Misconceptions About Online Advertising Abound

By: Hillary Rosner

Since myths run rampant on the Internet, it’s not surprising that there’s also a wealth of myths about the Internet. How many times have you heard that content is dead? Ask virtually anyone who works in the world of interactive advertising, and they’ll toss out a laundry list of popular misconceptions that have left them shaking their heads.

“It’s a myth that this medium should respond like a mature medium,” offers Fred Rubin, director of iDeutsch, the interactive arm of Deutsch. “It’s an unbelievably immature medium despite the amount of press and the incredible amount of money that has changed hands in quite a short time. A new medium is not made overnight. That’s important to keep in mind.”

The dot-com boom was a product of its own sweeping mythology, and when the bubble burst, the myth was turned on its head. But the truth lies somewhere in between. “It’s unreasonable to think that the consumer needs 7,000 Web sites,” says Allie Shaw, vice president of global marketing for Unicast. “The sites that provide relevant and easy-to-use content are the sites that are going to prevail. This industry has a disease of broad statements. People went from this adrenaline rush to this manic depression. But enough is enough. This is a business, and ultimately it has to function like a business.”

What follows are some common perceptions about interactive advertising and the realities of the business.

Interactive ads don’t work. “Who has proven that they don’t work?” demands Greg Stuart, CEO of the Interactive Advertising Bureau. “Every study we do has proven the opposite.” In a recent letter to the The Wall Street Journal, Stuart cited research by Morgan Stanley Dean Witter, Marketing Intelligence, Information Resources, Inc., and Nielsen Media Research that indicate online ads work. The IRI study, for instance, found that simple banner ads drove consumers to try new products from Procter & Gamble and Unilever. When the online magazine Slate surveyed its readers about the effectiveness of the site’s redesign last fall, the publishers included some questions about advertising. Fifty-nine percent of the audience said they regularly noticed ads on the site, according to Jodi Sternoff, Slate’s associate publisher, and 60% of that group said the ads impacted their buying decisions.

Beyond case studies, Stuart relies on good old-fashioned logic to dispel the misconception. “Advertising as a concept works in radio, TV, magazines, billboards. It works in bathroom stalls, supposedly. But somehow when it goes to the Internet, it doesn’t work anymore? That just logically doesn’t make any sense.”

Some of the confusion may come down to defining the term “work.” “The myth is that online is a direct-response medium just because you can click on it,” says Nick Nyhan, president of online advertising research firm Dynamic Logic. “And that if consumers don’t click, it’s a bad ad. The truth is, if I clicked on every ad I saw online, I’d never get to do any work.” According to Dynamic Logic, online ads produce a 4% lift in brand awareness, a 15% lift in message association, a 1% lift in purchase intent, and a 30% lift in ad recall.

Still, many marketers erroneously believe that clickthrough is “the most important metric online,” says Forrester Research’s Jim Nail, who recently surveyed marketers’ objectives for online ads. “Eighty percent said conversion, and 40% said branding. I said, ‘How do you measure the branding impact?’ And 55% said clickthrough.”

So how to tell if an online ad “works”? “The absolutely definitive answer,” says Nail, “is that it depends. If you’re Lands End or L.L. Bean, then you’ve got to measure in clickthrough conversion, sales. But if you’re doing branding, you have to measure awareness, recall, persuasion.”

The Internet must do for advertisers something completely unique and different from what other media do. The arrogance of the dot-com boom years contributed significantly to the buildup of this myth. “A lot of people want to have online be seen as different because they’re like, ‘this is so special, we’re so special,'” says Nyhan. “A lot of that is the hubris that permeated the industry in the beginning.”

Now, however, it is critical to understand the Net as merely one part of an overall strategy. “If I’m a marketer, my main focus should be how do I make sure each dollar I’m spending is being intelligently spent,” says Rex Briggs, principal of Marketing Evolution, a consulting company. “Often times, online is put in this category with separate goals. That’s sort of silly.” The better approach is to ask how online can help with overall corporate marketing goals. Using the same yardstick-looking at things such as branding and driving longer-term sales, says Briggs, “online can do all of those-and often more cost-efficiently. You can also do more innovative things that are much harder in other media. But because online can do all of these things, we’ve overlooked the basic things that marketers spend billions of dollars to try to accomplish.”

Consumers ignore or delete all e-mail offers. Consider this: A recent Forrester Research study asked consumers to agree or disagree with a number of statements. One statement said that e-mail is a great way to find out about new products or promotions. Of those surveyed, 50% agreed. Another statement read, “Most of the e-mails I receive don’t contain anything I’m interested in,” to which 40% agreed. “You can’t blame the medium if the marketers aren’t putting the effort into understanding what consumers want,” says analyst Jim Nail.

Statistics indicate that marketers can often get up to a 10% clickthrough rate using focused, opt-in e-mail marketing. “Like all advertising, when it’s contextually relevant and targeted well to an audience, it works,” says Slate’s Sternoff, who has experienced success with e-mail campaigns for UNWire — a free e-mail newsletter about the United Nations — which generated 600 subscriptions in the first week, and Ben & Jerry’s, which asked for nominations for its “Citizen Cool” contest and was inundated with responses.

Still, the excess of spam out there can turn the opt-in e-mails into needles in a massive haystack. “Spam is killing what is a very, very useful tool for marketers,” says iDeutsch’s Rubin. “We’ve seen it in the real, direct-mail world, where mail clutter has contributed to declining response rates. And it’s much easier to look through a stack of mail and pick out the one from AmEx than to find it in that preview window in Microsoft Outlook. When you get 50 or 100 spams a day, you just delete everything.”

Unfortunately, the only solution at hand seems to be to wait for more effective filtering programs. (Yahoo!’s is impressive; Hotmail’s is a joke.) “We’ve found that if we get highly targeted lists and people have opted-in, they want to receive things,” says Robert Anderson, creative director at FCBi, the interactive division of FCB. “We track them every month and you can see what people are interested in. If you send ‘refinance your dog house’ to thousands of different people, it’s not going to work.” But with “the right kind” of e-mail, Anderson has seen response rates of 10% — for clients such as Compaq, the U.S. Postal Service and Clairol — even, he says, as high as 30%. “It’s the kind of thing in direct marketing we wouldn’t have believed.”

The Internet, as a medium, reaches only a small portion of the population.

As of December 2001, U.S. Internet penetration was 64%, according to Nielsen NetRatings, which counts the “Internet universe” — people with Net access, at 182.4 million. Consumers spend 15% of their media time on the Internet. “If someone says we’re not reaching 40% of households,” says Nail, “you look at the demographics and from an advertising standpoint, not to be elitist, but they’re not desirable targets for advertisers.”

It may be true that the Internet isn’t a mass medium in the old-fashioned sense of the word. But then again, what is? “I’d argue that unless you’re dealing with a major prime-time show or the Super Bowl, there really isn’t a mass medium anymore,” says Briggs. “Even network television only gets you a fraction of what you used to get.”

Unicast’s Shaw says that one of the most significant misconceptions is that advertisers aren’t spending money online because they don’t believe in the medium. “If advertisers aren’t spending money it’s because we — the entire Internet industry, from most Web sites to third parties — don’t make it easy for them. We make it easy when we say, ‘You’ve told us what you want, we’ve responded with X, Y, and Z, and now the negotiation has to take place about price.’ We’re seeing them step up to the plate, but not for things that are inefficient. The industry has not found a way to be driven by advertiser demand.”

Only dot-coms advertise online. Therefore, no one is advertising online. Online advertising revenues were $8.2 billion in 2000, according to quarterly research report by PricewaterhouseCoopers and the Interactive Advertising Bureau. With revenues through September 2001 tallied, the estimate for the full year is $7.4 billion — a decrease of 10%.

But this glum news comes with a caveat: There were double-digit decreases in other media as well. And analyst projections still expect online revenues to reach $20 billion by 2006. “Every projection I’ve seen for advertising overall picks out interactive as one of the bright spots going forward,” says Tom Hyland, partner and chair of PwC’ New Media practice.

So just who is advertising online? In 2000, dot-coms accounted for two-thirds of the dollars spent online, according to Forrester’s Nail. In 2001, traditional companies accounted for 60%. “We’re seeing a big shift happen,” says Nail. “Traditional companies aren’t spending as much money as dot-coms did. But traditional guys increased their spending 45% over that year.”

The allotment for online campaigns is so low, it’s not beneficial for traditional agencies to work on these campaigns. Because the allocation for online spending is still relatively low, it can indeed be tough for a traditional agency structured around producing lucrative TV commercials to generate income from interactive. But this is changing — and as traditional marketers are coming around to the Internet as a serious piece of their marketing puzzle, agencies will have little choice but to fulfill their clients’ needs.

“We made a conscious decision here to take interactive media and make it part of our media departments,” says iDeutsch’s Rubin. “Because the way we approach media for our clients is with a multi-tiered approach. A dollar that’s spent across media is better than a dollar spent in one medium.

When you go to the AOL-Time Warners and the Viacoms and say, ‘I’ve gathered up all this money, I’m going to give you this whole chunk and I want all of this stuff,’ you just wind up with a much deeper program.”

Still, there are other hurdles to overcome. Last summer, a Jupiter Media Metrix study revealed that there were more than 4,000 ad formats available for online advertisers. “Advertisers cannot spend because they’re so confused by all that’s available,” says Unicast’s Shaw. “On TV, you can buy 15 seconds, 30 seconds or an infomercial. So why should we expect advertisers to change their whole way of doing business to do business with us? Do we expect that advertisers should try 4,000 formats in order to find out what they want?”

Wireless is the next frontier for interactive advertising.

Oh, to feel this sort of wide-eyed optimism again. Wireless is surely an area whose time has not yet come in this country. But the next frontier?

Doubtful. “I think there is somewhat of an overexpectation on wireless,” says PwC’s Hyland, who believes that advertising will work in very specific service markets such as restaurants and movies. “But the original thought of beaming ads to my cell phone and my PDA was a bit optimistic and it will take time.”

Once heralded as the spawning ground for the second coming of so-called push marketing, most experts in the know now stand firm in their conviction that wireless’ promise lies solely as an instrument of pull.

“How you give people a message and what kind of information you use to give them the appropriate message at the right time is even more important than on the Web,” says Carrie Himmelfarb, vice president of sales for Vindigo.

Will wireless ever live up to marketers’ initial expectations? “It’s like AOL or Prodigy in about 1988,” says Nail. “You can see the promise, imagine the application. But there’s no infrastructure to deliver location-based targeting yet, there are no access devices, the consumers really don’t know what the heck they’d use this thing for. And marketers are still struggling with PC-based Internet. So it’s a long way out there. I would make the appeal to the wireless companies not to spend any money on this. Just fix your networks so my calls don’t drop in downtown Boston.”

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