewer worries about online privacy than adults have--though their attitude could change quickly once they get their own credit cards and bank accounts. Still, it remains unclear whether mainstream advertisers will embrace the next generation of adware, especially those that spent millions on ineffective banner ads throughout the late 1990s. "Bottom line is it's just a gimmick," said Mitchel Harad, chief executive of San Francisco-based online direct marketing agency GetRelevant. "It's easy to generate lists of people who have worked with you, but a list of people who have paid you and want to do business with you again is harder. It's impossible to say whether adware actually generates any purchases." According to a survey by trade publication AdAge, the nation's top 100 advertisers spent a total of $350 million in online advertisements in 2000, down 7.7 percent from 1999. The percentage of total ad budgets dedicated to online advertising also shrank, from 0.5 percent of the budget in 1999 to 0.4 percent in 2000. By contrast, advertisers spent $7.04 billion on magazine ads and $14.41 billion on network TV ads in 2000. Against persistent uncertainty with the economy, as well as new ad technologies, some companies are deciding to invest more in their own sites instead of others. Target, which spent $826.7 million on advertising in 2000, has focused on building Target.com through in-store promotions. "Adware sounds intrusive, and it's not a strategy we'd even consider," Target spokesman Douglas Kline said. "We have Target.com for guests who want to interact with us. We give credit to those guests to make choices about how they want to be contacted."

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