• by July 13, 2001

Dave Morgan, the founder and Chairman of Real Media, left at the end of June to start True Audience - a software company that plans to generate more ad income for web publishers by putting quantifiable values on their site traffic. In the process of gathering information to make certain True Audience met the needs of the market place, Morgan and his colleagues interviewed 41 companies, including a mix of 26 media sellers - high-traffic content publishers, sweepstakes, web utilities, free ISPs, reps - and 15 advertisers, agency media buyers, traditional companies and dot-coms.

MediaPost asked Morgan what he learned from the interviews:

Morgan: This research concludes that the chief source of pain that online media companies experience today, beyond external market conditions in the immediate term, is difficulty in demonstrating the value of premium-priced advertising to advertisers. This is due to a range of factors, including the absence of needed industry standards, too little attention to traditional advertising practices, and the general newness of the industry.

MediaPost: How has this affected advertisers?

Morgan: Advertisers are confused about how online media should fit into their overall marketing mix. That confusion is slowing the speed with which they are shifting a larger share of their marketing budgets into online programs, and it underpins their reluctance to pay premium prices for any supposed value online advertising provides that cannot be directly measured.

MediaPost: So, this puts pricing pressure on the websites?

Morgan: Indeed. Because part of the hype about online advertising in recent years was that the results are highly measurable, advertisers are increasingly inclined to push the risk of online advertising onto the media companies in the form of performance-based pricing. The current economic downturn and buyer's market for online advertising has increased the negotiating strength of advertisers who want to price campaigns strictly according performance. Because most media companies have a limited ability to effectively target advertising to segments of their audiences, these types of performance-priced campaigns typically require them to burn through a large volume of untargeted ad impressions to produce revenue and thus are generally uneconomical for most publishers.

MediaPost: What, if anything, can web publishers do about this?

Morgan: More than anything, online media companies need to better demonstrate the premium value of online advertising in terms other than strict direct-response metrics. An important part of doing so requires media companies to have better knowledge of their audiences. Better audience intelligence will enable media companies to demonstrate value and influence response by more effectively targeting appropriate segments of their audience for particular advertisers, track the impact of advertisements according to various audience segments, and package their audience in ways traditional advertisers know how to buy, such as "gross ratings points" (GRPs), "designated market areas" (DMAs) and "recency/frequency/monetary value" (RFM).

MediaPost: What did you research reveal about the more popular trends in Internet marketing?

Morgan: Virtually all the advertisers say they prefer to buy according to cost-per-action campaigns today. 'Integrated' is a word many advertisers and publishers use to describe a variety of advertising strategies whose common theme is high degrees of customization and co-branding with publishers. These deals range from marquee tenancy sponsorship of particular site sections, to advertorials, micro-sites, co-branded promotions and joint online/offline ad campaigns for multi-channel media companies. Both publishers and advertisers agree that custom programs often produce the best ROI, but on the downside they are more complex to sell and implement.

MediaPost: What about rich-media and the new, larger ad units?

Morgan: Without a doubt, these are alternatives whose time has come. Rich media, pop-ups and interstitials seem to have reached technical and market maturity. Advertisers with experience in rich media report strong brand impact and generally positive ROI. The new larger ad size standards recently introduced by the IAB seemed generally welcomed by survey participants. Interestingly, permission email (i.e., to their house lists) was the most popular online marketing vehicle for marketers, and many publishers also cited both sponsored newsletters and list rentals as significant sources of revenue.

MediaPost: How did survey participants view the near future of online media and advertising, and the next 12-18 months?

Morgan: Generally, optimism prevailed, relative to the reality of the obvious market downturn in recent months. Most predicted recovery would not be quick. Four themes were clearly pronounced:

1. Consolidation Many respondents anticipated that there would be significantly fewer media companies competing for a share of ad dollars by the middle of 2002 compared to early 2001.

2. Demonstrating Advertising Effectiveness Respondents emphasized that advertisers and publishers both were going to have to invest more in measuring and demonstrating the effectiveness of online advertising in a variety of ways so that advertisers have a better understanding about the value of Internet media.

3. More Focus on Online Branding All parties were interested in better understanding the effectiveness of branding online. This is particularly important for publishers, for whom brand effectiveness could mean significant advertising price premiums compared to strict direct response performance-based pricing.

4. At Least 6-12 More Months of Pain Even the most optimistic respondents didn't expect growth in online advertising spending to strengthen before the fourth quarter of 2001. Many other participants believed that healthy growth would not return to the sector till well into 2002.