Commentary
What's Really Working?
- by April 2, 2002
OK, it’s true that the industry’s devastating ad revenue declines — spending slipped by 8.4 percent between the first three quarters of 2000 and the first three quarters of 2001, per the Interactive Advertising Bureau — and the ever diminishing number of click-throughs generated by banner ads form a strong body of evidence that online advertising doesn’t work.
Consider the point of view of Holly Becker, a noted analyst at Lehman Bros., who said in a February interview that from her high perch at one of the world’s leading investment banks, there is no there when it comes to online advertising. (She then proceeded to downgrade AOL Time Warner stock.)
But down in the trenches, a different story is starting to emerge. According to that subset of advertising people who spend their entire working lives pondering questions such as "Are people more likely to click on bigger ads?" and "Will I get greater lift if I coordinate my online buys with my offline buys?"some of this stuff — no, a lot of it — works. Their belief is backed up by both public industrywide studies and private studies that point to the increasing efficacy of various forms of online advertising. “You have had converging data from a couple of different viewpoints,” says Forrester Research’s Jim Nail, who has been studying the industry for years.
But the question of exactly what works is still a thorny one, because, as Jeffrey Silverman, VP/general manager of DoubleClick’s media unit, points out, the medium is still so new and online media can take so many forms. "We have to step back and realize that the medium has only been around for five years,” he says. Even in a rapid-fire era where we have already been through one boom-and-bust cycle, there’s still a lot to learn. But Silverman, like the others, can tell success stories from a variety of different angles. Can email be successful? Yes. What about pop-up ads, sponsorships, and rich media? Yes. Building brand awareness through frequency? Yes.
The trick to making online advertising work, say those in the marketplace, is in the details. Of course, not all pop-up ads work, nor all rich media-enhanced skyscrapers. But as knowledge about online advertising grows, so does the ability to create and plan along guidelines that actually work. Thus, in this issue of MEDIA, we explore what’s really working? The quantity may surprise you.
Isn’t It Rich?
Have you always had a hunch that rich media just might work? It does. The form, which actually describes any interactive ad with a hint of TV’s audiovisual liveliness, has slowly been gaining favor. And here are a few reasons why: DoubleClick’s Silverman says he’s seen a difference in brand awareness lift of as much as 71 percent with what he calls the “little bit more effort” involved in creating an ad in Macromedia’s Flash, the most popular rich media technology.
Gerard Broussard, senior partner and director of media analytics at Ogilvy & Mather Worldwide’s OgilvyOne, points to a study done by the agency that exposed consumers only to a static ad or, conversely, only to a rich media ad, and also measured efficacy by both direct response and branding objectives. For both goals, the Flash ad had between 20 percent to 30 percent lift over the one that didn’t. What makes Broussard particularly excited is not just that it works for Ogilvy clients, but that the agency’s in-house studies back up the sometimes agenda-filled results of studies sponsored by online industry organizations such as the IAB. “The stuff is really true,” he says.
Advertisers maintain their reluctance to share juicy case studies with the media, but one for Nextel, an advertiser that puts almost its entire online budget into Unicast’s commercial-like Superstitial, is at least one case in point. (Advertisers such as Coca-Cola and American Express also use the Unicast format.) When the cellular phone giant first began to use Superstitials in the fourth quarter of 1999, its buy was a cross-section; Nextel also used lots of banners. Today, the company is among the Superstitial’s biggest supporters; by last year’s fourth quarter, the advertiser had increased the size of its buy with Unicast by 323 percent, based on the results it received in both gathering qualified leads and traffic to its website from the campaign. While it’s easy to believe that high-production-value ads such as the Superstitial might have a negative effect on ROI, that’s not necessarily true. Many advertisers choose to use existing footage that is then converted to the format for a cost of about $5,000. Nextel’s Superstitial ROI breaks out as follows: in the third quarter of last year, Nextel had a $9 cost per lead from the format, as opposed to $67 for a banner. (Email won out over the other forms by a hair, costing $8 per lead.) “The ROI is so exponentially improved,” says Ally Savorino, Unicast’s VP-global marketing.
Advertisers seem to be drinking the rich media Kool-Aid. For the week ending Sept. 9, 2001, Jupiter Media Metrix tallied a total of 104.3 million Flash ad impressions. By mid-February, that number had tripled to 317.2 million. Additionally, Jupiter reports that large-size ads — which aren’t necessarily rich, but often are — have increased in impressions by 185 percent in the 10 months ending in January.
Moral: You can never be too rich.
Pay for Play
A link that screams “Incredible Savings on Computing Software” in no way has the pizzazz of a singing, dancing rich media ad from, say, Coca-Cola. Unless, of course, you’re looking for incredible savings on computing software. And those in the pay-for-performance segment of the online advertising business wouldn’t have it any other way.
The revenue numbers don’t lie. Segment leader Overture (which recently changed its name from GoTo) was almost alone in posting financial results from 2001 that hark back to the good old days of 1999, as advertisers continued to flock to a service that promised they’d pay only when people clicked on their sponsored links. In last year’s fourth quarter, the Pasadena, Calif-based company posted revenue increases that were 40 percent above the previous quarter and 154 percent over the fourth quarter of 2000.
Another sign of success: advertisers — which bid for premium placement within the company’s listings service — are steadily increasing the amount they pay per introduction, increasing from an average 17 cents in the fourth quarter of 2000 to 23 cents a year later. (Though the listings are offered at the Overture.com site, 95 percent of traffic comes from syndicated versions of the service on major portals such as AOL Time Warner’s America Online, Yahoo!, and Microsoft Corp.’s MSN.)
Lisa Morita, the company’s senior VP/general manager of online business, attributes the success to being perfectly positioned for penny-pinching times. “We nicknamed it ‘the year of accountability,’” she says of 2001.
Perusing a few Overture case studies makes one wonder whether more dot-coms would still be around if they’d plowed their advertising dollars into paid listings instead of sock puppets and Super Bowl ads. One online travel advertiser, Travelworm, paid $850,000 over a 10-month period with the service and garnered $4.5 million in sales. Says Morita, “I think it’s fair to say the most savvy advertisers were the quickest to adopt the paid placement model.”
Moral: The early bird catches the worm.
Context Is King
Other advertising types see success in using old-time media theory, getting results out of putting online advertising in the right context, just as they do offline. “Media should be planned as media,” says Fred Rubin, executive VP/director of the Deutsch units iDeutsch and DirectDeutsch.
In August, the agency planned an integrated online and offline campaign to launch the new Almay cosmetic line Kinetin with a promotion called “Turn Over a New Leaf.” While offline media for the anti-aging brand included The Today Show, online the brand was touted in appropriate areas of the iVillage site where people would be open to learning more about skin care. Visitors could express their interest by registering to receive more information and enter a sweepstakes. Though Almay won’t disclose specifics, Rubin says the effort resulted in tens of thousands of registrants and that Almay is slated to run a similar promotion on the site soon. Meanwhile, a rich media ad from “out-of-banner” advertising service Eyeblaster resulted in a 10 percent-to-15 percent click-through rate, he says.
What’s interesting about the success of contextually based online campaign, is that, to some extent, the media planning philosophy flies in the face of the demographic and psychographic targeting touted by so many web publishers. Contextual advertising, be it from a rich media advertiser such as Almay or a matter of contextual linking, as with Travelworm, is all about hitting people when they’re most receptive, instead of hitting them because their surfing activity suggests a certain profile. Rubin, a longtime direct marketing executive, says he’d rather target by behavior any time.
Moral: It’s the message, not the medium.
What’s the Reach and Frequency, Kenneth?
Though planning online media using traditional metrics such as reach and frequency is only a few months old, some initial results are encouraging.
In November, The New York Times’ Digital section excitedly ballyhooed what it calls Surround Sessions —advertising from a single marketer that would follow visitors throughout one visit to the Times site. Working along somewhat the same lines as sponsorship opportunities, the Times hit on the idea because it would allow for reach, frequency, duration, and the ability to tell a story “as opposed to a drive-by banner ad,” explains Craig Calder, VP/marketing of the unit. He explains, “Having something like a Surround Session would allow advertisers to measure reach in a more similar way.”
One of the initial advertisers, AstraZeneca’s acid-reflux drug Nexium, saw a 20 percent lift in brand awareness and a 45 percent lift in message association. Banner ads had results of 1 percent and 16 percent, respectively. Nexium has renewed its Surround Session buy for a second two-month session.
Further, visitors spend 11 minutes on average with surround session campaigns while at nytimes.com. “What other medium can offer a captive audience for 11 consecutive minutes?” Calder asks.
Forbes.com created its own solution to the reach and frequency conundrum last December, announcing it would guarantee advertisers two viewings of ads during a 30-day period to 800,000 unique users of the site. Results aren’t in, but president/CEO Jim Spanfeller sounds bullish about the reach buy and other indications he’s seeing from blue-chip advertisers looking to reach the increasingly wired C-level executive crowd. “We’re substantially over first quarter last year,” he says. Not that all advertisers have jumped on the reach and frequency bandwagon; in fact, they tend to underspend and thus see underdelivery on their objectives. Says Forrester’s Nail, referencing the oft-referenced cross-media study for Dove’s Nutrium [MEDIA, March 2002], “If you ran a TV campaign that was 10 reach and 1.7 frequency, it wouldn’t be effective either.”
Moral: Everything old is new again.
Get Smart
So if you have to launch an online advertising campaign, how should you proceed? First, no matter whom you talk to, everyone agrees that nothing can replace being smart to ensure that advertising works, no matter what the medium. As simple as that sounds, it’s something that online advertising executives come back to again and again, almost as a way of emphasizing that in the days when advertisers were paying ever higher CPMs for ever-less-effective banner ads, smarts weren’t part of the picture. “What works is measurement and management of your campaign,” states John Nardone, managing director of Modem Media’s market programs practice. “It doesn’t matter what it is.” Heck, it could even be a banner ad.
When planning an online campaign, it’s crucial to know your objectives, plan your buy around those objectives, and be prepared to continually monitor and optimize the campaign, Nardone and other online media execs say.
Echoes Ogilvy’s Broussard, “There is no one size fits all.”
Moral: Use your head.
This story first appeared in the April issue of MediaPost's MEDIA magazine. To subscribe, please click here.
