Norman Rickeman is a partner and Allen Stiles is an associate partner in Andersen Consulting's Media & Entertainment Practice.

Only four years into the age of the Internet, there's no doubt that the advertising industry knows how to talk the talk about new media paradigms, interactive marketing and all things cyber. But can it walk the walk?

A new study alarmingly suggests that despite all the industry ferment over today's shifting media landscape, most traditional advertising agencies are still missing an enormous opportunity to stake their claims to the emerging world of electronic commerce. An Andersen Consulting survey in December, of 10 major ad firms, including both domestic and global full service agencies as well as technology-focused and direct marketing shops, attempted to gauge how advertising agencies are using information technology to respond to new media and consumer trends, especially with the rise of the Internet. The key finding: While most advertising agencies clearly recognize that new information technologies have become vital to better understanding consumer behavior, manage client services and facilitate internal agency operations, a surprisingly wide gap exists between most agencies' stated goals in these areas arid their actual implementation efforts.

While all the agencies surveyed agreed that consumers growing use of electronic services signifies an important shift in buying behavior and media usage, few are actually employing such information technologies as marketing databases, data mining or other consumer analysis tools to better understand either the dynamics of this new marketplace or the most effective means of communicating with consumers. Indeed, most online advertising is still restricted to banner ad branding efforts, despite the fact that new information tools exist to help make such ads far more targeted, interactive and transaction-oriented. It's one thing for online consumers to see a general image-oriented ad for Saturn automobiles, for example, but it would be quite another to see one that offered $1,000 cash-back from their own local Saturn dealership or a chance to test drive a vehicle conveniently delivered to their home or office.

Most ad agencies rated the use of such knowledge management tools a "high priority," but it is mostly only direct marketing firms that appear to be systematically using such tools in their campaigns. Moreover, such infotech "illiteracy" appears to predominate even among agencies with a strong client base in the retail and consumer product sectors, where the opportunities for brokering electronic commerce services are greatest. This suggests that many traditional ad firms still tend to view the Internet as just another passive ad medium, rather than a powerful two-way channel for learning about, and marketing to, consumers.

The advertising industry is in danger of missing a huge revenue stream. Unless agencies begin to deploy consumer analysis and marketing tools, and soon, the management of e-commerce services for consumer product companies could well be left to Web hosting firms, Internet access providers or even e-commerce systems vendors and others with little or no expertise in consumer-oriented marketing communications.

And it's not just client-oriented activities that appear to be suffering from the relatively sparing use of information technology. Our survey also spotlighted widespread infotech utilization weaknesses in the internal operations of most of the agencies surveyed:

* Most agencies rated better project and account management, integrated time reporting, client performance modeling and contract planning as "high priorities," yet infotech use to achieve these goals was lagging.

* Most agencies reported a high degree of centralized control of infotech functions, with relatively little coordination of functions with the needs of local agency offices.

* With the exception of direct marketing firms, the percentage of employees committed to infotech functions was far below the norms in other industries, such as insurance or banking. Many ad agencies still seem to view infotech as merely a "back office" issue-a burdensome "cost of doing business," if you will-rather than as a strategic weapon that can be leveraged to serve clients more effectively and gain competitive advantage.

But with the growing segmentation of media audiences, and the ever-greater challenges agencies face in understanding and reaching these audiences, the advertising industry ignores the strategic potential of information technology only at its peril.