The extraordinary growth of online advertising in the past five years has been driven by companies looking to capitalise on the consumer shift from high street to internet. Plot online media spend against e-commerce sales since 2000, and the rising curves look tellingly similar.
Without doubt, the main reason online is, at last, on most marketing directors' radars is because it offers an efficient, quantifiable means to drive business growth at a fraction of the overhead of a bricks-and-mortar operation. And the latest online adspend figures make sense of this trend. More than half of digital media investment comes from that great bastion of return on investment, paid-for search.
But let us not forget about the role of broadband, the rise of which has also prompted e-commerce advertisers to loosen their purse-strings.
People with high-speed internet spend at least 40 per cent more time online than those with dial-up, so faster access means users are more likely to buy online.
Domino's Pizza is a classic example. Our research showed it takes broadband users more than a minute less to buy online at Dominos.co.uk than over the phone. When we served relevant advertising exclusively to high-speed internet users, conversions improved by more than 20 per cent. These results prompted Domino's to reorganise its media mix, a trend that is spreading industry-wide.
But with success comes competition. As more consumers buy online, the response-led online channels, such as paid search and affiliates, have become irresistible to marketers. Mounting web use in broadband homes has led to a boom in inventory supply. This, in turn, has negated the threat of media inflation. But the most important issue for marketing directors and heads of e-commerce is this: how can you maximise business volumes online in an increasingly competitive environment, while avoiding trampling all over the efficiencies that make digital so attractive in the first place?
The first step is to ensure the online response channels are being used to best effect. This calls for rigorous optimisation. But this can only go some of the way. To take business volumes up a gear online, we turn again to broadband (and the masses of rich content it has allowed to spring up). The growing importance of digital in people's lives has meant online can be used in more ways than ever. This allows us to combine its heritage as a response channel with its new role in brand communication to boost e-commerce returns.
The growth of super-fast internet has accelerated the emergence of high-quality "sticky" content online. The latest Ofcom Communications Report shows TV lost 2 per cent of its reach among the young adults audience to entertainment via the PC, a trend supported by the recent IPA TouchPoints survey. The survey reveals insights about online users' media consumption and found "expert users" of the internet now spend up to three times as much time accessing music, film or entertainment than other online users.
Channel 4's simulcasting episodes of Lost and the SkyByBroadband service are two examples of companies investing in digital content to stay in touch with splintering audiences.
True, internet-protocol TV is off the consumer radar for now. Internet TV content for the PC, on the other hand, is in demand - now. Add the rise of user-generated video content from mobile and blogs, and the web is beginning to live up to its promise as a medium that can entertain as well as inform, so advertisers now have valuable support for its response-driven channels.
The use of video advertising is set to grow exponentially in the next two years. In the US, $225 million is already invested in running TV campaigns online, a figure set to triple next year. Less regulation, tighter targeting, real accountability and the ability to transmit or stream outside linear TV schedules on demand has encouraged brands such as Pepsi and BMW to shift spend from broadcast to web in the US.
This by no means spells the death of TV. It is simply about following the consumer and becoming even more multichannel. In a short space of time, delivering coverage on Yahoo! will become part of the TV plan. At this point, you will have real media integration.
The big difference with broadcast TV, however, is that advertising online is just one click away from a website offering further communication - and, crucially, a return path to convert audiences into customers. This is the key point. The opportunity is for e-commerce operators to broaden the role of the internet. Yes, it is a communications channel that influences consumers before they transact online. But it is also a way to generate a broader base of prospects, captured via the hard-working acquisition channels. Broadband is creating the means to build awareness and convert it into real business.
Of course, building awareness to support acquisition is not only about applying video ads online. Digital media owners have the greatest flexibility to create content around which advertisers can show off their assets.
We are working on a project with Channel 4's Music team for Bose, an experienced online advertiser with strict ROI parameters. The idea is to promote its speaker technology using Channel 4 Music content to build awareness and boost the volume of e-commerce prospects in the process.
More media owners need to follow this example. There will continue to be hundreds of brilliant online campaigns in the coming months that make short-term creative use of interactivity. But for advertisers investing heavily in digital, the key for planners and media owners is to create solutions to support the e-commerce and marketing teams, both to widen communications reach and build business volumes.
We talk to clients about "looking round corners" and future-proofing digital business with a longer-range strategic perspective. But the speed at which consumers are taking to new forms of digital content means this opportunity for brands is already here.
- Dan Clays is the managing director of Quantum.