InformationWeek

February 2, 1998

Ad Space For Sale

Intranet advertising is on the rise, as IT managers use it to cover costs and provide content. But is this a good idea?

By Noah Shachtman

year ago, intranet advertising would have seemed unthinkably invasive. Today, it is gaining acceptance and is poised to enter the mainstream. Corporate IT managers are allowing-even encouraging-ads on their intranets.

So far, intranet chieftains at companies such as Amoco, EDS, and Netscape Communications are interested in advertising for three primary reasons: to obtain low-cost content that can boost employee productivity; to promote corporate initiatives and services; and to supply an infusion of cash to an area that's too-often underfunded.

But intranet advertising also raises some thorny issues that go to the heart o f IT's corporate mission. If IT is supposed to make employees more productive, is that goal served by bringing commercials to the desktop-turning workers into consumers?

IT managers, un-derstandably, want their intranets to be as robust as possible. But in today's lean and mean business environment, budgets are stretched thin. Enter companies such as Individual, Mediconsult.com, and PointCast, which offer intranet-ready fare, including competitive data, lively chats, and message boards -- all for next to nothing. But there's a price: Employees must wade through pitches for everything from island vacations to online trading when they interact with this material. What's more, these ads can be clicked through to sponsors' home pages, causing workers to spend time online that's not devoted to company business.

Some IT managers are more than willing to accept these advertisements as a cost of obtaining content cheaply. "We're in a rapidly changing industry, so timely information is important," says Bob Ber trand, a systems analyst at Houston Industries Inc., an international energy services company in Houston that broadcasts PointCast's service over its intranet. "If we didn't get this information from PointCast, we'd have to build a PointCast to get what we need. So I don't consider advertising to be a high price to pay for quality information."

Over The Firewall
Many analysts see this advertising-for-content trade-off as the primary vehicle by which advertising will climb over the firewall. "Intranet managers are extremely interested in third-party content," says Bill Doyle, a senior analyst at Forrester Research Inc. "They want to distribute it to 80%-plus of their workforce." Forrester predicts the market for intranet content will grow to $1.2 billion by the year 2000.

Other user companies are taking a different intranet advertising tack. They're using ads to highlight corporate programs and encourage workers to keep the money that they spend on travel, gifts, and services in the corp orate family-or at least with approved vendors.

Time Inc.'s intranet, for example, exhorted its employees during the holidays to buy magazine subscriptions and NFL merchandise through the company. At Amoco Corp., in Chicago, corporate divisions such as Amoco Chemicals actually pay IT to run their pitches. "Ad dollars are a source of revenue that will go toward lowering the per-desktop costs of computers throughout Amoco," says Betty Henry, who chairs the working group that governs Amoco's intranet effort.

On Netscape's intranet, employees can bank, schedule medical appointments, and purchase pagers and cell phones at corporate rates. The company uses banner ads and bulk E-mails to promote these services. "If we can take people's minds off some of the outside issues they need to deal with, if we can take some of the pressure off workers, it helps productivity," says Patrick O'Hare, Netscape's human resources intranet manager.

Netscape employees have responded to some of these ads. "It's really help ful," says engineer Mark Takacs. "I've used it to get information on my 401(k) plan and for online enrollment for health benefits. It's a great example of how we use our own products."

No Pitches
But many intranet experts, who believe in delivering services through the intranet, don't share O'Hare's enthusiasm for ads. Mike Wing, who's in charge of content for IBM's corporate intranet, nixed internal company promotions. While IBM workers can buy computer equipment and Olympics merchandise through the company's intranet, Wing won't allow banners soliciting these services. "We couldn't use up the real estate for that stuff," he says. "Besides, we don't want employees feeling like we're selling them something."

Some analysts think this is wise. "Employees are sensitive to anything that smells of corporate spin," says David Leveen, a principal at Cognitive Communications, a New York intranet consulting and development firm that helped design intranets for Apple Computer, Mitsubishi Internation al, Seagram, and Xerox. "They feel the chairman's holiday message is marketing enough."

Some IT managers are taking intranet advertisements a step further by letting outside companies solicit business on the corporate network. They see, at least, a way to underwrite some of their more ambitious projects, if not a potential profit from intranet ads.

Few businesses are far along in the process. Mediconsult.com, in Boston, is pitching corporate clients such as health maintenance organization Humana Inc. on the "opportunity for the intranet environment to become a profit center," and for the chance "to subsidize ambitious intranet programs extending to electronic commerce," says Deb Falk, Mediconsult.com's VP of marketing. Her company provides customers with intranets, extranets, and public Web sites with health-related content.

Humana, in Louisville, Ky., is apparently listening. "We're planning a strong strategy of generating revenue from our projects with Mediconsult.com," says Kraig Blair, Humana' s director of Internet marketing. Humana offers Mediconsult.com's service to its customers via its Web site, and will make this information available to its employees over a corporate intranet, which the company plans to have up and running in about a year, Blair says.

LucasVarity plc, a London supplier to the automotive and aerospace industries, is exploring "recouping some of the cost of the intranet" through advertising from outside companies, says Josh Linkner, president of GlobalLink New Media, an Internet and intranet design firm in Bloomfield Hills, Mich., that's working with LucasVarity. IT officials at Time, meanwhile, say they're considering intranet ads from outside companies to fund additional projects and to subsidize services.

Perhaps the furthest along the path is EDS. The computer services firm has built a complex intranet-based procurement system called Renascence Channel, and has already convinced more than 70 advertisers to pay as much as $150,000 each to run animated commercials an d banner ads on the system. "We're able to reduce the cost of product delivery because of advertising," says Bob Englert, director of the Renascence Channel. "Two of our largest customers are already asking to share in the ad revenue." Now accessible by the company's 75,000 employees, Renascence Channel is being rolled out to EDS's 8,000 corporate customers.

Distinct Mission
Still, many IT managers are leery of using the intranet to make a buck. They believe their craft -- and their tools, like the intranet -- have a distinct mission within an organization: to support other divisions of the enterprise by facilitating communications, building a reservoir of best practices, and helping employees work more productively. Dilute that mission with a commercial imperative, the thinking goes, and the traditional functions will suffer.

"Our intranet is not intended to be a bulletin board or a newsletter," says IBM's Wing. "We're trying to become a model E-business, and the intranet is emerging as a central vehicle for this change. We don't want to muddy the waters with ads."

Even projects seemingly benign to management can sow distrust in employees. Is the special deal that Microsoft offers over its intranet really a new employee benefit? Is EDS's Renascence Channel providing information that facilitates intelligent purchases-or is the company just trying to make its intranet advertisers happy?

With all this potential for conflict, why would advertisers bother with intranets? For some vendors, a corporate network is the easiest way to reach key decision makers. "EDS resells our products, so it's extremely important that we build brand identity and gain exposure within EDS" precisely when demand is created, says York Bauer, VP of distribution and partner development at Wall Data Inc., a Kirkland, Wash., enterprise-connectivity firm advertising on EDS's intranet.

But experts see a larger reason for this commercial migration onto corporate intranets -- our ever-diminishing attention spans. "T raditional advertisers are driven to fill up as much space as they can," says Greg Clayman, a marketing expert with Bright Sun Consulting in New York. "They're trying to burn impressions into consumers' minds to keep their brands at the top of people's consciousness."

This has made advertising so pervasive that we tune out all but the most in-your-face marketing appeals. Disinterest leads advertisers to scramble for more and more eye-opening means of influencing our opinion. So cross off another area of life where you didn't think you'd be bothered by commercials. Intranet advertising is coming.

See related story, " Get The Most From Intranet Ads ."

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