MEDIA: SPOTLIGHT ON INTERNET ADVERTISING - Accountability and creativity drive a return to digital media

The internet's potential for accountability means it is growing fast.

Last week looked like a good one for the online advertising world.

Yahoo! acquired Overture for £999 million and the IPA's Bellwether report brought further cheer.

Bellwether revealed that the internet was the only medium that could expect to enjoy an increase in spend - the number of advertisers planning to spend more than 10 per cent of their marketing budgets on it had increased to a record 7.4 per cent.

Meanwhile, on the Overture deal, Dan Rosensweig, Yahoo!'s chief operating officer, claimed that Yahoo!'s action was not part of a defensive strategy but designed to challenge Microsoft's MSN.

However, now that Yahoo! owns Overture it is well placed to counter the rise of Google in the pay-per-click arena, which has become one of the key battlegrounds for advertisers on the internet.

The total paid-for search market is now worth some $2 billion a year and is growing furiously. The reason for its success seems to be borne out by Bellwether - it is highly accountable, can provide a tangible return on investment and is thus extremely attractive to advertisers.

New-media agencies are lining up to testify that they haven't been this busy for a long time as advertisers look to increase their internet presence.

While the consensus is that the accountability factor of search listings is fundamental to the expected growth in internet advertising, there do seem to be other factors at play within Bellwether.

John Owen, a director of Starcom Motive and the chairman of the IPA's digital marketing group, thinks that advertisers have had time to assess results from previous online activity and are increasing their spends accordingly. "It's absolutely part of this trend towards greater accountability but also advertisers are coming on board for brand-building campaigns," he says.

And, in addition to the nitty-gritty fact of response rates that has driven Yahoo! to make its move, rich-media formats, faster access speeds and better creative work are also factors that are helping drive the internet advertising arena forward, according to Owen.

But is it true that the much-maligned creative product has finally got better? Mark Cridge, the managing director of Glue London, has noticed that volumes of work are increasing. "Things are certainly better this year than last," he says. On the creative front, Cridge concedes that there is still some bad creative out there but he senses a general improvement and feels that the industry is attracting brighter creatives who are using digital media in a more integrated way, thus encouraging advertisers to run branding campaigns.

"Larger file sizes and larger formats mean there is a bigger canvas to work on and this is attracting good creatives to digital media," he says.

This is also attracting new advertisers to the arena.

Cridge says that there is now an all-round greater understanding of the possibilities of internet advertising and that it is being used in an integrated way. "It's due to agencies and advertisers understanding what is and what isn't possible. Rather than focusing on just one ad, people are looking at the links between the different creative channels," he says.

This is a view echoed by Ciaran Deering, the managing director of Tribal DDB. He says that more lapsed advertisers are willing to dip their toes back into internet advertising, particularly when they realise the response rates they can gain and that internet advertising now offers them the possibility of building brands. He says that McDonald's is a good example of an advertiser that has realised that the internet can be used for brand-building campaigns.

Deering says another factor could be that the medium now has a cheaper cost of entry and is therefore attracting new advertisers, particularly small- and medium-sized businesses.

So does this mean that internet advertising has finally become mainstream and reached a level of maturity? After all, Yahoo!'s deal seems to suggest a large dose of faith in the new-media market.

Toby Hack, the head of inter-active TV at OMD UK, certainly seems to think so. He thinks that the recognition of the power of internet advertising could have a profound effect on interactive TV advertising.

This, too, is an accountable medium and, as Sky will testify, has grown exponentially in the three years since the first interactive TV ad was transmitted.

"With the net, people have recognised that it has grown up, while interactive TV is, for the time being, going through its angsty teenage years," Hack says. He predicts that interactive television advertising will also enjoy an uplift in spend as advertisers see its benefits.

While accountability and better creativity are driving the growth in internet advertising, Owen also thinks part of the growth predicted by Bellwether might be due to advertisers investing in their own sites.

Owen also points out that research has shown that two-thirds of people have now used the internet to make purchases from websites.

While Bellwether acknowledges that its internet predictions include proposed e-commerce activities, there is some dispute as to how much difference it will make. Deering thinks that while some of the projected growth might be coming from businesses investing in their sites, the majority is from internet advertising.

"Building or upgrading a website is a long and costly process. So, from a cash-flow perspective, a lot of this revenue is advertising driven - advertising is a short-term communication method," he concludes.