Ad budgets soar in race for subscribers

Internet service providers have ramped up their advertising spending in a race to sign broadband subscribers since the Government's decision to unbundle the local loop.

At $1.08 million, Telecom's Xtra April spending in print advertising was almost triple its March bill, says Nielsen Media Research.

The product was the third largest spender in the print category in April, according to the Nielsen figures, up from 17th biggest in March.

Its TV advertising spending also increased significantly, up more than $500,000 in April to $1.3 million - taking it from eighth largest spender in the category in March to fourth.

Slingshot's broadband advertising spend was also on the rise, said marketing manager Mark Callander.

The firm was spending 70 per cent of its ad budget on broadband this year, compared with 35 per cent last year.

Nielsen figures showed Slingshot's broadband advertising spend rose from just $7000 in the first five months of last year to $204,000 in the same period this year.

Callander said the figures were too low but Slingshot had significantly boosted its broadband advertising.

It advertised its broadband services on television for the first time about six months ago.

"There's a fight for market share as ISP customer bases are migrating from dial-up to broadband."

Slingshot previously focused on pushing its dial-up product but Callander said broadband customers were seen as more valuable as services such as internet telephone calling and downloading television came on stream.

"It's not just about offering a broadband service now," he said.

"All these other value-added services, as the market matures, will become essentially more revenue you can get from the same customer.

"A broadband customer is being perceived as more valuable than it has been in the past 12 months given the regulatory environment."

Callander said the broadband market in New Zealand was about offering the lowest price but offers for value-added services would be the future.

"If you look at the maturity of our market at the moment it's very price-driven," he said.

"All the media is about free this, free connections, free modems, so you can see it's very much a land-grab stage in the product lifecycle."

IDC telecommunications analyst Chris Loh said the increase in advertising spending could be a sign of the growing pressure on the industry.

He said broadband uptake would burgeon under the right market conditions and New Zealand's high number of dial-up users were prime targets for broadband.

"The advertising spend is an important means to help facilitate adoption."

Telecom would not comment on its marketing strategy but spokesman John Goulter said the rise in advertising spending in April coincided with the launch of Telecom's higher-speed-broadband plan.

Goulter questioned the Nielsen advertising data, published in industry magazine AdMedia, but did not provide alternative data.

Big spend-up

* Telecom spent $6.5 million advertising Xtra broadband in the first five months of this year, compared with $6.3 million for all of last year.

* Slingshot spent $204,000 advertising its broadband services in the first five months of this year, compared with $62,000 for all of last year.

(Source: Nielsen Media Research)