Is advertising dead in the ME world?
I was recently at a conference for digital marketing, and online advertising got a really rough ride. Naturally, there was a lot of discussion about social media, mobile andother wonderful content due to its talkability, but there is still a whole world of opportunity within the online advertising space.
We are in the ME worldnow and brands are starting to wake up to the fact that the consumer is in control of the conversation. As someone put it recently, “The deer has the gun now and not the poacher”.
But, as marketers, we need to stand up and be counted. Yes, there is a lot of noise out there and click-through rates are declining in some sectors, but, if we continue to produce messaging that doesn’t allow for an opportunity to ignite a conversation with the consumer, we are never going to win. It is imperative we deliver a value exchange to the consumer through our advertising and give them something in return for their contribution. As technology continues to evolve, we have the ability to really drive true interaction through the ad units and detach functionality that you would normally see in a website and serve it through the advertising. Long gone are the days of trying to round up the sheep and put them in the pen. They are constantly grazing now in different fields and we need to take the food to them. With broadband prices falling through the floor and bandwidth connections improving, we can really deliver rich experiences.
We also need to put a big push behind optimisation. I see far too many campaigns that are just thrown live. The media agency pulls the final performance report, they tell the client it achieved an average of 0.2% click through and everyone moves onto the next campaign. Creative and media need to work together and to have an informed view as to why the campaign is working well or not so well, while in flight, and then have the ability to swap in new creative or new experiences to drive up the ROI. As the ad networks become smarter and we gain richer insights into user’s behaviour online, we can also serve different experiences based upon the behaviour of the user. Behaviour optimisation is still in its infancy, but there is huge value in setting aside a campaign optimisation budget to run in parallel with the campaign media budget.
In 2008, there is still a huge role for advertising to play, we just need to be smarter with it.
Tom Poynter, Publicis Modem
82 Baker Street, London, W1U 6AE
t 020 7830 3939, www.publicismodem.com
A switch of focus
Online advertising has been growing healthily and shows no signs of slowing. Industry experts are even predicting that internet ad spend will overtake TV advertising in the next year. By Robert Lester
Despite fears that the economic slowdown will hit advertising budgets this year, evidence continues to mount that the digital sector will go from strength to strength. The latest figures from the Internet Advertising Bureau (IAB) show that online advertising accounts for 15% of UK media spend, while a report from WPP’s Group M predicts that the UK will become the first major economy to see advertisers spend more on the internet than on television ads.
But the impressive statistics should not mask the fact that online advertising faces a number of significant challenges in 2008. Facebook, one of the heavyweights of the burgeoning social networking sector, faced a backlash at the end of last year when it introduced an advertising system called Beacon, which broadcasts purchases made on outside websites to Facebook users’ friends.
Meanwhile, a report from Deloitte’s technology, media and telecommunications division says that the online ad industry should consider a TV-style watershed ban to restrict the marketing of products, including alcohol, on the internet. And, on top of that, there have also been suggestions that people are growing tired of display ads – for so long a central part of any online strategy.
With 90% of UK households now on broadband (IAB), the opportunities have never been greater for brands to engage with consumers online. But there is a feeling that advertisers need to work harder than ever before to make their messages relevant.
The IAB figures, released in October last year, showed that online grew more than 41% year on year in the first half of 2007. Although the full-year figures will not be released until April, the IAB predicts online advertising spend for 2007 will have reached £2.75bn.
Classified advertising is the latest online success story, growing 72% year on year in the first half of 2007. It now accounts for 20.8% of all online advertising spend. Internet display advertising (including banners, skyscrapers and rich media formats) climbed 33% in the same period, giving it a 21.5% share of the market, while paid-for search (search engine listings that advertisers pay for when a consumer clicks through to their site) was up 44% year on year and now has a 57.1% share of the online total.
Experts point out that search is not a threat to established media, but the growth in other areas indicates that brands are starting to divert money away from channels such as newspapers and TV. Group M forecasts that UK internet ad spend will overtake TV, which has been the leading advertising medium for half a century, in 2009.
Group M says the UK will be on the brink of passing the milestone at the end of this year, when the internet will account for 24.8% of UK media spend, just behind the 26% share held by the TV sector. UK internet ad spend will need to grow at just another 6% year on year to overtake TV in 2009. The WPP-owned digital agency also predicts that UK internet revenue is likely to climb by 30.8% this year, compared with just 1% year-on-year growth in TV.
The grim Christmas trading figures reported by some of the high street’s leading brands have led some to speculate that growth will be curtailed this year. But others argue that online will be one of the last sectors to suffer in any slowdown because of its accountability. Board director at Publicis-owned Zed Media Nick Burcher says/ “If we do have an economic slowdown, it’s accepted wisdom that there will be pressure on marketing budgets, meaning more of a need to provide return on investment. With pay-per-click advertising, online is far more accountable than other channels, so it is better placed to weather the storm if there is one.”
Observers believe the uncertainty will affect some sectors more than others. Financial services companies have traditionally been big spenders online, but as finance brands deal with the credit crunch, there is evidence that their priorities are changing. Automotive has overtaken finance and accounts for 12.5% of the online ad market versus finance’s 11.7%, according to the IAB. Recruitment continues to lead the way with a 24% share, while consumer goods and retail made steady progress with 5.3% and 3.1% respectively. Burcher adds: “Online, as an industry, should be positive and look forward, regardless of what happens to the economy. There will be continued online use, although the emphasis might shift. It might be more about acquisition, rather than brand.”
Lessons from social networks
Brands in all sectors turned to social networking sites in 2007, sensing the opportunity to target the notoriously hard to reach younger age groups. But, while Facebook was undoubtedly one of the biggest success stories of last year, many believe its problems with Beacon should act as a lesson for the industry. Head of digital at direct response media agency Equi=Media Rebecca Ward says: “The nature of social networking means that any mistakes can have huge and immediate implications, and be extremely damaging for a brand. If consumers don’t like your ads, groups demanding removal can be created and distributed within seconds.”
Beacon was the most controversial of several money-making technologies unveiled by Facebook founder Mark Zuckerberg in November. Under the service, friends of a Facebook user who bought a book on Amazon.com, for example, would see the Amazon logo next to a message about the purchase. However, after concerns were expressed over privacy, Facebook moved to placate users by changing the system so that people are asked explicitly to authorise the publication of each Beacon message. Previously, messages would publish automatically unless a user said “no” to a publication request within a certain amount of time.
Paul Cook, founder of ad serving company Positive Feedback, says: “What Facebook did with Beacon seemed a bit desperate, especially as social networking relies on relationships. They stepped over the line and annoyed a lot of people. With social networking, you can come up with lots of really good, clever ideas that provide amusement to people, and also give the brand what they want, but you need to be a bit more creative.”
Brands have to be particularly careful when trying to interact with people on social networks, according to Tony Mooney, director of consulting and propositions at Experian Integrated Marketing. “Any advertiser that feels they can barge into someone’s personal peer-to-peer world is going to have to think again,” he says. “They are going to have to pay more attention to being relevant.”
The Facebook backlash is the latest in a series of developments that have raised fears about privacy online. The concept of behavioural targeting has been gathering momentum in the past year after a series of acquisitions that saw AOL buy Tacoda, Yahoo! snap up Blue Lithium and Google take over DoubleClick. The principle is simply that the better advertisers bid to understand users, the more accurately they can target them. But consumers are wary of the online data advertisers hold on them.
However, head of trading at Media Contacts Dave Katz says: “There might be a certain element that is slightly paranoid about ‘Big Brother’ watching them but, if they think about why, they will realise that a lot of it is intended to put services in front of them that they may want to purchase. If it’s the Government, with things like ID cards, then that’s scary, but when it’s the ad industry it’s different and not quite so scary.”
Striving for relevance
The aim of behavioural targeting is to make online advertising more relevant to consumers – something that experts agree every brand should be striving for. Grey’s creative officer Jon Williams, who was previously head of digital creative at Beattie McGuinness Bungay, says: “The whole online experience is essentially based around a value exchange principle. My time is very valuable as a consumer and any brand looking to engage me needs to understand that value. In exchange for my time, you have to give me something that is useful, that makes my life simple, that entertains me fantastically or that makes me look incredibly cool to my mates when I send it on. Unless it does that, it’s going to be passed by and looked over.”
It is a point picked up by Zed’s Burcher, who believes consumers do not have an issue with being served non-intrusive ads if they are useful and relevant. “Consumers and internet users are willing to accept certain things if they get something in return,” he adds. “If people are getting great content, they’re not upset by a pre-roll ad before they watch the content.”
Katz admits that online advertising is largely driven by supply, rather than demand, but says consumers have taken for granted for too long the fact that the internet is effectively free because of advertising. He adds: “People we speak to would rather get the internet for free with some advertising than have to pay for it without ads.”
But the irrelevant nature of many display ads has led some in the industry to claim that consumers are growing tired of what is becoming an outdated tactic. Mooney says it is important for brands to realise that consumers online behave differently and have different tolerance levels in terms of advertising: “There’s rather too much of the advertising methodology transferred from the offline world,” he says. “Brands just stick ads up online like a press ad or a poster and if they’re lucky someone will click on it. I don’t think we have got anywhere near the degree of sophistication demanded by consumers.”
Katz argues that the industry is getting “cleverer” by moving towards less interruptive, more integrated campaigns. However, he believes there is still a place for “low-cost, stack-it-high stuff” and adds that large advertisers will want to do both.
Philip Scotcher, head of digital at Engine Group-owned Personal, says that it should not surprise anyone that “flashing, beeping, expanding” ads are “annoying the hell” out of people. He adds: “I shouldn’t have to fight to close some intrusive banner just because my mouse has rolled over the ad space. Advertisers who understand users’ behaviour online will realise they should be looking to create and enhance the content users are already interested in as opposed to diverting their attention.”
It is generally agreed that advertisers have to work harder online – and offline for that matter – to engage consumers than in the past. Vizeum managing partner Ben Wood says: “They are bombarded with more stuff than they used to be. Online advertising has to work harder, but I don’t think display is dead. If you can make a banner or button relevant to me, that’s going to be an incredibly powerful piece of advertising.”
As behaviour online evolves, advertisers need to constantly think of ways to engage people, says MSN commercial director Chris Ward. He believes branded or exclusive content, downloadable gadgets and games are all online devices that will be more widely used in 2008.
Research from Royal Mail suggests that integrating digital advertising with direct mail campaigns can increase customer spend by almost 25%. The company’s head of media propositions Fraser Chisholm points out that digital and direct both have strengths and weaknesses and says that marketers should consider an integrated approach – for example, clicking on something online to trigger a mailpack.
“Digital is easy to respond to and good for sharing, but it doesn’t cut through as well,” he adds. “It doesn’t necessarily make the recipient feel valued. Direct mail is sensory – you can touch it. It grabs people’s attention to a much greater level but it’s slower.”
It is clear that online advertising must negotiate a number of hurdles in 2008 if it is to live up to Group M’s lofty predictions. But for brands willing to fully commit to the medium, the future looks bright. Equi=Media’s Ward concludes: “The major challenge for advertisers is that consumers are increasingly savvy about the marketing process and demand a higher-quality, better-targeted service. This is a wake-up call for many advertisers who have found their lazy approach no longer works.”
Robert Lester is features editor at Marketing Week