I wonder who will be bold enough to call the ‘top’ of the online ad market? I have felt that online will easily reach a 15% share of advertising revenue for some time now, but it feels like we will surpass this figure even quicker than many anticipated. With so many distribution channels yet to be fully realised, including the burgeoning community networks and natural search optimisation, the challenge to digital agencies will be how to embrace their clients needs at a pace that keeps up with a voracious consumer demand.
The latest data from the Internet Advertising Bureau (IAB), carried out in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC) confirms that online advertising’s break-neck growth continues to outpace any other form of advertising media.
Given that the wider UK advertising sector is struggling, and in many areas is depressed, the 40.3% like-for-like annual growth for the first half of 2006, confirms that we are in for another record breaking year and pushes online’s share of the pie to 10.5%.
2006 will not be far off 2 billion in online revenues, bring-on 20%!
October 6th, 2006 at 4:34 pm
The best way to think of brand mangers is as a sycophantic sheep. By this I mean they listen to many voices (conferences, friends in the industry, press etc) and when one decides to jump they all follow soon afterwards. Some brand mangers embraced paid search, CPA, affiliate etc a considerable time before the majority came following. They were the ones who enjoyed amazing cost per a lead on Google, sold vast amounts of hotels rooms through Media Brokers or MSN and where able to catapult their careers forward.
Now that the pack has followed we see almost hyper inflation in generic PPC terms. Conversations are now occurring were by PPC results are coming in at DM levels, CPA is delivering frustrating low results and CPM rates are unworkable for DR campaigns. This is all leading to growing frustration in marketing departments. Couple this with the dark side of agency inflating third party tracking cost and the IAB floundering over click and view based conversions I feel confident in being able to call the “top” of the online market.
The top will be reached when greater ROI is achieved through “old” media options TV, DM or even National Press. ITV has had a stinker, CTR and diminishing audiences have help to make it look like very good value for clients. National newspapers have looked within themselves and are now bending over backwards to work with agency on creative advertising options. For a travel and tourism client a well designed, relevant creative idea next to editorial from Simon Calder will always produce considerable brand empathy with the viewer. I personal think that online it’s reaching near its peak, for this technology cycle and we might even see it drop back as we witness the sheep move back to the evolving old media landscape.
October 6th, 2006 at 6:14 pm
It’s a very good point you make Duncan. Many prices paid for online acquisition are getting scary. Some PPC sectors are tough to deliver the old amazing CPA’s and there are a lot of agencies doing bad work for big margins, so the potential for a car crash is there.
My personal view is that brand managers and many media buyers have had it easy with online. There’s a need for creativity in content and distribution strategy. Placing media in a few places flies in the faces of media fragmentation. A more sophisticated approach, that takes into account the non-direct response potential of e.g. search, is needed. Delivery of PR, CRM, and a brand strategy that engages across media must be on it’s way.
The changing nature of media consumption, especially in the 16-24 age group also makes me very optimistic for online.
Many of the sheep may get eaten by wolves, the innovators will do very well long-term.
Arjo
October 8th, 2006 at 2:13 pm
I couldn’t agree with you more on the very accurate observation regarding the general attitude of the majority of brand managers and media buyers to online. But maybe that’s where the problem lies. Online is being used as an umbrella term to cover off many different disciplines.
Some of these can be easily matched to an offline equivalent, rich media formats = Newspaper, email = Direct Mail, search = Yellow Pages. However the more innovative and creative solutions do not have a definable offline equivalent. For example, marketeers have always understood the importance of word of mouth advertising. You are in the market for a new car so you will discuss this with your friends and family, people down the pub etc and evaluate the comments coming back to aid your decision making process. As a marketeer you knew this was happening but couldn’t quantify its existance. Social networks have elevated the know-it-all from the pub and has empowered them to reach an audience of millions. This evolutionary step forward is both an opportunity and threat to brand owners.
I feel creative solutions should be viewed as communication planning rather than media buying. For example social networks are this years hot topic. However, the members of these autonomous regions are already rejecting heavy handed attempts by brands to break into them e.g. Ronald McDonald having a homepage on Myspace, or new film releasees cluttering up Youtube. However within the realms of communication planning a client could take the essence of these sites and introduce them to their own coporate sites.
This is at present being done fantastically well by KLM on their Chinese routes. A country where business contacts are all important, KLM have introduced a social network area for customers who have brought business flight tickets to China. This is enabling customers to build up contacts and make relationships with fellow business people in China. Which in turn is helping KLM to become indispensible to them so securing brand loyalty above and beyound what a simple advert could ever achieve..
I believe online, as the fundamental base for comms planning will become inseperable. But it will take sometime and a lot of education from specialist agencies to the wider marketing community for this to be happen.
October 9th, 2006 at 10:13 am
I love your idea of the pub know-it-all elevated to a cast of millions, we could have some fun with this…
Marketing has always been about networks - and networks, whichever way you look at them are social. If interactive bases it planning on solid foundations, which must include better customer segmentation from the best bits of traditional advertising, and combines this with our ability to track and respond, we will avoid the hyperbole you quite rightly fear. So will the integrated agencies succeed over the specialist then?
Arjo
October 10th, 2006 at 1:30 pm
Will the integrated agencies succeed over the specialist agencies especially in light of resent account moves? I am referring to Carat scooping the consolidated Alliance and Leister account from Latitude and Mediavest Manchester. I think this is an excellent example of what will shape the future, the commoditisation of what we do. Media agencies have over the years won accounts by rebating more and more of their agency media commission. This has led to the situation now that top tier agencies are working for less than 1%. They are making their margin through bank interest on the huge sums of money going through their companies. Also, by having “special” arrangements with media owners for remuneration above and beyond what is know in the public arena.
Clients need to decide what is more important to them, the short term gain of cost cutting and moving accounts purely on rate, or is a more long term strategy required? I personally think that it might be somewhere between the two. Paid search is already so commoditised that this trend will continue. There is also an argument that your search strategy to a degree is influenced by your other advertising activity. So it might make sense to employ one integrated agency to look after it all.
However organic search is a specialist discipline and isn’t something a full service agency can decided overnight is something they can offer a client just because they are asking for it. Well, an honest agency with the client’s best interests wouldn’t. Organic search is a very fluid environment, which changes daily. It is always going to be a game of cat and mouse between the search providers and SEM programmers. At present we are witnessing the next jump forward in search with the development of social influence within the process.
If your Brand was a Aston Martin DB7 would you take it to a cheap backstreet garage to fix it? Or would you take it to a specialist Aston Martin garage and pay the experts their justly deserved “specialist” fee? Sensible brand owners will always see the value of the expert where by the opportunist will always view the cost saving as an acceptable compromise. I’m confident the blue chip brands will always view organic search and social media monitoring as a specialist subject.