• by Fara Warner , August 21, 2008

Some big players are throwing big bucks online, but where will all that cash go?

Sort of like a clown car routine in reverse, marketers are funneling huge amounts of cash into segments that are seemingly too small to accommodate the influx. Plans by General Motors Corp. and Procter & Gamble Co. to shift significant portions of their advertising dollars to the digital realm in the next few years are forcing many to ask whether the digital space is ready for primetime.

Industry insiders and analysts are voicing concerns about the quality of online content, the effectiveness of digital advertising, and the need for measurements that truly show how digital ranks against traditional media such as television.

P&G recently confirmed reports from a Canadian marketing blog that it plans to boost its digital media spend in that country from 3 percent to 20 percent of its overall ad expenditures. Canada often has served as a testing ground for P&G products and marketing programs, so the digital shift could be on the horizon for the United States at some point.

GM, which already is one of the largest digital advertisers, according to comScore, says it plans to significantly increase its presence in the digital space in the next several years. However, it has disputed advertising trade reports that it would move 50 percent of its media budget - some $1.5 billion - to digital in the next three years.

Accenture's annual Global Content Study revealed that half of those answering the survey predict digital advertising will surpass traditional advertising in five years. A new report from eMarketer predicts the auto industry will increase its online ad spend from about $3 billion this year to $5.6 billion by 2012. The reason? It's where the consumers are.


Strike Force

"We are following the consumer," says Betsy Lazar, GM's executive director of media and advertising operations. When it comes to reaching people who are in the market for a car, "(digital) does a much better job than a branded message through television," she says.

GM saw a clear increase in the number of consumers moving to the digital space during the writers' strike, when many popular series had to resort to re-runs, resulting in sharp declines in viewership, Lazar says. But she adds that GM's digital shift is simply part of an evolution that began in 1996 when it created Cyberworks, a media-buying entity devoted to online media, and began experimenting in online advertising.

"We started to speak about what the alternatives would be during the strike," she says, noting that by purchasing front-page spots on portals such as AOL, MSN and Yahoo, the company can score a higher audience reach than it can with a Super Bowl ad.

Automakers are among the country's largest advertisers, but not everyone is buying. "Our target is really rather narrow," Lazar says. "Only 50 percent of adults will ever buy a new car. In a month, only about 1.5 percent of them are even looking for a car. We may catch them with a branded message on television, but with technologies such as TiVo they are avoiding advertising and paying less attention. Digital presents new ways to reach the people who are in the market to buy a car."

Big advertisers see digital as a mainstream medium to reach consumers. But industry watchers, insiders and analysts are concerned that despite 14 years of growth since the first advertising went up online, the medium may not be ready for such large ad expenditures.

"There's absolutely no shortage of content, but we have to be careful that we aren't creating another version of cable television," says Ross Dobson, managing partner and director of Mullen Advertising and a former Digitas executive. "We have 900 channels, but nothing to watch. There's been a lot of 'user-generated content,' but also a lot of 'loser-generated' content that isn't valuable to consumers or advertisers."


High Gear

"From a pure media perspective, we are pretty crunched," says Tom Beck, president of Enlighten, a digital media firm in Ann Arbor, Mich., whose clients include Kao Brands and Pulte Homes. "In the auto space - edmunds.com, Kelley Blue Book, the obvious places - there is an inventory problem. The question becomes, how do we create more inventory? How do we come up with content?"

Beck says advertisers still spend too much time trying to decide whether to buy against content like blogs or social media. "They should be asking themselves why they are advertising inside that content," Beck says.
Industry analyst Emily O'Halloran, managing director of Accenture's media and
entertainment digital advertising practice, notes that advertisers need to be thinking of new advertising formats, not just the content against which to place more banner ads.

GM's Lazar agrees that companies have to be on top of what's happening in the digital space beyond the traditional online experience. "We are dabbling in mobile," she says. "We are building out across platforms. We are looking at video-on-demand products, including digital showrooms. Then there's digital television, which we are testing. There will be a learning curve to this, and we want to know what's happening when all of this explodes."

O'Halloran says organizations accustomed to creating 30-second television spots and display ads online may not be prepared for the coming shifts. "On an operations side, it's going to be costly to support these formats," she adds. "There won't be as much standardization. It's going to open up the door to a lot of creativity."

That is, if there are organizations designed to deal with the change. C. David Wolf, Accenture's managing director for media and entertainment digital transformation, says that companies are just beginning to consolidate ad sales to gain a single view of the customer. "Right now, there are still individual silos inside of companies, and those need to be broken down," he says. "You have buying groups that look at channels."


Best-Laid Plans

Case in point is the recent decision by Starcom MediaVest's GM Planworks to cut 5 percent of its workforce in an effort to streamline its processes. This follows a decision announced in March to turn the stand-alone Planworks into a more integrated part of SMG. In an announcement at the time, SMG executives said the move would give GM more access to the different media disciplines within SMG. The digital business at Planworks is headed by Curt Hecht, who holds the duel role of leader of GM's digital team and chief digital officer for SMG.

Accenture's Wolf says marketers have to create organizational changes that take two issues into account: the digital shift to a multiplatform strategy, and understanding how consumers want to be in touch with advertisers. "Television is just another screen, like mobile or online," he says. "Consumers are becoming agnostic about what screens they use."

"Marketers want metrics to work on their terms," says Richard Kosinski, chief digital officer with Westwood One and a former Yahoo advertising executive. "The existing measurements may not do this for them, and they also will continue to have to prove return on investment."

Online advertising has been pitched as far more measurable than television or even print. But industry observers say mainstream advertisers increasingly want to know how digital compares to television, and they want to measure intent. "There's definitely been something holding up the money going into digital," says Jim Kite, president of connections research and analytics for MediaVest in New York. "It was hard for companies to prove the metrics. It is still difficult to compare apples to apples with television against digital."
Measurements have come a long way since online metrics consisted of how many visitors came to a site. But impressions, click-through rates and data sampling are only the start of what companies want to see from the money they spend on digital advertising. "We can't be about delivering impressions - it has to be about digital experiences," says Beck of Enlighten.

It also has to be, finally, about purchase, intent and engagement behavior, says Julie Colton of Mullen Advertising's digital practice. "We have to have deeper measurements," she says. "We need to be measuring who is online so we understand who we are reaching, then measuring how we reach them, and finally measuring what [are] the behaviors that happen online that make the advertising relevant to those consumers."