The short shelf life of online growth figures

Last week saw the publication of the IAB/PricewaterhouseCoopers (PwC) figures for the value of online advertising in 2008. Looked at in the context of that year, it was all good news. At a time when overall ad spend was falling by 3.5%, online spend went up by 17.1% year on year to £3,350m. That meant online’s share of spend went up 3.7% to 19.2%, overtaking print along the way.

These are impressive numbers, confirming the story about advertisers’ flight to more accountable media during recessions that the DM industry and subsequently its online counterpart have trumpeted for years.

But they already have the feel of belonging to a former era. As Chris Dobson, EVP of global advertising sales at BBC Worldwide, said at The Guardian’s Changing Media Summit last month: “In December online advertising hit a cliff.”

This was confirmed last week by the IPA’s Bellwether Report, which showed confidence falling in all sectors – including digital – and showed online ad spend being revised down by 4% in the first quarter of 2009. This followed a fall of 7%  for the last quarter of 2008, again according to the IPA’s figures.

And anecdotal evidence of a tightening online market has continued to accumulate. Even giants such as Google and Microsoft have laid people off.

Of course, none of this devalues the basic foundations of online advertising. Online audiences continue to grow at the expense of other media; people exert more control over their media experience; social media continues to grow in importance. But online’s claim to accountability is also looking like less than the full story.

It’s certainly true that online is more accountable than any other medium, but that accountability only extends to its direct response aspects.

So while it is easy to measure how many people click on a banner or a search listing, and even possible to then track what they do online after that, it’s just as hard to quantify the value of a user seeing a banner that they don’t click on as it is when they see a poster or a TV ad.

As a result, attention has tended to focus on the tactical value of online. It’s no surprise that search, the ultimate tactical online medium, should command the highest share of online ad spend – 59.3% last year according to the IAB/PwC figures.

Nor is it a surprise that a great deal of work is being done by the search giants to establish the value of search for branding. The argument that consumers expect to see leading brands among the top results for the appropriate search terms has become commonplace, and the notion of search as a PR tool is equally well accepted. Meanwhile, there are continuing attempts by the likes of Google, Microsoft and Platform-A to find a way of attributing value to all the stopping points in a customer’s online journey to a purchase; to move, in industry jargon, away from “last click wins”.

The first fruits of this attribution work are expected towards the end of this year and could have massive implications for online advertising. All but the most search-centric of companies acknowledge the importance of the work done by the advertising a consumer sees before they start typing into the search box in terms of brand recognition and value, and therefore the likelihood of someone clicking on a particular search result.

Increasingly, however, media is being bought on a bald cost per conversion basis, driven by the rise of online ad networks and exchanges. Whether a media property stays on the schedule depends simply on whether it can meet the advertiser’s set cost per action.

This looks great for advertisers, who pay only what they wish to pay, but high-end publishers in particular are finding life in this environment very tough, believing that such an approach devalues the quality of their content and makes it even more difficult for them to sustain its production. A system that attributes value before the final click could have a dram-atic impact here if it showed the value of quality content at an early stage of the purchase process.

Moving away from “last click wins” could also start to place real value on the use of social media, currently the subject of work to establish such metrics as engagement and buzz generation. Combining these with harder attribution metrics could address the problem of experienced online advertisers being reluctant to use social media because it doesn’t meet the accountability standards established by other interactive media.

It could also allow advertisers of products that rarely command any kind of click-through, such as FMCGs, to see the value of online advertising for them. And if that happens, last year’s IAB/PwC figures could soon look not just dated, but positively antediluvian.