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E-Commerce Retrospective

This story by Barbara Fox was published in U.S. 1 Newspaper on March 17, 1999.

All rights reserved.

Only three years ago, when newspapers were new to

the online world, some of their advertising rates were sky high. It

was like the Gold Rush, when eager miners were flocking to California

and paying hundreds of dollars for a shovel.

Those advertising rates have dropped by half. "Our CPM (cost per

thousand) averages in the $25 to $30 range," says Peter Levitan,

CEO of one of the state’s leading websites. "In 1996, it might

have been in the $50 range," he admits. "In 1996 people were

picking numbers out of the sky."

Levitan founded New Jersey Online, part of the Newhouse empire, which

also includes the Star Ledger, the Times of Trenton, the Jersey Journal,

the New Yorker, Parade, and other Conde Nast magazines. Surveys show

that New Jersey Online is the third largest website in the New York

area, second only to AOL’s Digital City and the New York Times.

"E-Commerce: Is New Jersey Ready for It?" is the topic for Levitan

in a speech sponsored by Technology New Jersey at the DeVry Institute,

630 Route 1 North in North Brunswick, on Tuesday, March 23, at 8 p.m.

Cost: $30. Call 609-452-1010.

How to price Internet advertising is still an open question, says

Levitan, and so New Jersey Online offers price points of from $40

to $12,000 per month. For $40 you get a mini site in the yellow pages

area.

The son of a Manhattan-based apartment builder, Levitan earned his

bachelor’s degree from the San Francisco Art Institute, Class of 1973,

stayed to get his master’s, worked for five years as a commercial

photographer, and then went into agency work at Saatchi & Saatchi,

where he was an account manager for such clients as Johnson & Johnson,

General Mills, and Northwest Airlines. "I left Saatchi to start

an interactive test market in Maine, and a friend of mine, who was

president of the New Yorker, said that Newhouse was doing in New Jersey

what I was doing in Maine," says Levitan. He launched New Jersey

Online in the spring of 1995 (http://www.nj.com).

The $64 question: Is any publication, anywhere, making money on a

website? Until nine months ago, no, says Levitan, but now the answer

is yes. "It went through a complete shift. Local sites are doing

well in terms of local advertising. Ultimately, it is a recognition

that a lot of people are using the Internet every day." He quotes

a Star Ledger Eagleton poll taken last fall that showed 36 percent

of New Jersey residents went online in a given week. Nationally,

44 percent of youth ages 12 to 19 use the Web.

Levitan speaks of "just absolutely incredible numbers" generated

by holiday sales. In the 1998 holiday season consumers doubled the

amount of money they spent ($2.3 billion according to a Jupiter survey)

and 60 percent of the shoppers were new to the Web. "It’s a crystallization

of the idea that this is not the future any more, it’s today,"

says Levitan. His opinions:

What retailers do need: Some kind of Internet presence.

"If I were Susy’s dress shop in Princeton, and I realized shoppers

were watching less TV and consuming less print media, I would add

the Internet to my marketing objectives.

What retailers don’t need: An extensive virtual store.

"I can make the case that a brilliant banner alone can work,"

says Levitan. He cites an America Online study showing that ad banners

are as effective as television commercials in terms of day-after recall.

"We have some advertisers who have been extremely successful with

a two-page website. We preach simplicity."

The late entry of ad agencies in cyberspace has been caused,

he says, by too much attention to the bottom line. "They didn’t

have the incentive to take people off the profitable side of the business,

for instance, making TV commercials, to use them on the less profitable

side, the Web side," says Levitan. "Some of their lunch has

been eaten by the dedicated agencies. Some of the agencies in the

state need to figure this out fast."

Because some of these agencies are not making proactive moves to take

their clients to cyberspace, clients are doing it on their own. For

a major daily, at least 85 percent of the advertisers supply "camera

ready" copy from an ad agency, says Levitan. In contrast, fewer

than 70 percent present "web ready" ads to New Jersey Online.

The biggest mistake ad agencies make: not making the investment

in the right people. "That is a very big investment. Agencies

are paying a lot of money to a very small population of people who

do understand how to buy and create digital media," he says, quoting

a salary figure of $75,000 for someone with two years experience who

knows how to create Web ads and buy Web space, and that someone is

probably 28 years old. "There is a great demand for very few people

with that skill set."

The worst ads: those without a call to action, the plain

logo that assumes someone will click on that logo to learn more. Even

if you only add the words "Click here" that improves the click

through rate, and "active banners," those with motion, also

receive higher click-through rates.

The value of speed versus glitz: "I can’t say that

speed is critical," says Levitan, "because we have to do certain

things graphically, but we do have page size parameters." On his

site, news pages will load faster than feature areas targeting to

leisure surfers and college students, such as the area on Bruce Springsteen.

And the site always has a live cam somewhere. Look for beach scenes

next summer.

None of this wisdom was as obvious three years ago. And three years

ago the value of databases was also not generally known. "In ’96

I didn’t know the value of the database applications," Levitan

admits.

Seven reporters (one-fourth of the company’s staff) are responsible

for updating the now popular databases for such areas as movies, yellow

pages, maps with directions, events, and school reports. What with

the databases and special breaking news stories these reporters generate

20 percent of the information put on the Web. The rest comes from

the newspapers and the chat rooms.

Levitan notes that chat rooms are not profit centers: "They are

more sponsorship oriented. The fact is, if you are chatting, you are

not inclined to want to leave to go visit Susy’s Dress Shop."

"In 1999 we are going to position ourselves as the single best

place for people to save money in the state," says Levitan, "with

coupons and efficient delivery of deals to the consumer." Need

a lawnmower? Go to his site and type in the words "lawnmower"

to see if someone has a lawnmower deal. Print out the dollars-off

coupon and take it to the store. Or tell the website to E-mail you

when there is a lawnmower sale. "Our goal is to help bricks and

mortar retailers to grow their business," says Levitan, "to

drive people to their front door."

Levitan’s coupon-printing strategy will be in place by early summer.

Yes, he admits, there are national coupon sites. "The problem

is they are national. The reality is, these kinds of decisions are

local. You want to shop within 20 minutes of your house."

The $64 million question is whether the Newhouse newspapers are finding

their ad revenues siphoned off by cyber ads. Levitan hedges on this

question, noting that the company does not release internal profit

figures, but he answers it as president of a national new media federation

with 1,000 online newspapers in its membership.

"We have not seen across America an erosion of advertising dollars

because of advertising spent on the Internet," says Levitan. "Will

that change? As more people spend money on the internet, the money

has to come from somewhere. That’s why smart newspapers have robust

online businesses."

Another medium that desperately needs a robust Internet presence is

television, says Levitan, and he uses Princeton as a harbinger of

what will come. Television viewership in Princeton is way below the

national average, and Internet usership is far above average. Levitan

thinks this trend will spread: "People have a certain amount of

screen time."

— Barbara Fox


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