Barriers to Major Online Spending - Are There Any Left?

When the U.S. economy levels off after its recent nosedive, brand advertisers will officially be out of excuses.

Advertisers have been dangling a carrot (their large advertising budgets) in front of interactive agencies and online advertising companies since the early days of the web’s emergence as a commercial medium. And online advertising has adjusted its course since then to accommodate big brand advertisers, hoping to eventually gain access to some of those big budgets.

Back in 1996, those advertisers who were brave enough to advertise online had one chief complaint: ad production costs were too high, due to the number of disparate ad sizes that needed to be produced in order to launch a simple web ad campaign. We addressed this problem by adopting a set of ad standards that greatly reduced the number of potential ad sizes for online ad campaigns.

In the early days of web advertising, we rallied behind the notion of accountable advertising. While we were unsure of the true value of online advertising, we developed ways to measure online ad campaigns on a very granular level, analyzing metrics like impressions, clicks and conversions with tools like third-party ad servers and website analytics software. Although any media director worth his salt would tell you that it is unwise to evaluate individual media in a vacuum, we subjected online media to such scrutiny in hopes of tapping into big ad budgets.



Clicks became the next big thing. Advertisers wanted them. And they wanted them in huge numbers. Some online agencies and marketing companies protested that a click didn’t even come close to representing the true value of an online ad, but their voices were drowned out by others who built businesses on the cornerstone of driving click traffic. We all learned within a year or two that this was a big mistake. And we refined our approach once again.

Clients next wanted to hear about the brand value of online advertising. They asked over and over about whether interactive media could be used to brand. We developed brand studies, based on methodology that has been used in offline media for decades, which proved that online ads could brand. Aided and unaided recall, awareness, purchase intent, association, consideration – you name the metric – we tested for it, measured it and trumpeted the results all over town.

We thought we were in the clear once we proved the branding value of online advertising, but the brand advertisers had another request – case studies. They wanted to see real-life businesses with real problems, addressed by real interactive media solutions. They wanted to not only see results, but also understand how online media contributed to those results in comparison to offline media. Although most major brands would like to keep such case study data very close to the vest, we somehow convinced a few of them to share their results for the good of the medium. We got the job done, and now we have case studies to point to anytime a client asks for proof of the medium’s effectiveness.

Did this put us into the clear and open the door to the big TV budgets? Not yet. The next request from the brand advertisers was for success metrics compatible with those they had been using in the offline world for decades. So that online media could be measured side by side with offline media in terms of reach, frequency and GRPs, we showed how central ad serving and reporting, coupled with precise targeting, could provide gross impression and frequency statistics that could easily be converted to reach and GRP figures.

These days, it seems to me that we’ve removed most of the barriers to entry. We should be seeing widespread investment in online ad campaigns. The only barrier that remains is the condition of the U.S. economy. Many analysts are in agreement that the worst is certainly over and that the economy is returning to normal, so will we see a larger investment in online media? We can only hope.

One thing is certain, there is still a tremendous opportunity for large advertisers to reap tremendous benefits by increasing the percentage of their ad budget spent online. The average online consumer spends 11% of his total media consumption with interactive media, while the average advertiser spends only 1 or 2 percent of his total ad budget in interactive media. A recent case study for Dove Nutrium, conducted by the IAB, the ARF, MSN and Dynamic Logic, showed that Dove could improve key brand metrics by increasing the percentage of their advertising budget spent on online media. Simply optimizing the media mix by boosting online media’s share resulted in high single-digit gains in key brand metrics. I’d like to think that in a world where brand managers get excited by upticks in purchase intent of 2 or 3 percentage points, the case has been made for increased expenditure in online media.

So, have we removed all of the major barriers to large-scale online ad spending from major brands? Tell me what you think on the Spin Board.

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