Anyone involved in the online advertising market has experienced a rollercoaster ride over the past five years. At the height of the dot-com boom many advertisers leapt to promote their brands on the Internet, and threw money at the medium with little thought of how it fitted into their overall marketing strategy. When the Internet bubble finally burst the backlash was severe, forcing advertisers to reassess the medium.
But the market is now edging towards stability and few companies have ruled out advertising online completely.
Evidence of this softly-softly approach is also being evinced by online service providers. Last week, Internet search engine Google announced it was to launch a news service – but on a trial basis, without charging for the content or running advertising on the site. Google head of UK sales Kate Burns explains why: “We are testing the product. We are not too sure how to charge, but most probably it will be text-based advertising.”
Hesitancy in the current climate is understandable. The online advertising market is growing – up seven per cent in 2001 when the overall advertising market was down by 4.3 per cent according to the Interactive Advertising Bureau (IAB). But it is still a very small proportion of the overall advertising market. In 2001, &£16.5bn was spent on advertising in the UK and online advertising represented a mere one per cent of the total market (&£166m), according to figures from the Advertising Association.
UK websites desperate to retain advertisers are understandably cautious about withdrawing advertising mechanisms such as pop-up ads, which appeal to clients.
In July, the US operation of women’s Web portal iVillage, banned pop-up ads from its site following complaints from users that they were irritating. However, iVillage.co.uk has not followed suit: “In the UK, advertisers are still reliant on pop-ups,” explains UK chief executive Philip Rooke. “We intend to ban pop-ups, but it is a question of when.”
Danny Meadows-Klue, chief executive of the IAB in the UK, says the medium has always been an advertisers’ market: “There is an exceptional degree of transparency online – you can track exactly what effect a campaign has had.”
This has proved to be a double-edged sword for the medium, with advertisers demanding that they pay only on evidence of results, such as a lead, download, subscription, or sale. It has also fuelled comparisons with direct marketing.
Certainly negative perceptions of online advertising persist. “At the moment, online advertising is like local radio because it is very cheap,” says Catherine Edmondson, marketing director at Internet recruitment site Workthing. “We are having to work hard to convince people of the quality of advertising.”
One of the benefits of online advertising is its ability to target a market very specifically, but few users are taking advantage of this factor yet. “A lot of online media buying is very much one-size-fits-all,” believes Workthing’s Edmondson. “If you go to a media buyer, you always hear the same [website] name whatever the brand.” Rooke from iVillage agrees: “In the worst of the advertising recession and Internet downturn, media buyers and marketing managers would pick the ten biggest sites so they couldn’t be blamed if online didn’t work.”
But he believes that this has changed, with about 70 per cent of online advertising going to the top-ten sites, such as MSN, Yahoo! and Freeserve. But even these sites are trying to offer advertisers some form of targeting by creating different segments on their site, as well as offering advertising across the board. “Finance has seen a huge increase in revenue in terms of the category, but this has not meant that finance companies are just advertising [on sites] in that sector,” says Alison Reay, sales director for Yahoo! UK & Ireland.
Raising awareness of online advertising and improving its image is one area in which media agencies can have some influence. Charlie Dobres, chief executive of new media agency i-Level, believes that traditional media agencies could do a lot more to educate the advertising industry about the Internet. “These agencies are geared up to selling on TV. They haven’t invested in a strategic manner in their online businesses,” he says.
However, big media agencies have been valuable in bringing bricks-and-mortar companies to the Web as part of wider marketing campaigns. “Quite a lot of interactive planning and buying is being done as an arm of a big agency, so we understand a client’s request offline and make sure that the online campaign fits with that,” says Howard Nead, managing director of PHDiQ, the interactive arm of PHD.
Although hesitant, most companies have begun to move towards the Internet. “Until a year ago, companies were spending &£10,000 here and there on trials,” says iVillage’s Rooke. “Now, businesses such as Unilever, Masterfoods and Procter & Gamble are deciding what they want to plan for a year.” In July, the top-ten UK online advertisers were a mixture of clicks-and-bricks companies such as Dell, eBay, MBNA Europe Bank, MSN, Freeserve, O2 and TRUSTe, as measured by ad impressions – the number of times an ad is seen.
With less than 50 per cent of UK adult consumers using the Internet at home, according to Forrester Research, the market represents a growth area for advertisers. Google is wise to tread carefully as the online advertising model has yet to prove itself and issues of quality and accountability still need to be resolved. In such a new medium, it may take another five years before the advertising industry is fully able to assess the viability of online advertising.