For E-Commerce Firms, Cutting Offline Ad Spending May Be Mistake

by Sep 29, 2000, 12:38 PM

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Many e-commerce companies are cutting back their offline advertising expenditures, citing the higher efficiency of online ads. But Internet advertisers are wrong to assume click-through and ensuing sales are a measure of their online ads' effectiveness, according to Rick Watrall, Partner of the Hudson River Group, a Valhalla, NY firm that specializes in marketing mix measurement.

"If companies believe their Web ads are driving traffic and sales, they naturally tend to spend more of their marketing dollars on the Web. But they risk doing so at the expense of other marketing initiatives, which may, in fact, account for their ads' apparent success," Watrall said.

While online tracking is certainly a phenomenal tool, Watrall pointed out, there's widespread misunderstanding that the Web enables advertisers to find out precisely how effective their online advertising is. "There's a trap, however, and many companies fall into it when they assess their Web advertising in a vacuum ... without weighing how concurrent marketing efforts such as print, outdoor, radio and television, in-store promotions, direct mail and so much else contribute to driving click-through and sales. Moreover, online tracking doesn't allow advertisers to determine how much of those sales are incremental-i.e. above the natural baseline if the ad hadn't run." Watrall cited cases where multiple marketing media might contribute to the apparent success of Web ads:

Pets.com - Pets.com runs banners, many offering discounts, on a wide range of pet-specific, general interest and shopping Websites. At the same time, the company has a much-praised national television campaign, a significant outdoor campaign in major metropolitan areas, and a direct-mail tie with one of the nation's leading veterinary insurance companies. Click-through on banners is high, but is it because the banners themselves are successful, well-placed executions or because concurrent marketing efforts have impressed consumers to check out Pets.com?

Monster.com - Monster.com promotes its online resume site through banners on the major search engines, directories and general interest sites. But the company has also generated significant buzz from its 1999 "When I grow up" national television campaign, which is back in rotation, and its most recent effort, which debuted in the 2000 Super Bowl and continued to run through much of the year. The company has also bought print ads in the major news and business magazines as well as selected human resources trades. Is it the banner ad or the cumulative impressions that drives job seekers to post their resumes on Monster.com?

E-trade - E-trade advertises its Internet trading service via search engines and directories when users enter key words like "online trading" resulting in significant click-through. E-trade is also known, however, for its humorous national television advertising and print executions in selected business and financial magazines. D

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