Well-known Silicon Valley blogger Om Malik recently covered the slowing growth of online advertising companies like ValueClick and Time Warner's Platform-A. Microsoft CFO Chris Liddel, during an investor conference call, expressed that even though the company's advertising component is expected to grow, it is still experiencing a challenging advertising environment. Furthermore, Microsoft's investor relations GM, Colleen Heally, warned about advertisers showing reticence on spending and sub-optimal monetization.
Despite the dark clouds ahead, studies continue to show that online advertising still manages to retain its position as the fastest grower. Jupiter predicted that the U.S. online ad market is on pace for 20% growth in 2008. December 2007 research from ZenithOptimedia showed that online advertising expenditures would grow at least 23% this year as compared to flat growth for all other segments except for television.
It's amazing that the growth rate sustained at this level comes with the noticeable absence of the financial services mega-marketers -- Countrywide was one of the top three Internet advertisers last year. But that's only the statistical part of the story.
Savvy marketers realize that it is because many marketers cut advertising spending during a recession that a recession is the best and least expensive time to gain market share through advertising. Publishers are more open to negotiating deals. Plus, there is less competition as other companies reduce budgets or drop out completely. This is the time to brand yourself as the leader in your category.
It's well-documented how companies leverage downturns in the economy to effectively market themselves. In the 1970s, marketers like Revlon and Philip Morris increased their advertising to gain market share. Today, companies like Procter & Gamble, General Motors, Verizon, News Corp and PepsiCo all increased their first-quarter ad spending.
The typical response to cut back on ad spending when the economy slows down is understandable. However, advertisers with strong brands, stable monetary resources and compelling value propositions can take share from their weaker competitors by effectively targeting their advertising.
The logic holds true today as Wal-Mart, for example, has launched a series of price roll-backs coinciding with a major TV campaign, "Save Money, Live Better," highlighting Wal-Mart's evidence that it can save the average family more than $2,500 per year -- a position that should increase sales and brand equity.
For brand advertising campaigns like Wal-Mart's, placement is paramount. Brand engagement studies show that the impact of placing advertisements on the quality long-tail site exceeds the impact of broader sites because consumers are favorable to the advertisers who support their favorite niche sites. If you can reach your target consumer at the time he is most interested in your brand, your brand lifts significantly. Research from the Atlas Institute shows that when you reach consumers on quality, focused sites, you can reach better frequency saturation and realize better recall in addition to higher brand perception.
As a result, marketers are valuing placing their advertising in premium locations with innovative campaigns that reach the audience where they are engaged and spending their time -- on long-tail sites. ComScore shows that 64% of the time consumers spend online is not on the Top 20 sites. Therefore, you either reach the consumer 36% of the time or you need a long-tail strategy that marries your brand priorities to your online campaign.
Examples of vertical brand marketing strategy include Eukanuba, which realizes that pet owners are passionately visiting pet-specific sites. General Motors' Pontiac G8 campaign is aimed at sports car aspirational consumers who might not be considering a Pontiac -- but would do so if the brand was associated with their passion -- and those consumers can be found on sites focused on passions like entertainment and travel.
Walt Disney World Resorts targeted Moms looking for end-of-school affordable vacations and got a great response on the mom, parenting and education verticals. These companies are effectively seizing the moment to promote their brand, new products and shine with greater share of voice in the (temporarily) quieter online arena.
When times get tough, advertisers have an opportunity to get better value for their advertising budgets than in high-spend times. The goal of any branding campaign during a recession should be effectively getting their message and value proposition across to consumers who will be ready to spend when the upward cycle begins again, as it always does. However, efficiency is the key and fragmentation is the major challenge.
Premium vertical ad networks are emerging to make the 64% of the Internet audience on the long-tail sites efficient and to deliver a premium brand experience where the consumer is most engaged. Strong vertical ad networks build strong relationships with those publishers, ensure quality, aggregate those sites and guarantee frequency control and premium placement that online advertisers expect.