Mr. Helfstein: There are multiple facets of the Internet. We mostly focus on advertising content. There is e-commerce as well. All of that is economically sensitive, because a lot of that has to do with consumer consumption, whether it's advertising, which is basically driven by a company's desire to sell products, or e-commerce, which is driven by consumers actually buying the products or even content. A lot of the content on the Internet is free, but you also have purchased content. So effectively, we look at it and we say, "The Internet is cyclical." The good news is, in some cases, it's less cyclical than other areas of advertising. Search advertising and e-commerce are both taking share, so they're not seeing the type of negative trends that we're seeing in more traditional advertising, but display advertising, for example, probably will decline in 2009 just as much as cable advertising.
TWST: So they're big enough now that they feel some of the pain.
Mr. Helfstein: The issue with Internet display advertising is twofold. Number
one, there is unlimited inventory. When you have a lot of players and you don't
get pricing discipline, players will price for share and that's a dangerous
trend relative to other sectors and media where there is really limited
inventory. If you think about traditional television advertising, there are only
a certain number of commercials on the top four networks, Sunday night to
Thursday night and everybody wants it. So there is kind of a limitation to it.
Number two, the Internet, for all its metrics that we haven't searched — which
are very positive — display advertising is really unproven. Effectively, they're
like glorified billboards. People see them but most people don't click. The
click-through rate I believe is less than 0.1% and getting worse. So the
question is a matter of what the impact is. Somebody saw your banner ad. Did
they do anything? It's the same argument with a billboard outdoors. So you're
really seeing a bifurcation. You have search advertising, which is very
measurable. An advertiser only pays if somebody clicks. That is measurable so
you can make an argument, it's kind of the least waste in media. Then you go to
the other end of the spectrum where it's really unmeasurable and you're guessing
as to what that impact is. In an ad recession, advertisers want to spend less
time guessing.
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