In Web Advertising, Red Sky's the Limit
By Devin Leonard; Tim Smith

(FORTUNE Magazine) – Writing off Web advertising is easy--until you've seen the work of Tim Smith, founder of Red Sky Interactive in San Francisco. Smith is hailed as a guru for award-winning campaigns such as the Miller Lite beer pager (which uses instant-message software to coordinate pub crawls) and Absolut DJ (a site that lets vodka fans mix dance tracks). The ponytailed, 41-year-old, Marshall McLuhan-quoting gadfly delights in taking shots at Madison Avenue. FORTUNE caught up with Smith last month to talk about the future of Web advertising.

Q: Why are people so down on Web advertising?

A: At first there was a bastardized use of Web ads. We still have people peering at postage stamp-sized videos going, "Ooooh, that's awesome," when, in reality, it's crap. A lot of what's going on right now is people saying, "Okay, we've got a streaming MP3 player and we want to sell Coke. Coke and Christina Aguilera have a relationship. And she does music, right? All right, let's stream Christina Aguilera." There's not a lot of creativity in that.

Q: Okay, could you talk about Red Sky's work and how it's a better use of the Web?

A: The beer pager is a great example. The question we got from Miller was, Short of having a big public event, slapping people on the back, and saying "Miller Time," how do you incite a riot? We could have built a pager, but that would have been enormously expensive. What we did was employ a virtual device that allows people to connect with their friends and associates. We're still seeing tons of use. This is something that couldn't have been deployed in any other kind of media.

Q: Why aren't major advertisers doing more things like that on the Internet?

A: The people making the decisions don't understand the medium. They've got too many people banging on them, saying, "You can't go there. It's not right." Their marketing guys are saying, "That's risky." Their technology guys are saying, "Nobody's got the plug-in."

Q: Are the big Websites part of the problem?

A: Absolutely. AOL has 30 million users. The AOL home page is ridiculously valuable real estate, worth more [than apartments in] Tokyo, Manhattan, and San Francisco. But to get there, you have to play by their rules. Their rules say you can only be a sign of a certain size and your ad can't move. Yahoo says, "We will not post interactive banners."

Q: Some people say Web ads won't really take off until broadband penetration is greater. What do you think?

A: It's ridiculous. I think that people who aren't getting any traction right now are always going to hang their hopes on the next big thing. Guys, if you can't figure it out here, check out. Start a car wash.