Special Feature: Forecast 2003

You know what it’s like to get a couple of friends to agree on where to go for lunch. If you think that’s tough, imagine getting 150 leaders of the media industry to agree on where online advertising is headed in 2003. Well, that’s exactly what we tried to do at our annual Forecast conference in New York this past September. We invited 150 of the top media planners, buyers, sellers, marketers and researchers to debate a series of resolves – on consumer branding, agency consolidation, email marketing, CRM and the overall media climate – that would help determine the direction online media is headed in the next year. Their conclusions – some surprising, some predictable – and their valuable insights are on the following pages, along with commentary from panel moderators and a “By the Numbers” forecast for 2003.

A Humbler, More Complementary Web
It’s official. The Web has been humbled. If the late ’90s were go-go years of revolutionary arrogance and the early days of the new millennium were about hand-wringing and finger-pointing after the crash, then 2003 may well be the year that online advertising settles down and settles in. Integration was the keyword at this year’s MediaPost Forecast 2003. Online advertising must and will be more tightly integrated with offline campaigns. Interactive departments must and will be woven more seamlessly into agency structures. The language and metrics of Web ads must and will become more compatible with those of their offline predecessors. Even the ad units themselves, from pop-ups to email assaults, will have to conform better to the ways in which consumers use the Web and their tolerance for intrusion. Gone are the days when “the Web would change everything.” Now this medium just seems to be looking for a way to fit in, for a viable place within a much larger media mix. Can the Web really take its place among TV, print, and radio as a standard item on the media buying menu? “It is going to earn what it deserves based on its cleaning itself up,” says Adam Gerber, director of media strategy at The Digital Edge.

Oy Vey!
In fact, most ad executives are more prescriptive than predictive about their industry in 2003. Introspection now replaces self-celebration, as industry figures begin to sound like Woody Allen caught on a particularly self-deprecatory day, eager to diagnose online media’s multiple ailments and prescribe what should happen in 2003. “I don’t know what [the Web] will look like in five years,” says Gerber. “It’s 10 years too early.” And the laments are legion. Interactive remains an after-thought in campaign design. “Creative is bad because it is usually a translation,” says Shawn Johnson, founder of Bleu22 Studios, which specializes in online movie promotions. Too often, the interactive teams work with crumbs — leftover offline budgets and creative concepts that need to be refitted for the Web. Execution and back-end reporting are complex and difficult. “Clients see the problems agencies go through and they get gun-shy,” says Sharon Katz, VP and director of media at Modem Media. For agencies that do buy into the Web, pricing remains unprofitably low because online inventory is theoretically infinite. “It’s hampered by the fact that supply and demand are way out of whack,” says Bill Wise, COO of MaxWorldwide. And the consumers? Don’t ask. Sure, they love the platform, but they really, really hate the ads. “Users don’t think of it as a medium, and so they think of advertising as intrusive,” says Ruby Gottlieb, SVP and director of planning and affiliated media services at Horizon Media. The industry continues to seek formats that will elicit response without resentment. And even email, the new darling of marketers, risks losing its effectiveness amid a growing sea of spam and inbox abuse by legitimate advertisers. “If we don’t get involved, bad marketers could ruin it for everyone,” says Nick Pahade, managing director of Beyond Interactive. Oy gevalt! What’s a fledgling and stumbling industry to do?

Integration Now, Integration Forever!
What it takes is getting with the program, much of the industry seems to be saying. The new gestalt is greater integration with the infrastructure of media creation and selling. Treating the Internet as a discrete medium, “that’s been our mistake,” says Greg Smith, managing director at Carat Interactive (New York). “You have to understand each medium’s role in accomplishing your objectives. This medium is a tool. It’s not an end in and of itself. That’s what we’ve been sucked into, believing the cult of the Internet, and consumers don’t look at it that way.” Greater agency consolidation is likely to continue, and many ad executives see this development as critical to growth on the online side. “We’ve reshifted our creative teams so that you don’t separate online art directors or print art directors. One team handles everything now, and that has made a significant difference in how we handle online creative,” says Dave Song, interactive associate media director at Arnold Worldwide. Rather than ghettoizing online advertising, consolidation will only help mainstream the fledgling platform, help it learn to speak in terms of branding, reach, frequency, and GRPs. “It’s similar to going to a foreign country and attempting to speak their language. They know that you’re not getting it right, but they also respect you for trying,” says Sean Finnegan, media director at OMD Digital. “If you want to be a player, you’ve got to play by the rules,” adds Smith. Working within the agency infrastructure may be the best opportunity for interactive advertising to challenge some of old media’s lazy assumptions about its own effectiveness and accountability. To be sure, independent Web marketing shops will not disappear. Even the big boys admit that dedicated Internet studios will continue to exert both pricing and creative pressure on the conglomerates. It is too easy for agencies to fall back on simpler, familiar, more profitable platforms such as TV. Agencies have little incentive to invest or innovate online, says Jeff Lanctot, director of media at Avenue A. “For Avenue A, if we don’t find a way to make it work, we shut down the shop and go home,” he argues. For the foreseeable future at least, independents will pitch themselves to clients as Internet true believers, the ones best able to innovate and then navigate the platform’s complex execution and tracking. “All the better to eat you,” the conglomerates seem to reply. “If there is someone doing something better than us, fortunately we have the pockets to go out and buy them,” says Roni Jenkins, director of communications strategy at Digital@JWT.

The Complementary Medium
Having put rhetoric about the “interactive revolution” behind them, most webheads now focus on proving that the Internet is a good “complement” to the larger media mix, and many executives sound more like coaches urging colleagues into the fray. For 2003, getting the interactive teams involved with campaigns closer to inception will be job one, because this is where the money, the creative, and the legitimacy of ad platforms get set in stone. “You want to be there at the get-go to really force them to create big-picture ideas that are media agnostic — not just spearheaded based on television, but something that can go across all the communications mix and really help build their brand,” says Jenkins. The top of the funnel is also where the money is, and if online is going to be profitable, it needs to be negotiated properly, says Finnegan. “You’ve got to get in there and make sure you are part of the compensation negotiation.” Getting into the process early is also critical to improving the creative itself, almost everyone agrees, and that in turn will help mainstream the platform. Rather than repurposing offline themes, Johnson foresees online campaigns that “breathe a story earlier, so those things can develop earlier. We can begin a story at a banner, bring them into another environment and then that opens up the story. We are seeing the first signs of the opportunity to be able to lead that story line,” says Johnson. Better online ads also breed offline acceptance, says Doug Jaeger, interactive creative director at TBWA\Chiat\Day. After his group created the famously interactive online Absolut ads “Now I have traditional people who only think about print thinking about exactly what this ad would be like online, because they have seen what that could be.” As a younger, more digitized generation comes into advertising, he expects they will come pre-loaded with the online possibilities.

Client-Driven, Publisher-Approved
The best news for 2003 may be that clients, not hype or agency arm-twisting, will move online marketing forward. Almost every segment of the industry reports that advertisers are coming to the table asking for the Web. “Their research spits out ‘online’ pretty clearly. Those case studies breed interest on the client side,” says Finnegan. “You look quite silly if you don’t include it.” “We are a complement. The big brands are starting to bring in 4% and 5% of their budget,” says Scot McLernon, EVP of sales and marketing at CBS MarketWatch. For the near term, ads almost certainly will be both intrusive and more deeply integrated with content, because that is what the clients want. Some publishers may have refused to run Sony’s recent highly advertorial ads intact, but according to David Cohen, SVP and interactive media director at Universal McCann Interactive, which developed the material, getting “into the very fiber of the sites we partner with” is the goal. “In our holiday season, the top places that you probably visit will have some form of Sony integration on them,” he says. Likewise, McLernon says that almost all the sponsors of MarketWatch’s eight-second intro commercials have re-upped. Nevertheless, many in the industry continue to worry about whether, when, and how consumers will reject webvertising’s growing clutter. Intrusive ads are “a disconnect from what the consumer wants,” says Jarvis Coffin, CEO of BURST! Media, who feels the industry must find creative formats and approaches that match this medium’s uniquely intimate nature. Katz predicts that websites will move to cleaner page designs that accommodate a single sponsor, a move that will ease the clutter and eventually tighten inventory. Still others urge Web ads to move to yet another level of sophistication and take into account how visitors experience different sites. To be effective, formats and marketing appeals need to match how specific audiences use their sites, whether they drive by, drill for info, or lean back and read.

Of Angst and Email: Not Broken, but Fixable
But if you want real ambivalence and anticipatory anxiety, compounded by an obsessive inability to take action, then consider the angst-ridden but increasingly successful email marketing sector. As Beyond Interactive’s Nick Pahade summarizes the confused gestalt, “It’s not broken, but it needs to be fixed.” Go figure. While still the indisputable darlings of clients, emailers fear that relentless spam will turn users off to the inbox altogether and make their jobs harder in 2003 — or worse, invite onerous regulation. Receive and open rates already are down, reports Pahade, and some marketers say that even well-targeted campaigns working from quality lists now return suspiciously modest CTRs. “I think it is bad,” says Scott Stephen, CEO of Yesmail. “The amount of email in your box will increase by 10 times over the next three or four years. I fear greatly this is going to water down a very legitimate communications medium for marketers and for consumers.” Federal legislation on email and privacy is going nowhere, says Jeffrey Kauffman, an attorney at Collier Shannon Scott, and so the Federal Trade Commission must reinterpret old laws in order to cover Internet marketing excesses. The FTC’s only clear target in the next year will be email list brokers who violate consumer privacy agreements. Otherwise, email bloat is “larger than any of the regulatory agencies can handle at this point,” says Kauffman. Marketers have no end of proposals for curing what might (or might not) be ailing the industry, although none of them is in place. Have the big ISPs admonish or even fine other ISPs that host spammers, says John Fischetti, VP and director of interactive marketing at Arnold Interactive. Having ISPs charge spammers for every bulk email would dissuade the bad guys, some say. Several marketers like the idea of third-party oversight, with a group that registers legitimate emailers, fines violators, and may even certify list brokers and name-collection practices. Since most hopes for a spam cure remain elusive, marketers anticipate battling a plummeting signal-to-noise ratio that will force them to work harder to make their offers much more relevant and compelling. The industry needs better standard practices: more care about obtaining lists and checking broker references, sampling lists first to ensure their relevance, and greater restraint by advertisers in using customer inboxes. While Kauffman fears that email abusers will only get more brazen and fraudulent if their own response rates decline, Brad Aronson, president of i-FRONTIER, predicts (or hopes) that bad practices ultimately will crumble under their own weight and dwindling effectiveness: “I don’t think [spammers] can continue to blanket everybody and continue to get results. It’s only a matter of time before everyone gets burned doing it that way.”

Meeting Customers Halfway
If online advertising’s dual missions for 2003 embrace both deeper integration with offline marketing and greater attention to consumer usage patterns, then it is not surprising that eCRM seems poised for growth. “The clients that we are working with are only increasing their budgets for relationship marketing online,” says Jason Heller, co-founder of Mass Transit. Online customer relationship management is the one place where Web marketing dovetails perfectly with the offline trend in maintaining and growing the value of existing customers. “The clients get excited about it because they see the parallels between what they can do online and some of the stuff they are already doing offline with database marketing and direct marketing,” says Tom Hespos, president of Underscore Marketing. Expect increased demand for online loyalty programs, because many clients “have gone beyond the ‘A’ of CRM, which is acquisition, and are well on their way to ‘B & C,’ which is to build their relationship and to care for those relationships,” says Paula Fedoris, SVP of customer and data strategies at iDeutsch. eCRM will help interactive units make the case for online investment because it increases the value of the consumers demonstrably in greater sales, deeper market research, and brand evangelism, says Heller. Collecting customer data is the easy part, says Dave Morgan, CEO of Tacoda Systems. “A huge challenge is integrating it together and reducing it to a certain amount of information you can take an action on.” Everyone is moving toward a greater integration of online and offline databases, adds Heller, but this will take a while. The industry needs to follow the lead of Dell and Amazon in incorporating transactional data into customer profiles in order to distinguish the value of online over offline CRM, says Fedoris. “It’s probably going to get even more sophisticated online [than offline], because now you can move people to different channels,” says Heller. eCRM will move forward and gain even greater ground in the coming months and years by segmenting audiences more effectively in order to personalize the relationship further and delineate the different values among audience segments. CRM should tell companies how to direct marketing funds more efficiently toward their most highly qualified segments. “What’s imperative early on is finding ways to pick low-hanging fruit, where you put people into basic buckets and un-qualify [some of] them, and then you can start talking to the best prospects,” says Morgan. For all its attractiveness to clients, however, eCRM is not a slam dunk. Fedoris warns against forcing customers online before they are ready. Programs must grow organically as the client base becomes more comfortable interacting with companies over the Web and as the online offers and services become more compelling to users than their offline counterparts. There is also a lot of confusion in the marketplace, Heller argues, because too many list brokers and ASPs sell CRM technologies without the necessary marketing analysis that makes sense of the customer data. Kevin M. Ryan, western U.S. manager at Wahlstrom Interactive, says his company incorporated eCRM services because an agency, not online customer service ASPs or direct marketers, is best suited to add the high-level strategic thinking and planning. “We came to the conclusion that it is not a technology,” says Ryan.

Patchy Optimism
So online advertising may not be all that anymore, but as 2003 opens the industry clearly is rediscovering its footing and a quiet confidence that the platform’s unique accountability, growing media share, and interactivity will win out in the end. Likewise, webheads seem to be handling their fall from grace well by settling into complementary status, perhaps garnering single-digit shares of ad budgets for the time being. “I’m OK with 5%,” says McLernon. “I’m OK with 8%, 12%. If you look at the overall media plan as a funnel, the Web is a complement to that overall marketing message. At the end of the day, if you are selling more stuff, then it’s successful.” And we’re OK with that. Being a stepsister to TV, print, and radio, at least for the time being, is not so bad if you know you are selling the goods. “[Online advertising] might not make someone cry. It might not make someone laugh. It might not win the awards. But it is pretty effective at selling products and services. I think we’re in a pretty good place,” says Universal McCann’s Cohen. The forecast for 2003? Partly optimistic with periods of dense circumspection.