It is time bigger brands started making the most of online advertising?

The biggest advertisers, which have in the past sponsored other advertising formats – TV, radio and print – are yet to fully welcome the online arena as the growing medium for advertising that it is.  It is, in fact, smaller companies that are paving the way to the future of advertising.  Still, isn’t it time they started reaping the benefits?

According to the 2007 Advertising Age list of US leading national advertisers, Proctor and Gamble Co., which spends almost $5 billion a year on advertising, channelled less than 2% of its measured advertising spending online.  It spent most of its enormous budget on television.  Measured media spending rose just 0.3% for major marketers – the most slothful growth since the 2001 recession.  Bradley Johnson remarks that Advertising Age’s LAN report is clear: “[b]ig marketers, facing a weakening economy and pressure to control costs, clamped down on spending” (Source: www.adage.com).

The Washington Post published an article last week featuring the University of Phoenix as an example of a small business in the advertising world that in fact is far more forward-looking than a number of big businesses at the moment.   Rob Wrubel, who manages ad spending for the University, spends up to $20 million a month on Internet ads.  The company paid more for online display advertising in the U.S. than any other business over the past year according to data from TNS Media Intelligence.  Moreover, out of the $278 million they spent on advertising last year most of it was on the Web.

“While spending on Internet marketing has been growing dramatically over the past decade, the top 50 or 60 brand marketers are very much underrepresented”, says Randall Rothenberg, president of the IAB (Internet Advertising Bureau).  He believes that the online industry has been “growing by grabbing the low-hanging fruit”.  Larger companies are yet to take the internet by storm.

There is huge potential revenue in online advertising and analysts have predicted that this will be realised and flourish steadily to double or more over the next ten years.   However there is doubt that the proceeds are sufficient for the type of content (articles, video etc.) that Internet thinkers foresee.  At present, the majority of money spent in online advertising is in search.  This form of advertising does not directly benefit companies putting information online – the search engines that run them take the profits.  For companies providing internet content, the largest source of revenue is in display advertising.  However, many online companies, though experimenting with new formats all the time, are waiting for the leading advertisers to direct their attention to the Internet.

There is a number of reasons why this might not have happened yet.  Many onlookers have remarked that the advertising industry is not sufficiently assured about the online sphere.  They are more used to producing 15-second TV slots or filling the pages of magazines than they are to completing an online campaign.  This is changing quickly though, with professionals rapidly getting used to the way advertising can work optimally on the web.  While it is difficult to gather precise information about online audiences for a given website, internet advertising holds the advantage of being able to be tracked.

Some critics say that bigger brands and especially luxury brands have more to lose and are consequently less inclined to innovate.  A new study by consultants Forrester Research found that only a third of the world’s premium brands sell their goods online, which indicates that this reticence is a mistake because online sales are growing all the time.  Some luxury brands bust after the dotcom boom and so are reluctant to try again, and there’s also a wariness hanging over from the 1980s when too many designer brands went on licensing flings that cheapened their class.  Guy Salter, deputy chairman of Walpole, the British luxury brands trade association says, “since then, the mantra has all been about control of the brand.  And to some, the net looks like the Wild West” (Source:www.time.com).  There is also the worry that the internet is a less refined sphere,”[b]ut the opposite is true”, says Victoria Bracewell-Lewis, a Forrester senior analyst, "a well-run digital channel can only enhance their image”.  An example of this is Coach, the American leather goods manufacturer.  David Duplantis, senior vice president oversees the web sales for Coach.com and praises the web as “our most powerful marketing tool and a significant driver of store traffic”.  The site receives 60 million visits a year and 40% of Coach customers say they view goods online before making in-store purchases.  Advertising on the internet is a gain for companies like these.

Surely it is only a matter of time before these larger brands gather the confidence required to take off online.  The exciting possibilities of the web are yet to be fully investigated.  Social and interactive facets hold many treasures in terms of advertising - the opportunities with blogging and video for building brand understanding and value are immense and certainly it is time that these companies started making the most of it.

Justin Drummond,

Chief Executive - Media Corporation plc

How the Internet is transforming American politics

As Obama’s historic nomination as the Democrats’ candidate for the U.S. presidency fills the press, much attention has been given to the role of the internet in his campaign, particularly the way that he used online campaign donations to challenge the initially far greater war chest of the Clintons. This, along with the record breaking number of Americans using the internet to remain informed and to participate in the election, has made for a new kind of political campaign - one that exists both in real space and cyber space.

The growing importance of the internet in politics is reflected in the findings of the non-partisan Pew Internet & American Life project released this year. Their study of 2,251 adults in April and May corroborated what many have anticipated: that the internet has become a tool to politically participate, understand and comment as well as disseminate information.

One of the greatest assets to the public is the accessibility of the detail of information about the election. A huge quantity of comprehensive information has been made available, both positive and negative. This has allowed users to see media that is unfiltered, to watch for themselves a full speech or address. The other side of this coin however is that the internet does not forget, and the slightest error or misstep is recorded, uploaded and circulated almost instantly. Each of the key candidates, Obama, McCain and Clinton, have had to battle it out against ill-conceived comments they have made or remarks by those connected to them. These include Clinton’s claim that she was fired on in Bosnia, to Obama’s connection to Revered Jeremiah Wright, to McCain’s association with preacher John Hagee, who stated that Hitler was an agent of God.

The upside, for Obama at least, has been the deep connection between online fundraising and the wealth of his war chest. From an initial disadvantage against Hillary Clinton’s substantial fundraising, Obama’s team took a new approach, promoting smaller online donations of even US$50 or less that were given multiple times. In this way they tapped into a wider base of people who were only able to give small amounts. These added up until Obama’s campaign was soaring, as Clinton went into debt to continue.

Obama has also made excellent use of social networking. TechPresident, a website which tracks the online elements of the campaigns, reports that he has 1.35 million friends on MySpace and Facebook. McCain on the other hand has only 197,000. How this online disparity will reveal itself in the reality of the upcoming race is yet to be seen.

What is assured, though, is that this year’s U.S. election is a historical one, both for Obama’s and Clinton’s battle and for the changing nature of the campaigns. It is a tough race to win, and the candidates must arguably be tougher than ever to manage the constant visibility brought about by online interactions.

Justin Drummond,

Chief Executive - Media Corporation plc

Viral Marketing Part 2

Few industries have undergone such radical changes during the rise of the internet as advertising and marketing. Statistics from the Advertising Association this year attest that UK ad spend has grown 4.3% year on year to reach £19.4 billion. During the past year 40% of all advertising was in the press with a figure of £7.7 billion. This placed it at in top position despite a yearly drop of 1.6%. But the fastest growing medium was online advertising with a yearly growth of 39.5%, making up 16% of total ad spent at £3.02 billion.

 The credit crunch has spelled trouble for television and radio advertising with less money being channeled in to the medium. It has been predicted that ad spend could be down by 2% this year, while radio could drop by up to 12%. With budgets stretched and purse strings tightened, it seems that companies are unwilling to fork out large sums on advertising budgets for traditional methods. Yet online advertising spending is on the increase, as are internet innovations which are changing the face of the medium and posing as many problems to advertisers as they provide benefits. 

Viral marketing was once seen as a somewhat subversive offshoot not to be taken too seriously, but as the years have passed, marketers have recognised its importance and influence. Panasonic’s Lumix campaign is a viral success story. The launch of the Lumix range was supported by a viral game called ‘Gyrorunner’ in which players had to balance a 3D man on a gyroscope for as long as they could. A score of more than a minute was rewarded with a £20 Panasonic voucher and entry into a prize draw to win a camera.

Since the game was launched, nearly 600,000 people have played it and the site has had 1.6 million unique visits. Panasonic’s web communications and e-commerce manager, Gaele Lalahy, recognises the importance of a well-thought, well-placed viral, saying “It can end up being the element that drives the most relevant traffic, creates brand engagement and achieves data capture.” But viral marketing is not without its disadvantages. One of the problems associated with this medium is whether target audiences will actually be reached and, even if they are, will they be inclined to buy the product in question. A high hit rate does not guarantee a successful viral campaign. For example, Kylie Minogue’s Agent Provocateur viral was viewed 350 million times but there was negligible increase in sales for the brand.

Of course, the viral brought Agent Provocateur to people’s attention, so it wasn’t a wasted effort overall. Likewise, viral marketing should not be seen as a cheap alternative to traditional advertising. When a viral takes off it can be great publicity for a brand, but the unpredictability of the tastes and habits of web community mean that the medium cannot be trusted to deliver every time.

Even a well-planned, well-targeted viral can fail, like, like L’Oreal’s consumer blog and Sony PSP Rappers, such is the fickle nature of internet popularity. The main issue is the measurability of ROI through viral marketing. As yet there is no meaningful way of quantifying how successful a viral campaign turns out to be. Although virals may be easy and cheap to make, it is still necessary to measure their success. While there is no definitive way of finding out how well a viral has done, there are various charts and sites such as Viralchart.com. So as online advertising continues to grow and viral marketing reaches maturity, it becomes increasingly important for brands to keep abreast of trends and developments. Forewarned is forearmed.  

Justin Drummond,
Chief Executive - Media Corporation plc

Marketing to women online

Only last week, the success of the Sex And The City movie in cinemas across the world highlighted the magnitude of the show’s female fan-base and the accomplishment of its marketing team.  Indeed, a great deal of the £28.3m generated in its opening was no doubt scooped from the purses (many probably designer) of eager women, who had been heavily targeted with advertising in the run up to the movie’s opening.  Looking at an achievement like this in the context of advertising budgets being increasingly spent on the internet, it throws up questions as to what kind of potential the female audience has in the world of online marketing.

There is little doubt that the online buying power of women is growing.  While in the early days of the internet, online consumerism was a territory dominated by men, it was nevertheless predicted that women, as the main shoppers in a household, would overtake as the main spenders in the eCommerce sphere.  Recent demographic surveys indicate that this is indeed the case. 

It would seem that women are much more than just a niche market.  Lisa Witter and Lisa Chen state that “[t]oday, women represent the largest and most important consumer market there is” (Source: www.alternet.org).  They constitute 83% of all consumer purchases and make 80% of all health care-related choices for themselves and their families.  Indeed, they have come a long way since their pre-war, stay-at-home lifestyle and things continue to evolve.  The latest polls in 2007 showed that, in the US for the first time ever, single women outnumber married ones, whether this is down to postponing marriage, living unmarried with partners or outliving spouses and choosing not to remarry.  So both single and married women seem to be making a great deal of the economic decisions.

Women’s economic and political weight in the private and public sectors is increasing too. They are altering the face of philanthropy and non-profit sectors.  It seems that women are more committed to funding causes they believe will initiate social change, as the numbers donating to charitable organisations are increasing greatly. An American survey of nearly 400 prominent businesswomen found that high-net worth female business owners with assets of more than $1million are more likely than their male counterparts to contribute at least $10,000 a year to charity. There has also been a boom in female political donors, and women volunteer more of their time than men.   A recent study by the Bureau of Labour Statistics found that in 2004-2005, 32.4% of women volunteered compared to 25% of men.

With this changing status women could well become the prime target for companies marketing their products and services online.  It is recognised that women, more so than men in the US and UK, are culturally encouraged to be more inclined to discuss their purchases with friends, recommending items they are pleased with and asking for advice from peers in decision-making; “they utilize the powerful marketing tool: word of mouth” (Source: www.alternet.org).  This goes hand in hand with an expectance of openness to information about goods they wish to purchase, and makes them harder customers than men in many ways.  Thus, if companies were to start catering more in their online advertising campaigns to their toughest audience, who demand specifics before they hand over the money, they would no doubt be covering the requirements of men and therefore be appealing to a wider group.

Just a couple of months ago, Yahoo! followed in the footsteps of Glam Media, iVillage and DivineCaroline with their new site Shine. Targeting females aged between 25 and 54, it claims to help women navigate their lives and careers while serving adverts to a group that advertisers are excitedly trying to reach.  However, a successful advertiser does not simply target a demographic. Advertisers must increasingly take into account life stage versus age.  Suzanne Kolb, chief marketing officer for E! Entertainment says, “[f]rom a marketing point of view, we think more about key life events, rather than age, such as married with kids, single, college” (Source: www.adweek.com).  The use of behavioural marketing is incredibly helpful in getting the right person to see your advert by targeting those whose habits fit the type of lifestyle typically attracted to the product you have to sell – something which will not be the same for all women.

For the future, with women’s political and economical clout on the up, perhaps it is the behaviour of women that advertisers should be watching.  If they continue to grow as the main buyers on the internet, marketing may have to become more appealing to this audience.  Though, along with this, advertisers should clearly bear in mind the sub-categories within the general group so that targeting remains relevant to the potential customer it reaches, not just aimed obliquely at “women”.

Justin Drummond,

Chief Executive - Media Corporation plc