Online Advertising is Fighting Back Off the Ropes, Part I
Up from the canvas after a dizzying blow from the recent years of dot.com-phobia among media buyers, online advertising has fought its way back to respectability this year, and the score card proves it.
After surveying chief media buyers, GartnerG2 projects that the share of media budgets going to all forms of interactive advertising will jump from 5.5 percent in 2002 to 6.78 percent in 2003 and more than 9 percent in 2004, according to Denise Garcia, senior analyst. "This increase in budget is significant, especially when compared to our growth estimate of 3 percent for online advertising. [This] would raise revenue estimates from $8.1 billion for Internet only in 2002 to $13.5 billion for the total interactive ad market by 2007," Garcia says.
In fact, there is no shortage of revised estimates and surprising early results for online spending in 2003. TNS Media Intelligence/CMR now sees Internet ad revenues growing 7.4 percent in 2003, far outpacing consumer magazines (5.4 percent), radio (4.9 percent), and network TV (2.8 percent). The company saw a 12.2 percent jump in Web marketing revenue in Q1 2003 from the same period in 2002. Most surprising of all, The Online Publisher's Association reported a jaw-breaking 40.7 percent rise in Q1 revenues among its 24 member sites over the same period last year. Pow!
Is Internet advertising really making its long-promised comeback? After the humiliating dot-carnage of the past few years, no one wants to return to the braggadocio of Internet 1999, but across the online ad industry, there is a humble optimism that Kid Web is indeed back and swinging.
"We are seeing significant investments by a number of our clients. We are seeing two to three times what we have seen in prior years," says Fred Rubin, partner and director, iDeutsch and directDeutsch. Likewise at Avenue A, Jeff Lanctot, VP of media, says he mistook a marked revenue spike in late 2002 to seasonal buying, but lo and behold, the growth continued in Q1 2003. "It seems that the momentum is very real and much more broad than it was in 2002," he says.
Critical Masses and the Recession Dividend
There seem to be as many reasons for this new flow of cash to online as there are Web ad formats, but clearly, 2003 represents a year when a number of long-germinating efforts in the industry are coming to flower. Some argue that the economic recession and ad budget pullback actually helped Web advertising because, "In a tough economy, dollars flow to accountability," says Lanctot. Web veteran Jarvis Coffin, CEO and director, Burst Media credits some of this turnaround to accumulated credibility for the industry as well. "After eight years, a lot of trust gets built up. The industry is in a very different place. All of this pours into the process of confidence-building that is helping these guys," he says.
Above all else, virtually everyone agrees, the medium's sheer normalization in everyday media habits and its ubiquity even in the executive suites, has served as the most potent Prozac for Web-phobic media buyers. "While everybody was busy looking at their stock portfolios go to hell, consumers started getting broadband and [making] the Web part of their lives," says Greg Stuart, president of IAB. Clients who, perhaps wisely, waited in the wings to see whether the medium would flourish are seeing, in their own homes and offices, how much the Web really matters. "The good news is that it panned out," says Coffin. "It has enormous attraction among audiences, which forever has been all that matters."
Nevertheless, we found that much of the comeback talk surrounds two vastly different interactive formats, search and rich media, and this may be a very strong sign for Internet marketing. The diminutive and quiet, but perfectly placed search ad has re-focused everyone's attention on the Web's core media attribute - a place where people actively look for specific information, and where the power of dropping a relevant promotion in that path is unequalled. Meanwhile, on the other end of the format spectrum, some major brands are seeing rich media placements not just as TV and print look-alikes, but as TV/print plus- namely, awareness plus depth of interaction and limitless information. Between these two formats, Web marketing may be finding the succinct story regarding relevance and involvement that it needs to tell to clients and agencies.
The Search Jab
Search advertising clearly is leading the charge back to the Web, by most accounts the fastest growing sector, but the phenomenal rise in keyword-based buys in the past year is also helping to lift all boats and shape general thinking about the Web. Yahoo's recent announcement that it plans to purchase search engine specialist Overture, is just the latest indication that the industry sees that this is where the growth and opportunity will be found in the near future. "It's true that search engine marketing is at the heart of most campaigns," says Lanctot. "It's something that has become a must-do." He estimates that about 20 percent of media dollars through his company will go to search this year. "My media director would say that if you aren't putting money into search engines you are letting business walk out the door," says Bruce Carlisle, CEO, SFInteractive, and in many media plans the search component is at the top of the pyramid now.
More than money, the search phenomenon also represents a good barometer of changing attitudes toward Web investment, and one reason why the IAB's Stuart is genuinely bullish now about the industry. "Search is largely direct marketing advertising, and direct marketers typically are leading indicators of other growth. That's what happened in cable," he says.
But now, many say that even outside of search buys, the power of relevance is fueling much better packaging and pricing from the sites themselves who are presenting clients with more quality audience segments. The success of search also helps focus clients and publishers on the central attributes of the medium, grabbing the targeted consumer when he or she is in the act of doing what most people do on the Web - look for information. "The growth of the search engines has taught us all that contextual advertising is king," says Carlisle. Getting sites, agencies, and even clients to think more like Google, getting relevant promotions to people when and where they most need them, is not at all a bad thing even if search engines tend to hog the limelight for now. "It's championing the role of contextual relevancy. We think that is helping. We are benefiting from that," says Coffin.
Can the search boom last, however? With engines like Google actively trying to place their sponsored links on other publishers' sites, there are signs that the inventory is limited. Geoff Ramsey, CEO, eMarketer, sees an inevitable comeuppance, because "If everyone is doing it, it doesn't have the same effect. We're going to see bidding wars with search, and people are going to realize it's only going to take you so far. It misses 80 percent of the market because you ignore the branding aspect." Nevertheless, he says on balance, the search boom is good for the industry, because it is getting new clients in the door where they can consider a broader line of online products.