- By Dibya Sarkar
- Jan 07, 2001
In a world where advertising is pasted onto buses, propped up along roadsides
and flashed from most commercial Web sites, there remains one domain where
the medium is not yet at home: government Web pages. But this area, too,
is in Madison Avenue's sights.
A handful of state and local governments' Web sites display insurance,
automobile, bank and technology advertisements. While the ads get a lot
of eyeballing from citizens, they also get scrutiny from government officials.
Governments are looking hard at the idea of accepting ads on their sites
because they're interested in the extra money they might generate. But they're
most interested in how the public will react. They worry about conveying
an image of favoritism or endorsement or, even worse, the appearance
that advertisers have a say in site content.
So most municipalities are taking the wait-and-see approach. "This is
an industry that likes to see what their peers are doing in the marketplace,"
said Rishi Sood, a principal analyst with Gartner Group Inc., a market research
firm. "It's never a first-advantage, first-mover industry."
Still, some municipalities and states have decided the potential revenue
is reason enough to give Web advertising a try. And at least one company,
eGovNet of Ohio, has decided the potential market is compelling enough that
it has created a new business focused on government Web advertising.
Should these early deals work out as intended, and should the public
take it in stride as they do other advertising strategies, the potential
for growth is undeniable.
One of the first localities to take the plunge was Honolulu. After suffering
through a recession that lingered through the better part of the last decade,
Honolulu needed a ticket into the Digital Age. The city had a Web site,
but a tight budget made e-commerce services a reach. Enter the private
The city decided to consider charging citizens convenience fees for
e-services and selling ad space on its Web site.
"Regardless of which company we would have gone with, providing e-commerce
had to be done at no cost to the city," said Courtney Harrington, deputy
director of Honolulu's information technology department.
Hawaii Internet Consortium, a subsidiary of National Internet Consortium,
said it doesn't support advertising, only convenience fees. EGovNet, a Columbus,
Ohio-based e-government provider, proposed charging convenience fees and
using advertising. Ad revenues would be split with the city, which would
get 60 percent.
With full support from elected officials, Honolulu signed a contract
with eGovNet in April. They reasoned that the extra ad revenue would keep
convenience fees low because the company didn't have to rely on fees for
a return on its investment.
Two months later, the first banner ad — for the Bank of Hawaii — appeared
on the site, followed by an ad for The Prudential Insurance Co. of America.
Under terms of the contract, eGovNet hosts the city's portal, which
gets about 700,000 hits a month. It's done for free on the company's equipment
at a downtown Honolulu site. In exchange, eGovNet gets exclusive rights
to post ads on the city's Web site for the next five years.
Little did Honolulu know that it was one of the first localities to
test the waters of what some are predicting will be a tidal wave of this
type of advertising. "There's a part of me that doesn't like it, but the
fact remains this is a part of life," said Harrington, who has fielded inquiries
from interested officials in other localities. "What we can do is...keep
it under control."
Officials of state and local governments that accept ads or are looking
into it said profit isn't the impetus. Rather, they just want to defray
operating and start-up costs while keeping convenience fees low. Representatives
from smaller municipalities said without advertising revenue, they couldn't
offer e-government services at all.
EGovNet is the first, and perhaps the only, company offering such a
deal. The company was formed in July 1999 and created a subsidiary six months
later called govAds to deal specifically with advertising on government
Web sites. The company's goal is to develop a network of public-sector sites,
a one-stop shop for advertisers.
Internet advertising is typically sold based on the cost per thousand
impressions, or CPM. When a user accesses a Web page, measurement software
counts it as an impression. So, for example, a $50 CPM for 200,000 page
views would cost an advertiser $10,000.
Honolulu received about $7,800 for the quarter ending Sept. 30 from
its first two ads. (Ads for BMW and American International Group Inc. have
since appeared on the site.) Harrington said the site will display no more
than 10 advertisers on a page, which could generate up to $100,000 annually
for the city. He said eGovNet has probably spent $500,000 on the city's
portal so far. But that's peanuts compared to the potential windfall from
advertising, company executives said.
"They have a monopoly," CEO and co-founder of eGovNet Tim Bartlett said
of government Web sites and the traffic they get. A private company might
spend a tremendous amount of money branding their sites to generate traffic,
but government sites get traffic without having to do anything, he said.
On average, state government Web sites get 10.9 million page views,
or impressions, a month. Based on that, governments could generate about
$4 million a year, he said. "The average growth [of page views] of public
sites is 6 percent per month," Bartlett said. "The numbers are astounding
when you do comparisons to the private sector."
According to the Internet Advertising Bureau, a trade association, online
advertising in the private sector surpassed $4.6 billion in 1999 and is
expected to garner between $8 billion and $10 billion in 2000.
But it's too early to tell whether the public sector will produce the
same results. "We're probably at the start of that period," Sood said about
the Gartner Group. "I don't see a lot of activity taking place over the
Sood declined to predict advertising revenues in the public sector,
but said smaller municipalities, with fewer resources, might be more likely
to consider advertising. Officials at eGovNet also declined to share their
In October, Salt Lake City signed a three-year deal with eGovNet that
includes advertising. "I think many cities face budget constraints and that's
true here," said Deeda Seed, the chief of staff for Mayor Ross "Rocky" Anderson.
"[Advertising] seemed like something worth trying."
When the mayor took office a year ago, he considered advertising as
an option to help pay for a revamped Web site. A new site will be launched
in four months with expanded online services. Ads are expected to appear
on the site before then.
For eGovNet and potential advertisers, the city could be a gold mine
because it will host the 2002 Olympic Winter Games. The city's special projects
manager, Al Porter, said the site is expected to get a million hits per
week right around the Olympics, and that's a conservative estimate.
"That's the bare minimum," Porter said. "We'll probably get four or
five times more based on a projection by the Salt Lake Organizing Committee."
Officials at eGovNet are confident that seeing ads on government sites
will not turn off the general public. Bartlett said advertising is part
of Internet life, and people are used to it. However, the company does not
want online advertising to be annoying or invasive and instead places ads
where they make the most sense, he said. For example, a user registering
a car would see advertisers for auto insurance, sales, loans and parts.
Seed said Salt Lake City would not hesitate to pull advertising if people
complain. Harrington said Honolulu residents haven't fussed about them,
although he received one e-mail claiming that the city appeared to be endorsing
EGovNet has rules and standards for appropriate advertising, which is
"limited to advertising of goods and services available for lawful purchase
by individuals of all ages." That means no tobacco, alcohol, obscene material
or other goods and services that minors are legally barred from purchasing.
Jon Allison, eGovNet's general counsel, equated advertising on government
Web sites with what's seen on public television, where companies sponsor
or underwrite programming. "This is no different than PBS getting advertising,"
he said. "It's controlled advertising."
However, some worry about commercial-sector control and influence over
the public sector, and the appearance that governments are endorsing products
"It's fraught with some dangers because once you open the door to certain
speakers, you have to allow the door open to anyone," said Jef Richards,
chairman of the advertising department at the University of Texas at Austin.
He said he's "heard a lot of rumblings" from government agencies about the
issue of advertising.
For example, an agency might ask, if a government site posted a Honda
ad, does that discriminate against Toyota? The public might also question
whether government information has been influenced by advertisers. "If you
open it up to advertisers, are you turning over control to the advertisers?"
Based on case law relating to public transportation property advertising,
such as ads on a metropolitan bus, Allison said his company has the right
to pick and choose advertisers.
"In essence, because government Web sites are a tool by which governments
provide information and services to citizens — and are not vehicles for
public dialogue — governments have significant latitude to limit the content
of ads on their Web sites," he said. If issues of endorsement and favoritism
arise, a government could include a disclaimer, he said.
Among states, Massachusetts appears to be the only one experimenting
with advertising on its Web site. So far, ads appear only on its procurement
site, called Commonwealth Procurement Access and Solicitation System, or
Comm-PASS. Honda EV Plus, TEN Corp., Getronics and Central Reprographics
are among the advertisers. If a user clicks on a certain ad, this disclaimer
appears: "The Commonwealth of Massachusetts does not endorse the following
linked Web site and is not responsible for any of its content, representations
or errors contained therein."
David Lewis, the commonwealth's chief information officer, said the
site began accepting advertising this past summer as a pilot project,
and ads are directed only to statewide vendors. The site also solicits advertisers
through a banner ad called "Your Ad Here." Click on that ad and you're pitched
site statistics (20,000 unique visitors a month), ad size specifications
(234 x 60 pixels) and rates ($200 per month). It says each advertisement
can expect to appear 1,800 to 2,000 times. Lewis said he thought the concept
could fly, but only if done sensibly and with citizens in mind.
For example, if a state resident is renewing a vehicle registration,
then maybe coupons for Jiffy Lube would appear, he said. Or if a resident
is applying for hunting or fishing licenses, then the user could click on
a link for lodges in a particular area.
But he said state officials are still grappling with issues such as
legality and avoiding the appearance of endorsement. "There doesn't seem
to be any middle of the road on this," he said. "It's either do it or don't."
Lewis said a public/private e-government task force is still exploring
the idea and is expected to share its findings this month.
Dierdre Cummings, consumer program director of the Massachusetts Public
Interest Research Group, said the caution is justified.
"We have been raising questions as far as the concern the public should
have when the government is beholden to industry to fund information," she
said. "Some of the information would affect those very businesses. Could
we have faith in the information being presented independent of any influence?"
Other states considering advertising are Florida, Ohio and Texas. Nicolle
Devenish, spokeswoman for Florida's state technology office, said state
officials are intrigued by the idea and discussing it. "It's not something
you leap into," she said.
The Ohio Department of Administrative Services has a moratorium on the
use of ads, endorsements and sponsorships of all state-controlled Web sites
until the issue has been fully addressed.
"We found [the advertising issue] extremely large," said Mary Carroll,
the state's deputy director of information technology policy. "There are
a lot of legal issues to it, and there are also policy issues to it."
Carroll said Ohio surveyed several other states to see what they were
doing, but could not find another one endorsing ads on its Web sites. She
said Ohio's Bureau of Motor Vehicles was considering advertising when the
moratorium was imposed.
In November, Texas released an e-government feasibility study, part
of which looked at advertising as a revenue model. Although it cited surveys
in which 75 percent of residents found advertising entirely or somewhat
acceptable in funding e-government, it cited issues of control, censorship
vs. freedom of speech, implied endorsement by the state and service for
citizens vs. service for businesses.
"The lack of industry standards and guidelines regarding the "best practices'
in Web advertising makes it difficult to determine how to best use advertising
as funding for the state portal," the report concluded.
Several recent studies also acknowledged the increasing buzz about advertisements.
A Brown University study found that 44 government sites — about 2 percent
of the sites surveyed — had some sort of advertising. A University of Texas
study, conducted this summer, said most respondents would rather see advertising
or pay for services directly rather than use general tax funds or sell government-collected
data in support of e-government services.
The public may have the ultimate say on whether advertising is appropriate
on government Web sites. Several government officials said if the public
doesn't want ads on their sites, then they will pull them.
"Under any circumstances, we don't want to make government annoying,"
said Massachusetts' Lewis. "Government can be annoying enough."