After much talk and hype about the potential of high-speed access, British consumers are finally turning their backs on dial-up services.
According to figures published by Nielsen NetRatings, more than 50 per cent of Britain's 23 million home internet users were connected via broadband services in 2004 and the numbers are continuing to rise. The survey also shows that internet consumption patterns have changed too with high-speed users viewing an average of 1,444 pages a month, more than three times the figure clocked-up by those opting for slower connection speeds. The shift is likely to pave the way for a sea change in internet advertising as suppliers, agencies and their clients exploit the new opportunities.
But, the potential of broadband for advertisers is not just about increasingly content-rich campaigns. As Jeremy Hill, head of digital at Starcom, points out, the sudden upturn in broadband penetration means that, for the first time, there is a large and visible group of broadband customers. "When penetration was low, you couldn't really target broadband users," he says. "But now we can identify a distinct broadband audience and advertisers are beginning to target that audience."
Hill believes the existence of a mainstream audience that is spending more time online - and consequently less time with other media such as television - will attract the attention of a much wider group of advertisers, including brand-focused FMCG companies.
James Booth, managing director of ad technology provider Tangozebra, agrees: "The internet is now a lifestyle experience. The brands will want to be associated with that lifestyle experience," he says. "That's why you're seeing Pepsi launching a music download service."
The expectation is that more FMCGs will follow. And, while they will certainly look to interact with the audience, they won't necessarily feel the need to deploy a full audio-visual experience every time. "Just because you have fat pipes, it doesn't necessarily mean you have to throw a lot of video at the user," comments Booth.
Piers Heaton-Armstrong, European marketing manager at video streaming and content distributor RealNetworks, admits that, when it comes to stumping up cash for broadband-specific campaigns, clients still tend to be the 'usual suspects' in the automotive and entertainment sectors. For instance, Sony and Nissan have recently run video campaigns on the RealNetworks web site. "However, when you look at RealNetworks in the US (where the company is better established), we are pulling in FMCG advertisers such as Pfizer," says Heaton-Armstrong. He expects to see the same trend repeated in Britain and Europe.
There is also an expectation that spending on ad production will leap.
"We feel that broadband will open up the door to television-sized budgets," says Dean Donaldson, business development manager at B3 Products. In Donaldson's view, as internet connection speeds get faster, advertisers will see that the internet is "not only equal to TV, but better" with its capacity to deliver a rich user experience as well as interactivity. The result will be powerful brand campaigns with instant direct response mechanisms.
Arguably, the audience also compares with TV. "At 7pm there are likely to be more people logged onto the internet than watching television," says Booth.
Giles Ivey, head of ad sales at AOL, agrees. He says peak time is from 4pm through to about 9pm, a slot that was once considered to be the property of the TV companies. And he sees another factor boosting online advertising, namely increasing concern about the ability of hard disc recorders to enable viewers to skip through ad breaks. "There is a generation of consumers that starts watching a film 10 minutes late so they can jump the ads," he says. If big brands can't get their message across on TV, broadband internet might offer a better platform.
So the stage is set for internet advertising to become mainstream. Or is it? It is also a medium where users tend to get intensely irritated by disruptive advertising messages. "There has been a kickback against intrusion," says James Booth. "What you have to remember is that the internet is a medium where users want to be in control."
Meanwhile, an armoury of video and audio-enabled banners, expandables, overlays and pop-ups, is unlikely to be a low-cost option. "Filling the bandwidth that broadband offers will require work," says Victor Benady, CEO of Randommedia, an agency that has created interactive video ads for Sony Playstation.
So what can consumers expect to see on their screens in the coming months and years as agencies begin to experiment? Will we, for example, see a festival of video-led advertising? Not necessarily. While portals and service providers are certainly laying on a menu of movie clips, music videos and on-demand news to attract and retain a broadband audience, the web remains an overwhelmingly text-based medium. Similarly, the direct response model of banners with a simple call to action is unlikely to disappear.
Instead, the humble banner ad is likely to get richer to take advantage of broadband download speeds. As Giles Ivey points out, many brands, including Nike and GAP, deliver video through online banners.
However, video can be disruptive, especially if it runs across a web page. Booth is convinced that the way ahead is formats that allow the user to initiate creative. He cites the example of Tangozebra's ads on Lycos to mark the launch of the Meet the Fockers DVD. As users logged onto the home screen, they saw three small banners. A click on one led all three to expand and coalesce to create a widescreen video presentation.
But what happens when ads begin to appear next to audio-visual content such as streamed concerts or on-demand TV reruns? With access of speeds of up to two megabytes (MB) now routinely available, we're likely to see more of this kind of thing, either from the big portal operators (Tiscali has just announced plans for a TV-style service) or from television companies seeking to capitalise on their archive.
Running video ads against parallel audio/visual content distracts and the obvious alterative is to run them in traditional TV 'commercial breaks'. Dean Donaldson sees this as an obvious way forward.
His company provides technology to allow video to be run seamlessly in banners, but he believes the next great leap forward will be ads within online programming. "People are using expandables and video pop-ups, but we feel this is a bit old hat. We believe that what is coming next is advertising in the stream."
Until recently, in-stream advertising presented an intractable problem, as Yoav Arnstein, VP of international business development at Eyeblaster, explains. "Two years ago, if you wanted to include an ad in a video stream you had to encode the creative and content together as a single stream." This assumes a working relationship between advertiser and content owner and precludes flexibility in terms of placing a range of ads into the same video stream at different times.
However, now there is technology that allows ads to be directly served into streamed content. For instance, Eyeblaster allows ads of up to 8MB to be placed in a video stream. Used for the first time to place ads in online footage drawn from I'm a Celebrity Get Me Out of Here (see case study), it facilitates a fully interactive video experience. But not all are convinced that this will become a widely adopted model. Starcom's Hill has doubts whether consumers will really have a taste for video-ads peppered through their entertainment, but he does expect to see increased use of another television model. "I think what we will see is something closer to sponsorship, with advertisers wrapping their brand around video," he says.
Of course, users do not spend their entire time passively digesting text or staring at video. Piers Heaton-Armstrong notes the internet is a "lean-to medium" (rather than 'lean-back' TV), so consumers are interacting or downloading entertainment. This could provide broadband advertisers with a lucrative consumer touchpoint.
In the case of RealNetworks, the company has sought to profit from the download of its Real Player software by selling ad slots that are served to the consumer while the software is copied onto the user's machine.
"We have hundreds of thousands of people downloading Real Player and we offer 300 x 250 ad slots while that is going on," says Heaton-Armstrong.
One thing advertisers need to consider is that some broadband users are more equal than others. A consumer may be connected at 256KB per second, or 2MB, and this may have a significant effect on their experience, particularly in terms of viewing video and download times. The same video-stream sent to both users will produce very different experiences.
Consequently there is a realisation that, while the medium may be the same, creative will have to be tailored for different classes of user.
And, as Giles Ivey points out, you may also want to deliver a different marketing message to each. "If you take a company such as PC World it might well want to put a different emphasis on the message that it sends to each group."
As broadband advertising matures, there is also likely to be a greater focus on measuring how consumers interact with content. "You can track the interactions," says James Booth. "You can track how many people looked at a piece of video, how long they looked at it, whether they requested further information." In that respect, a greater focus on branding will do nothing to undermine the internet's fabled accountability as an advertising medium. However, when the efficacy of a campaign is being assessed, it will be necessary to start thinking beyond clickthroughs. What, for example, do the interaction stats say about the consumer's relationship with the brand?
Thus the learning curve for advertisers on the web is likely to get even steeper as high-speed uptake continues. As Giles Ivey suggests, while broadband has the potential to drive new ad models "it will be necessary to educate the market".
ITV PULLS IN THE ADVERTISERS BY STREAMING 'I'M A CELEBRITY'
As Big Brother shows, putting streamed footage of a reality show available online offers a means to increase reach, enhance viewer involvement and maximise commercial opportunities.
During the last series of I'm a Celebrity ... Get Me Out of Here, ITV offered regularly updated clips on the show's site. It used Eyeblaster technology to serve interactive ads for UIP and Ask Jeeves into the video stream.
"While broadly speaking, adopting the TV model - ads placed at designated slots during programming - the Eyeblaster solution harnesses the attributes of the internet," says Yoav Arnstein, VP, International business development, at Eyeblaster.
"Campaigns are fully interactive and accountable with all user behaviour logged, tracked and analysed," he adds.
"The advertisers liked it because it was a brand new platform and this kind of thing hadn't been done before," points out Simon Joseph, interactive accounts manager at ITV. "They also got great branding."
Joseph explains that, as ITV puts more content online, it will make sense to serve up interactive ad breaks. "Why not have the same advertisers online as you do on television?" he suggests. "That way, you get brand recall."
However, Joseph admits that the reach of the ad slots on the web site was limited by the fact that the Eyeblaster system required up-to-date versions of Internet Explorer. As a result, only about one in four of those who watched the programme footage could view the ads.
"In that respect, it was a learning experience," he says. "When we do the next series, we hope the ads will be available to more people."