If you thought the World Series was saturated with online broker ads, you ain't seen nothing yet. That was just the season opener of an unprecedented advertising campaign.
Online brokers raised $1.76 billion in the capital markets in 1999. Most of the money is tagged for advertising, says Greg Smith, online brokerage industry analyst for Hambrecht & Quist in San Francisco.
Here's what some online firms are planning to spend:
Charles Schwab should spend $200 million next year on ads, Smith says.
Fidelity is expected to spend $100 million on advertising.
E*Trade officials say as much as $350 million will go to advertising in the next year. That compares with almost $250 million for the 12 months ended September 1999, and $71 million in 1998 (see "E*Trade's Expenditures," below).
Ameritrade raised $200 million this summer for a new ad campaign. Its ad budget for fiscal 1999 was $60 million.
TD Waterhouse, which raised $960 million in a public offering in June, began a $100 million ad campaign in October, doubling its previous ad budget.
DLJ Direct plans to spend between $65 million and $80 million on advertising in 2000. In the third quarter of 1999 the firm spent $18.1 million on advertising--about three times as much as it did in the same period in 1998.
National Discount Brokers is budgeting a $30 million campaign, about the same annual pace as the $7.3 million it spent in the three-month period ended Aug. 31.
All together, the top 10 online brokers will spend close to $1.5 billion on advertising in 2000, analysts say.
Most of the money will be poured into television ads. "Online brokers still need to validate themselves in the minds of the public," says Jack Staff, chief Internet economist for Zona Research, an Internet industry marketing consultant in Redwood City, Calif.
Next year's ads will go beyond simply promoting online investing, Smith says. "Now they'll make sure the brand gets in the message."
Branding is critical. In a survey of Internet users conducted in September, Zona Research found that more than half couldn't name a single online brokerage firm.
The get-rich-quick ads aimed at small investors also will be scrapped, Staff says. Studies show more interest coming from senior citizens and young professionals.
Broker-bashing ads "probably are played out," Smith says. The theme "doesn't play as well as before," Staff says, because the lines between online discounter and full-service broker are beginning to blur.--Pamela Savage Forbat