Volvo, in Industry First, Turns to AOL To Spread Word on Its Latest Vehicle
                    September 25, 2000

                    By KAREN LUNDEGAARD
                    Staff Reporter of THE WALL STREET JOURNAL

                    At a time when some advertisers are questioning how well Web ads
                    really work, Volvo Cars of North America is gambling big that they can.
                    The auto maker is launching its latest car, the S60, completely online,
                    with no television advertisements and no national print campaigns, save
                    for a couple auto-buff magazines.

                    Sound like a risky scheme? Quite possibly, but it also will be a
                    high-profile test for the online advertising industry and Internet
                    powerhouse America Online Inc. In the auto industry's first true digital
                    launch, Volvo, a unit of Ford Motor Co., has turned to AOL and its more
                    than 24 million subscribers to get the word out on its new luxury sports
                    sedan, which it is counting on for one-fourth of its projected 155,000
                    North American vehicle sales next year.

                    It is the first deal of its kind for AOL, and the online service provider is
                    touting it as proof of "the value of the audience as well as the reach we
                    can bring," says Mark Hosbein, AOL's vice president of interactive

                    The deal is also a shot in the arm for online advertising generally, say
                    analysts. "It's a great validation of the medium," says Marissa Gluck,
                    advertising analyst for Jupiter Research of New York.

                    The deal, the value of which the companies won't disclose, includes
                    banner and column advertisements on various pages throughout AOL's
                    maze of services and rooms, including its auto area, a men's-interest
                    room and its map site, The ads will direct surfers to a
                    Web site Volvo has set up for the vehicle, AOL
                    subscribers will also be offered up to $2,100 of free options on a vehicle
                    -- a giveaway that gets Volvo prime space on AOL's welcome page,
                    which displays promotions at AOL's discretion.

                    Volvo is also mailing out 500,000 CD-roms showcasing the vehicle, which starts at $26,500. And it's offering giveaways for those who get to the dealerships to test-drive the vehicle, including 10 cars and trips to Sweden to pick them up from its factory there.

                    Volvo will advertise in car-buff
                    magazines, such as Motor Trend and
                    Car and Driver. "But that's sort of the
                    price of entry to get your car reviewed,"
                    says Phil Bienert, Volvo's manager of

                    The auto maker is planning some
                    traditional media advertising beginning
                    next year. But for the S60, which should arrive in showrooms in
                    mid-October, that might be too late.

                    "There's an axiom in the business that you never recover fully from a
                    weak launch," says Tom Healey, partner at automotive research firm,
                    J.D. Power & Associates, Agoura Hills, Calif. Volvo's online-only strategy
                    "strikes me as a risky idea, particularly for a launch."

                    The campaign, to a degree, was born of necessity. This is Volvo's third
                    new-vehicle launch this year from a company that used to "introduce a
                    new car every 10 years," says Bob Austin, manager of national
                    advertising. "We were using up a lot of our resources both mental and

                    Particularly financial. Mr. Austin says he spent approximately $20 million
                    on each of the other launches, for the V70 wagon in April and for the
                    Cross Country, an all-wheel-drive model dressed up to look like a
                    sport-utility vehicle, introduced last month. Both of those campaigns
                    relied heavily on TV, particularly cable.

                    When he looked to add another $20 million launch campaign to the
                    budget, "I had a little trouble with the number," says the 30-year Volvo
                    executive. Making matters worse: the premium prices on TV ads
                    because of the election, Mr. Austin says. "It seemed like this was the
                    perfect opportunity to test how to operate in the new environment."

                    He adds that if the deal had only included banner ads, he wouldn't have
                    done it. "Classic banner advertising has failed to impress me. Almost no
                    one references anything you've done online."

                    But combined with the free options, the trip giveaway and prominent
                    placement, he thought it was worth it. The launch, including the
                    giveaways, will cost Volvo roughly $10 million. Furthermore, 89% of
                    people who own a model 2000 Volvo vehicle are Internet users,
                    according to Strategic Vision Inc., a San Diego automotive-research

                    Still, "it's a big risk" for Volvo, says Jim Nail, a senior analyst specializing
                    in online advertising at Forrester Research Inc., Cambridge, Mass. "The
                    Internet is not a strong awareness-building vehicle for a new product."
                    It is better, he notes, as customers try to learn more about a product
                    or decide between a few. But, he adds, if he were counting on the
                    product for 25% of sales next year, "I would do a blend of online and
                    offline from the word go."

                    That is the way most advertisers, particularly auto makers, approach
                    the Internet. Japan's Toyota Motor Corp. is now selling its new Prius
                    sedan, which runs on both gas and electricity, only online. It still must
                    be bought and picked up at the dealership, but it's not available in the
                    showroom. But it is advertising the move throughout the airwaves and
                    print media. Volkswagen AG tried a similar gimmick this past spring,
                    offering its new Beetle in two online-only colors, vapor blue and reflex
                    yellow. That too was advertised in traditional media.

                    Volvo dealers, who will be stuck paying the interest of cars sitting in
                    their lots if the strategy doesn't work, seem to be offering qualified
                    support for now. Volvo briefed its dealers on the basics of the campaign
                    at a July meeting.

                    "Nobody went into shock," said Frank Dwyer, a suburban Detroit Volvo
                    dealer who attended. "Everybody was very excited about the car. They
                    weren't too nervous about the advertising." He personally isn't worried,
                    though he thinks it will be interesting to see if it works.

                    Volvo's corporate executives acknowledge the risk. "It could blow up in
                    my face," says Mr. Bienert, who is handling much of the campaign. "But
                    at the same time this thing could be huge. This could be a whole new
                    way to launch cars. We don't know."

                    Mr. Hosbein won't even discuss what it means for AOL if the campaign
                    fails. "We're committed to get results for these guys," he says. "We've
                    said we'll put the messages for this product in the places where we
                    think you'll get the reach that you need."

                    Write to Karen Lundegaard at