Search may be hot right now, but online branding will soon blossom.
Much attention has been paid to search-initiated, pay-per-click (PPC) advertising over the last couple of years, and rightly so. We at Jupiter Research (a Jupitermedia Corp. division) estimate spending more than doubled in Europe from 2002 to 2004, from €225 to €576 million, outpacing growth of all other advertising forms, online and off-. (In the U.S., it rose from $1.1 to $2.6 million during the same period.) As hordes of new advertisers latch on to paid listings' cost-effective, lead-generating potential, and Google awkwardly transitions from a private to public company, online activity and the industry it spawned garners plenty of column inches.
Recently I was asked, in light of all this, whether I believe the phenomenal growth of search advertising has overshadowed what the Internet can do in terms of branding.
No, I don't.
Although low-risk PPC activity may highlight the Internet's direct response capabilities, it hasn't totally overshadowed how the medium can contribute to shifting brand metrics. Though the spotlight has been on search, in the background marketers have been growing confident about using the Web to help build brand. Online branding spend, in the form of display ads, content sponsorship, and, increasingly, rich media and streaming video, also continues to grow steadily, dominating online ad spending.
From 2002 to 2004, investment in online display media formats increased from €580 to €946 throughout Europe. In the U.S., rich media advertising will almost triple in size from $0.5 million in 2003 to $1.3 billion in 2005.
Paid search advertising can tap into a self-selected target audience who are actively considering a product or service and encourage their clickthroughs. As such, paid search is particularly popular with retailers looking to directly influence an online (or off-) sale. Its dramatic growth is, in fact, closely linked to growth in e-commerce spending.
But limited creative possibilities don't make paid search attractive to some sectors, including automotive and fast-moving consumer goods (FMCG). Such sectors use the Internet more to build awareness, interest, and desire than to activate immediate response.
Almost all the major car manufacturers are now investing significant budget in online. They're making long-term sponsorships deals, using rich media formats, and creating viral marketing campaigns. Volkswagen created a campaign-specific microsite, exclusively on the NYTimes.com for three months, to celebrate 30 years of the Golf. Ford Galaxy sponsored "Family Days Out" themes on AOL and, interestingly, the Tesco.com retail site (an early example of "advercommerce"). And The Mystery of Dalarö was a superb and award-winning integrated ad campaign for the Volvo S40.
A new age may be dawning for the online FMCG sector as well. Drinks giant Diageo recently announced in the UK it's putting more time and effort into its online ad strategy. It intends to use the Web as a branding medium for brands such as Archer's Peach Schnapps, rather than as a direct response channel. This could be a landmark for the medium and may herald the start of a more concerted move by FMCG brands in this direction. It's perhaps not surprising considering how the Internet is becoming increasingly interwoven into the daily lives of the young, affluent consumer, and its consumption is increasingly cannibalising use of traditional media channels. Many available case studies highlight significant lifts in branding metrics by adding an online element to the marketing mix. Just ask the Interactive Advertising Bureau or Dynamic Logic.
The Internet still only complements traditional brand-building channels such as TV and print, which will continue to dominate for a number of years. But with increasingly fragmented media consumption, these media can't do it alone. Media must be more fully integrated, often with online at the core. Although these advertising conduits can build brand awareness, interactive media build brand experience and, ultimately, loyalty.
The burgeoning demand for paid search increases keyword bid prices, making participation increasingly expensive. Conversion rates are unlikely to rise at the same rate, so the channel is slowing and becoming less cost-effective. As this trend develops, balance will be restored between cost-per-action-based buys (e.g., search) and CPM-based impression buys. The two primary online advertising objectives, direct response and branding, will then coexist in more equal harmony.
Julian Smith conducts research and analysis on the European interactive marketing and advertising arena as an analyst with Jupiter Research, which shares a parent company with ClickZ.
His areas of expertise cover all aspects of the online advertising industry, e-mail marketing, mobile (SMS/MMS) marketing, search engine marketing, eCRM, online branding and Web site design. His particular area of interest is in the use of digital media for the acquisition, retention and development of customers.
Prior to joining Jupiter Research, Julian spent over six years working in a variety of interactive marketing agencies in London. These included Razorfish, Euro RSCG Interaction and TBWA/GGT where he worked in strategy and client service roles helping develop online solutions for leading blue chip clients. Most recently he assisted in the integrated marketing launch of 3, the new 3G video mobile phone, one of the largest new product launches in the UK in 2003.
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