# Fortune and Men's Eyeballs

The conventional wisdom debunked.
April 17 1999 3:30 AM

# Fortune and Men's Eyeballs

## Applying a bit of math to the great Internet giveaway.

Bill Gross, a Pasadena, Calif., businessman, has a great moneymaking idea. His firm, Free-PC.com, will ship you a free 333-megahertz Compaq computer. He'll also give you free Internet access and a free maintenance contract. In return, all he wants is two little things. Your soul and a pound of flesh? No, just your eyeballs and a bit of demographic information. "Eyeballs" is Webspeak for the number of people who see a Web page--and, presumably, any ad that is on it. If a Web page is served to 100,000 computers, that counts as 100,000 eyeballs, although literally it's more like 200,000, assuming two eyeballs per person.

eFax.com will give you a free fax number and allow you to receive faxes by e-mail--free. Everyone wants to give you free e-mail. Free personal address books and calendars, free mapping services, free personalized news and weather--all are available in exchange for your eyeballs and a bit of information about yourself, either asked for explicitly or gleaned from what you reveal in using the free service.

Which raises the question: How much can your eyeballs possibly be worth? Suppose I could insidiously find out enough about you to influence every purchasing decision you make. Suppose I could promise that every ad I sold you would go straight to your spending reflex. What could I sell that power for?

Now consider that advertisers spend an estimated \$100 billion plugging goods and services to America's 100 million households. In other words, advertisers, as a group, think that affecting the purchasing decisions of an entire household of average eyeballs is worth \$1,000 per year. That's for all the ads you see in every medium, from television to billboards, in the course of a year. Bill Gross is betting that his ads alone, aimed at just one person, will be worth almost half that amount. Maybe he will manage to find bigger spenders. Or maybe he'll be wildly more successful in affecting their decisions. Or maybe he's nuts.

His task will be easier if his \$400 doesn't have to come out of what advertisers are already spending but by convincing them that it's worth spending more. That's where the demographic information comes in. This is not a new concept, of course. John Wanamaker, who built a department store empire in 19th-century Philadelphia, once said, "Half the money I spend on advertising is wasted ... I only wish I knew which half."

But is the Internet so miraculous an advertising vehicle that Gross will be able to siphon off \$400 per person from total ad spending of \$1,000 per family--or persuade advertisers to spend an additional \$400 to reach each of his customers? This isn't so obvious. After all, targeting is not unique to the Internet. A Lexus ad in Car and Driver or Fortune is pretty well targeted at affluent people who like fancy cars. And ads on the Internet, at least so far, lack oomph. A banner at the top of a Web page just isn't the same as a luxurious two-page color spread.

Targeting may increase what advertisers will spend per eyeball, but it also reduces the number of eyeballs they have to pay for. Unless Wanamaker was willing to pay double for reaching the right half of the people, his total ad spending would go down and not up. The apparent going premium of 50 percent for a targeted ad on the Internet suggests that Internet advertising may be as likely to reduce total ad spending as to increase it.

Last year, advertisers spent \$2 billion on the Internet, compared with \$35 billion spent on broadcast TV and \$10 billion spent on cable. That's 2 percent of the \$100 billion total spent on ads in all media. The Internet ad market is growing at two or three times the rate of any other medium. So suppose advertisers direct one-fifth of their resources onto the Internet. That would be a tenfold increase in the Internet's share. And suppose the total market for advertising doubled. In this highly optimistic scenario, Internet ad spending would be \$400 per household. In other words, Bill Gross could break even--provided he was the only advertiser on the Web.

Eyeballs are worth money only because they are attached to wallets. And the size of the wallets is a strict limit on the value of the eyeballs. So have I just argued myself out of a job by mathematically disproving the theory on which my paycheck is based? Not at all--or at least I don't think so. Free magazine articles are one thing, free computers are another. Exchanging stuff for eyeballs makes sense as long as the cost of providing the stuff is less than the value of the eyeballs to advertisers. What it has cost Slate to provide this article by me can be the basis for a very profitable ad-based business. Take my word for it.

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