Online advertising: Boom, bust and a resurgent boom

V. Ramani

“I believe today’s marketing model is broken. We are applying antiquated thinking and work systems to a new world of possibilities… The traditional marketing model is obsolete.” – Jim Stengel, Global Marketing Officer, P&G

Internet advertising has come a long way since the first ad banner featured on HotWired (a part of Lycos) in 1994. The last twelve years of online advertising have been a rollercoaster ride, with a boom, a bust and now a new resurgent boom. No other medium has generated so much excitement among marketers since the early days of television.

Today, the Internet offers advertisers a wide range of tools, which they can leverage to connect with their customers: email marketing, search engine advertising, floating animated page takeovers, interactive rich media ads, streaming audio/video, viral marketing… the list is endless. Besides scoring high points on the novelty scale, these media offer advertisers a multitude of exclusive benefits: interactivity, measurability, synergy, targeting, multi-media, and even flexibility. Powered by these unique benefits, which are not available in any other medium, Internet advertising revenue has grown significantly faster than television advertising. According to the latest ad spend predictions from ZenithOptimedia, television advertising can begin to lose its global share of revenue in 2007 (after having lost significant bytes of the pie from the US and many parts of Europe).

In India, experts estimated the Internet would take 11 years to reach a base of 50 million people. Growing exponentially with each passing year, the Internet has in the last decade reached 40 million people! Television, on the other hand, took 28 years to reach the same number of people. Radio took 38 years and newspapers, 162 years. By the close of 2005, there were 38.5 million Internet users in the country (32 per cent being women, IAMAI 2005)—more than five times the number of users in the year 2000. While Internet advertising comprised less than one per cent of advertising in the year 2005, it is expected to be four per cent by the year 2010 i.e. 747 crores on a base of 19,562 crores. Until such time, the projected yearly growth rate of the ad industry is expected to stabilize at 11 per cent; the growth of the online ad industry will be consistently more than 40 per cent.

Measurability is the key factor that draws advertisers to the Internet for none want to experience the infamous axiom, “I know half of my advertising is wasted, I just don’t know which half”. The Internet offers the golden opportunity of building long-term relationships with the consumers—a benefit not provided by traditional media. The lifetime value of a customer is far higher with online advertising as the same customer can be reached several times with minimal effort. For example, individuals who find their partners on marriage sites such as Bharatmatrimony.com or Jeevansaathi.com can be reached after a decade, with an exciting holiday package to an exotic locale where they can renew their marriage vows. The same couple can be asked 25 or 30 years later whether they are seeking a match for their son or daughter.

Another key benefit of the Internet is that it provides advertisers with a common database—so they can cross-sell their products to each other’s consumers. For example, For example, Sony can sell audio stereos to Maruti consumers who have just bought the WagonR. This kind of “restrictive marketing” helps reap greater ROI—which is not possible in the case of any other medium.

Both these unmatched benefits—measurability and greater ROI—have caused a large number of mainstream ad spends to shift online. Quite naturally, traditional media are pressurized to enhance their measurement metrics and provide increased ROI. The rapid growth of Direct Response Television (DRTV) in the US is a ready example. Infomercials have already proved their effectiveness in reaching target markets. More than 29 per cent of Americans have reportedly purchased products by calling a toll-free telephone number advertised on an infomercial.

The next 10 years of advertising is set to see a convergence of diverse media. Leading organizations are pioneering new ways of measuring the impact of online advertising. Recently, unitedvirtualities.com hosted an online trailer of the film The Wedding Crasher, and gave visitors the unique opportunity of superimposing their own photograph onto the faces of the actors—interactivity at its best! What were the results of this innovation? A whopping 91 per cent of the visitors watched the trailer, with an average view time of 24.46 seconds. Yahoo! Consumer Direct, a research methodology by Yahoo! and ACNielsen, has been established to measure the impact of online ads on offline retail purchases of consumer products. Online ads, says the report, raise sales by 19 per cent on an average. IAB conducts large scale surveys i.e. Cross Media Optimization Studies (XMOS) to measure ad programs across multiple media (TV, print and Internet) in order to determine the optimal mix of budget allocation for individual campaigns to achieve target goals.

With competition for online ad inventory intensifying, marketers will have to take a closer look at the available matrices to measure effectiveness of the online ad—brand lift, view-through conversions, offline sales impact, behavioral tracking, cross-media mix modeling, rich media interactions, search usage, etc.

As the Internet continues to lead the way on accountability, traditional media will have to respond with better matrices for audience composition and marketing performance. In order to engage consumers—who today have several choices and great control over message delivery—ad agencies are compelled to make highly innovative advertisements. The new advertising world is set to grow more entertaining, informative, relevant, and authentic.

(The author is CEO, Mediaturf)

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