Is online ready to risk another boom time?

The Alliance & Leicester’s £10m war chest for online advertising has surprised many in the dot-com industry who believe that the medium isn’t ready for such large investments. By John Stones

Alliance & Leicester has increased the chances of its brand popping up in front of internet surfers this year by allocating a &£10m war chest to online advertising. Although the bursting of the dot-com bubble is fresh in our minds, UK businesses are demonstrating an increased commitment to online advertising. The companies that are driving this growth in the online medium are traditional businesses, such as Alliance & Leicester, rather than dot-com survivors or new ventures. Last week, Yahoo!’s share price soared after it surprised the market with a surge in revenue attributed to search-related advertising and the decision of blue-chip companies such as Coca-Cola and Honda to use its services. The internet has overtaken cinema to take two per cent of advertising revenue in the UK, according to the Interactive Advertising Bureau (IAB), the industry funded think-tank and self-regulator. It claims that &£360m is spent on online activity. Financial services is by far the largest investor, with 30 per cent of online advertising, and Alliance & Leicester’s planned investment has made the bank one of the biggest online spenders (MW last week). The &£10m announcement is causing alarm at some of the bank’s direct rivals and is likely to force them to re-evaluate their strategy. Alliance & Leicester is tight-lipped about whether the money is being reallocated from other media, such as direct marketing, and refutes the suggestion that the spend will coincide with a rebrand or purchase of an online banking brand. It claims it is part of the ongoing strategy to be an “online bank with a high street presence”. Joanna Lyall, a director of mOne, the online division of media agency MindShare, believes Alliance & Leicester’s move is an aggressive one. She says it could push competitors out and that the bank might even struggle to find ways to spend such a large amount. She adds: “I couldn’t imagine one of our clients spending that much – you couldn’t be sure where the money was going or of getting a return on your investment.” However, Lyall says online can be so effective that one of her clients had to temporarily remove its advertising because it was overwhelmed by the amount of traffic it was generating. Financial services are in the forefront of online advertising. This is because they have already seen a massive shift in consumer behaviour regarding the internet in terms of their own business. The British Bankers’ Association says that during 2002 its members recorded 870 million online transactions and predicts that this figure will have increased significantly for 2003. Egg, one of the relatively new breed of online banks, will now be outspent by Alliance & Leicester. Egg spends &£4m a year on the medium, but also continues to use traditional direct marketing. Egg marketing director Jerry Toher says: “We have noticed a steady increase in our competitors’ online advertising.” He says it is difficult to compare the medium’s effectiveness with direct marketing, because that will vary from company to company and campaign to campaign. But he points out that online advertising gives companies a valuable level of detail: “It is even possible to see if people drop out of an application process and why.” While internet advertising has offered obvious benefits for direct response marketing, its use for brand building has been slower. However, car manufacturers are coming up fast behind the financial services sector and have tripled their spend to account for 17 per cent ofonline advertising, according to the IAB. IAB chief executive Danny Meadows-Klue attributes some of the growth in online advertising by car companies to the introduction of new, larger online advertising formats which allow the use of the richer visuals that are traditional to car advertising. However, reservations do exist. Mazda advertising manager Maria McCullogh says the company will spend about &£700,000 on internet advertising this year, but adds that there are growing problems: “The downside is that the clutter is so intense and the creatives are so intrusive. This means it doesn’t have the same impact it used to.” McCullough also says Mazda’s research shows the internet is more suited to targeting men, and that for cars targeted at women, a “paper, touchy-feely” approach generates a better response. On the plus side, she says: “The internet can be effective in lengthening the experience of a television campaign. It offers, in theory at least, the possibility of tracking the entire path a consumer makes, from first click to which model or dealer they are interested in and what information they download.” This accountability, she says, makes it easier to justify allocating her advertising budget to online instead of outdoor. Yahoo! UK head of planning and strategy Phil Macauley says he is aware of the problems of clutter and accountability and theindustry is addressing the issues. Hesays it is important for Yahoo! to be carrying brand advertising and cites McDonald’s “non-clickable” online campaign as a good example. He believes that sectors likely to increase their share of online advertising include telecoms, both service providers and handset producers, and film companies, such as Warner Bros. However, while the consumer’s path and response to advertising online can be tracked effectively, the auditing of the amount actually spent by companies on internet advertising and obtaining comparative figures is difficult. As the medium becomes more established and the large corporations more accustomed to channelling significant parts of their marketing budgets online, so will the clamour for greater transparency. Despite the large sums committed, it is still impossible to find out how much individual companies are spending online, leaving researchers at the mercy of what a company chooses to reveal. Billetts managing director Tony Squires says: “The whole area of online auditing is very poor. There is no robust method of getting reliable spends, it’s not as robust as other media.” In response, Meadows-Klue can only say it will take a couple of years before the systems are in place to allow for full transparency. Whether this will satisfy the concerns of potential clients eyeing up the medium should become apparent in the near future.

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