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Placing banner ads on Web sites used to be for big businesses with huge advertising budgets. Now that companies like SmartAge promote free banner exchanges, it's anybody's game.

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Running ads on Web sites used to be for big companies with big advertising budgets. Now that it's free, it's anybody's game

Most start-up founders live off credit cards and macaroni-and-cheese dinners and can only dream of treating their employees to a grand evening out. Not Bill Lohse. Last June the chairman and CEO of SmartAge shepherded 22 employees of his wet-behind-the-ears company and their guests to a gala performance of Carmen with Denyse Graves at the San Francisco Opera, followed by a private dinner at Vivande, a tony restaurant nearby.

The celebration marked the official launch of SmartAge, a full-service shop for small companies eager to lure eyeballs to their Web sites. Lohse, 47, a tall, long-jawed man who is equally articulate on the subjects of niches and Nietzsche, says he doesn't care whether his brainchild brings him additional fortune. Lohse, after all, is already a multimillionaire, having founded or invested in several successful companies, including TimeLine (now part of Symantec) and Knowledge Adventure. He has also achieved a measure of celebrity as the former publisher of PC Magazine, the fattest and richest of the computer industry's publications.

By all rights, then, Lohse should be enjoying an early retirement in Tuscany, indulging his passion for Italian opera. But he chose instead to spend $750,000 of his own funds to "help small and growing businesses make money."

Lohse is talking about Internet money, and at the center of his plan are banner ads. Banners are one-by-five-inch digital billboards that companies pay to place on other companies' Web sites; when a visitor clicks on a banner, he or she is delivered to the advertiser's home page. According to the Internet Advertising Bureau, in New York City, banners and other forms of Web advertising are becoming big business, with companies buying $423 million worth in the second quarter of 1998--a 97% increase over the second quarter of 1997.

So far, most of those millions have come from large companies with plush advertising budgets and hefty investments in their own Web initiatives. That's not surprising when you consider that the cost of running a banner ad on a popular site like CNET is between $25 and $75 per thousand "impressions"--the number of times the page is seen by surfers. Advertisers on CNET can run through all those impressions in a few hours, and at those rates small companies--particularly those selling to local or regional customers--may get more value from advertising in their local papers. In addition, companies buying banners generally work with agencies that create their ads' content and design, and with consultants who help them plot an Internet strategy. Small-business owners, occupied as they are with payroll and cash flow, don't have that luxury.

Which is a shame because, according to Lohse, banner ads can be very good friends to small companies. Banners are "a great way for small companies to drive traffic to their sites and then to turn that traffic into real revenue," he says. Lohse is seconded in that opinion by Vint Cerf, an Internet guru and SmartAge investor. "Small businesses need all the advertising leverage they can get," says Cerf, who is MCI WorldCom's senior vice-president of Internet architecture and technology. "It's like the wonderful quote from Ted Turner: 'Early to bed, early to rise, work like hell, and advertise."

It is here that SmartAge comes in. Like its chief competitor, LinkExchange (recently acquired by Microsoft), SmartAge is building an artificial economy of banners, using itself as the gathering place and service hub. Say that Joe's Tires has a Web site it wants to promote. Joe contacts SmartAge and signs up for the company's SmartClicks banner-exchange service. SmartAge gives him some tools with which to build a banner ad and identifies other SmartAge clients likely to drive traffic to Joe's site--Bill's Auto Body, for example. The vendor then plops Joe's banner on Bill's site and Bill's banner on Joe's site. The service doesn't cost Joe or Bill a penny.

Although SmartAge collects no money for playing matchmaker, it does get to put its own banners on both Joe's and Bill's sites, driving customers to its own site, where it can sell them additional services. Here economies of scale kick in. SmartAge publishes about a million ads per day and boasts 125,000 registered users. That translates into a torrent of visitors to SmartAge's site, and an ever-increasing number of those visitors (the company declines to be specific) purchase some of SmartAge's other services, attracted by the low! low! low! prices that all that volume makes possible.

Cerf describes the banner exchange as "a built-in value generator," meaning that each sale of a service generates demand for another service. Say a small-business owner journeys via a banner ad to www.smartage.com. Once there, she decides to spend $6.95 a month for something called SiteWatch, which monitors the performance of her site, alerting her if her server slows down or if the number of hits falls below a predesignated floor. If those hits do decline, she may conclude that it's because her site is too hard to find. But look, SmartAge is there for her again, this time with a service called Submit that will register her at no charge with seven major search engines. (Submission to 400 additional engines and directories costs $9.95.) Once she's listed everywhere, the customer becomes a prime prospect for SmartAge SiteRank, which for $6.95 a month tells site owners where they rank on all those search engines and how they're doing relative to the competition. "There's a certain stickiness to our services," explains Johnathan Robinson, SmartAge's vice-president of sales.

The many-eggs-in-one-basket approach is fine with Richard Fascia, a former policeman and hostage negotiator from Rhode Island who consults with businesses on workplace violence, a service he markets on www.jeopardymanagement .com. "If I had to create the art, find out how to get it in the right places, do the analysis of where it goes and who sees it and so on, it would take me days of solid work, and I probably wouldn't get it right the first time," he says. "With SmartAge the whole process is very simple."

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