Despite the pessimism this year, online advertising is still
expected to claim a greater share of ad budgets over the next 12 months.
But how can this be when ad budgets are being cut and the initial
excitement around new media has dampened?
Well, although the growth rate in online advertising revenue is slowing
- to be expected for an industry that displayed such rocket rates of
growth in its infancy - the revenue rates are still increasing, just at
a less dramatic pace. This doesn't just include banner advertising
Online sponsorship, e-mail marketing and partnership deals are becoming
increasingly popular and are the final destination for a lot of the big
money in online advertising. Improvements in technology are also
allowing creatives to produce sexier executions.
So what's it worth? Ewan Darby, the strategic planning manager at AC
Nielsen MMS, expects online advertising to account for at least 5 per
cent of all ad budgets this time next year. What is holding back
investment, he thinks, is its lack of transparency.
"If you're an advertiser and 45 per cent of your budget goes on TV, the
next day you know what has been delivered. You can't measure online in
the same way - accountability is presented using so many different
measures. Everybody should be getting on board with ABC//electronic and
creating one industry standard," Darby says.
Figures for online advertising spend are still hard to come by because
of the immaturity of the market. Official figures that are published
regularly are those by PricewaterhouseCoopers, on behalf of the Internet
Advertising Bureau. According to last year's figures, online ad revenue
accounted for £154.7 million, £26 million more than cinema
adspend for the same year. Forrester Research estimates that total
online ad revenue will rise to more than £210 million during the
first two quarters of 2001.
So who are the big spenders at the moment? According to Forrester, the
financial services companies have invested the most in online
advertising in 2001, spending more than £16 million on the medium
since January. Consumer goods were the second biggest investors,
ploughing £12 million into their online promotions, closely
followed by media and entertainment, computing, and business products
and services brands.
In January, NetCrawling's LemonAd service found that Dell, Thomas Cook
and Ladbrokes were the top online advertisers. Over the past few months
these brands have been overtaken by Amazon and BOL. However, the facts
can often differ between research houses. For instance, Forrester's
estimates suggest that the current biggest online spenders are Hewlett
Packard, Amazon and Casino-On-Net.
Interactive advertising is not yet included in ACNielsen MMS's quarterly
advertising revenue figures, so there is no official word on what
proportion of advertising budgets go into interactive media, and whether
traditional advertising channels are suffering as a result.
However, what does seem certain is that the chunk of marketing budgets
that is dedicated to online advertising seems to vary dramatically from
client to client. According to a number of prominent media buyers, on
average between 1 and 15 per cent of marketing budgets are set aside for
digital media advertising in the current market. Colin Mills, the
managing director of media agency Carat, says that its clients dedicate
an average of 2 per cent of their ad budgets to online media.
Jason Dooris, the chief executive of MediaCom's online advertising
agency, Beyond Interactive, is more optimistic, putting the proportion
of budget dedicated to online at between 5 and 10 per cent. He comments:
"We haven't noticed online media budgets denting traditional ad budgets
to any significant degree so far, but the internet is an accepted media
channel and we believe that it offers a new audience in a new way."
However, how much brands choose to put into online advertising depends
totally on their objectives. Chris Mitchell, the marketing director at
Virgin Wines, says: "When we first launched, we concentrated on offline
advertising as it was an awareness issue." Now, he estimates, the
company spends more than 50 per cent of its ad budget online.
He says: "This year we're more focused on sales. We want to track which
ads are having the best direct sales effect and the best way to do this
is online. Its overwhelming strength is that people are just a click
away from purchase, whereas if people see your ad offline they could be
Michael Court, the media director at ehsrealtime, goes one step further
adding: "New media enables brands to strike up relationships with their
customers that require virtually no cost to maintain."
Although pundits can't agree on the proportional budget split for online
- it varies dramatically from brand to brand - the general agreement is
that however much companies are spending online, it's not enough. Mark
Cridge, the managing director of Gluemedia, says: "It's not as much as
it should be. There's a general perception that if a client is faced
with a budget cut they'll look at online first, but online is much more
cost-effective because of its accountability. The problem lies in
encouraging companies to invest in that accountability."
Some industry watchers think that the level of accountability synonymous
with internet advertising puts off some marketers. Lindsay Biggart, the
head of marketing at Yahoo! UK & Ireland, comments: "One of the key
considerations when evaluating the true worth of online advertising is
that the online audience is not calculated on an opportunity to see or
hear. Instead you are buying a guaranteed engagement or interaction.
Advertisers, therefore, know exactly how many people have been exposed
to their message and can easily measure how they have reacted through an
array of research tools including click rates, conversion tracking,
online questionnaires and our recently launched Buzz IndexTM."
She adds: "Many advertisers recognise the full value of online
advertising as a direct response, brand building, customer acquisition
and sales tool. The challenge going forward is to truly integrate online
advertising into the traditional media mix. One of the best
demonstrations of this was BT's recent Big Brother 2 campaign, where
they fully integrated online and mobile components with their TV
Carat's Mills says: "The involvement that a client has to have is bigger
per pound. New-media advertising is high maintenance and the depth to
which you can analyse feedback is dynamic. There are advertisers who
enjoy its accountability, but others see it as too high maintenance. It
depends who you are and what you are trying to do."
Yet Mitchell believes that it has become over-complicated: "Everyone
makes such a big deal about online but it really isn't that difficult.
You just have to track it properly."
And brands are not just investing in banner advertising. Sponsorship
deals and online partnerships are also becoming more significant.
Technology is becoming increasingly innovative and allowing more
adventurous creative executions to be used. For example, in a campaign
to promote the new Ford Mondeo model, Mdigital used a hijacking strategy
to catch people's eye online. If users typed in the name of a competitor
car marque into a search engine, before the search engine had found and
listed the relevant sites a full-page transition ad for the Ford Mondeo
would run for three seconds.
A listing on a portal such as Yahoo! and pay-per-performance models are
increasingly being used as a route to market. Brands that place
themselves in pay-per-performance directories, such as Espotting and
Goto, pay only for the traffic that is delivered to their sites as a
result of their listings on those directories - brands bid for search
engine positions that are linked to keywords.
Seb Bishop, the co-founder of Espotting, says: "The amount that brands
are spending is growing. For example, Norwich Union has increased its
spend by 140 per cent in the past three months."
So what about the big sexy brands with the big bucks? Well, tellingly,
several major car brands are investing heavily in web advertising and
branding initiatives. Online car sales are still small fry, but
manufacturers are recognising the value of the channel in creating brand
awareness for their models.
BMW, for example, created an elaborate online ad campaign this year by
producing a series of short films purely for web distribution. Created
by high-profile directors, such as Guy Ritchie, what BMW spent on
production costs, it saved on media as the promotion was distributed
virally online and watched only by those who wanted to see it.
Nick Hart, the brand communications director at BMW UK, says: "We view
interactive media as playing an important role in branding. It's an
innovative, technologically-led environment and the values associated
with the web are also associated with our brand and our customers. We're
not targeting click-throughs, we're building the brand online."
The first phase of the launch campaign for Volvo's new S60 model was
entirely online - a first for any major product launch. The S60 put the
manufacturer in competition with more sporty models, such as the BMW 3
series and the Audi A4, and Volvo also wanted to drive down its cost per
sale. The online campaign used games, pop-up ads with sound, transition
ads and dhtml (dynamic html which creates animations over a page).
Michele May, the advertising manager for Volvo, says: "The young,
affluent target audience for the S60 means that the internet is a great
medium to use. Results in terms of level of impressions, site visits and
brochure requests were high."
Yahoo!'s Biggart concurs: "Increasingly, advertisers are taking
advantage of the rich profile of the online audience; TGI confirms 70
per cent of the online audience are ABC1 adults compared with 50 per
cent for ITV and 55 per cent for Channel 4. Yahoo! reaches more ABC1
adults every day than most quality daily newspapers, so for advertisers
from financial, motors and travel sectors, online now delivers mass
audiences for traditionally expensive and elusive groups of people.
Maximising saliency and minimising wastage.
"It has become a medium that offers advertisers exposure to notoriously
hard-to-reach audiences and at times of the day where commercial
opportunities on other media are limited. The internet allows people to
research which car or holiday they are going to buy from their desks at
lunchtime. The key for advertisers is to get their message to this
audience when they are doing their research."
- Apart from exceptional campaigns, online advertising is usually one
element of an integrated ad campaign including other traditional
channels. This is being encouraged by the advertising industry - the
temptation to see it as a separate channel perpetuates the existence of
a "new-media ghetto" for agencies and creatives who work in the field. A
good example of the use of the web as part of an integrated campaign was
the latest French Connection work by TBWA, which generated interest in a
website labelled too risque for TV, www.fcukinkybugger.com, built by the
late creative agency Deepend.
Danny Meadows-Klue, the chairman of the Interactive Advertising Bureau,
says: "Although the advertising industry is currently undergoing a lot
of change, advertisers must put interactive media in as a line on their
Judging by the growing number of online advertisers that are achieving a
good return on investment, this is no tall order.
A MINI ADVENTURE ON YAHOO! UK & IRELAND
By inviting instant feedback through e-mail, any brands which choose to
go online have the ability to lock into how their ads are being received
and change the creative treatment if necessary. One instance where
online advertising triggered positive feedback was Mini.
Yahoo! UK &Ireland was the first internet site in the UK to broadcast a
streaming media placement of the new Mini when it launched on 13
The teaser for the world premiere appeared on Yahoo!UK & Ireland's
Once into the teaser, viewers were treated with a full frontal of the
new Mini as well as the chance to find out more, including where their
local dealers were located. The new Mini ad reached half a million ABC1
adults within 24 hours of the home page activity.
Teamed with more traditional media placements, including vertical strips
in broadsheet newspapers and ambient activity, the new-look Mini enjoyed
a high-profile launch, as did its slogan "It's a Mini adventure".
The activity on Yahoo! UK & Ireland prompted users to respond: "Great ad
and top looking car ... I like the preview on Yahoo! Cool idea." And
"excellent ad! Excellent use of the modern technology! Keep it up!"