E-Tailers Look for Efficiency in Holiday Ad Budgets

Although holiday online advertising activity this season is nearly four times what it was last year, online advertisers are off to a slower start, according to a report released today by AdRelevance.

The AdRelevance Report reveals that while the number of retailers advertising online this season (2,313) almost quadrupled from 1999 (657), ad impressionsare growing slower, total median impressions per retailer are down and the number of holiday-themed ads in October 2000 is less than half of what it was last year.

Among the findings from the AdRelevance Holiday 2000 Intelligence Report, which tracks and analyzes all holiday-related online advertising from October 2000 through mid-November 2000, include:

  • Online holiday ad impressions and spending by retailers did not post gains above last year until the second week of November 2000.
  • Due to the significant increase in total retail advertisers, total median online ad impressions per retailer were down 82 percent in October 2000 — falling from 130,000 impressions in 1999 to 23,000 this season.
  • Only five of last year’s top 10 holiday advertisers show up in this season’s rankings: Ubid, Yahoo, eBay, barnesandnoble.com and Amazon.com.
  • Although their rankings are reversed, “books, music & movies” (No. 1 this year) and “auctions” (No. 2 this year) are still the top two most promoted retail products on the Web. Unseating “toys” and “office equipment and supplies” in this year’s top 10 advertised retail products are “gifts &party supplies” and “flowers.”

“Despite high levels of holiday-related online advertising this season, it is becoming clear that retail advertisers are starting a little later this year. The truth of the matter is that seasonal online advertising impressions and expenditures grew faster in 1999 than 2000, through about mid-November,” said Charles Buchwalter, VP of media research for AdRelevance. “It’s interesting to note too that during the first six weeks of the fourth quarter, only 14 companies — out of roughly 2,700 retail online advertisers — made up 50 percent of all retail online ad impressions.”

Growth in Retail Ads and Impressions
October 1999 vs. October 2000
Metric 1999 2000 Change
Number of retailers advertising 657 2,313 +252%
Average number of ads per company 9.3 7.8 -16%
Median ad impressions per company 130,000 23,000 -82%
Number of holiday-themed ads 54 22 -59%
Source: AdRelevance

Although Amazon.com once again leads the holiday online advertising charge in 2000, strong competition is riding on its heels. Barnesandnoble.com, which ranked No. 6 last year among top holiday online retail advertisers, increased its share of the online ad pie by 9 percent — becoming the second largest online holiday advertiser. Announcing they would start online advertising early this season to encourage early shoppers, BestBuy.com posted one of the strongest online ad gains, becoming the No. 8 advertiser this year. Last year, BestBuy.com did not run an online campaign until late December. Top 1999 online retail advertisers not ranked in the top 10 this year include: Buy.com, Vitamins.com, Beyond.com, Drugstore.com, and Office Depot.

In the aftermath of the dot-com shakeout, retailers are under enormous pressure to buy media more efficiently this holiday season. According to a recent Jupiter Executive Survey by Jupiter Research, only 11 percent of advertisers down from 29 percent last year said that they plan to spend more than 50 percent of their budgets during the holiday season. Online media remains the No. 1 priority in a frugal environment, with radio, network TV, and cable TV losing ground to direct mail. Within the online category, advertisers continue to favor email, both retention-based and sponsored, for its high response rates and low out-of-pocket costs.

Jupiter’s survey found that 64 percent of Internet retailers plan to spend the bulk of their ad dollars online vs. offline this holiday shopping season. Conversely, only 21 percent of online retailers plan to advertise in print media and a mere 12 percent will advertise on radio, television and cable TV this holiday season.

The Jupiter survey found that 79 percent of retailers’ surveyed favor email campaigns as their most popular tactic this year, up from 72 percent last year. Portals came in second, but only 58 percent of executives cited that as their most popular tactic, down from 72 percent last year.

While advertising draws consumers online, merchants must savor the opportunity that the holiday season affords to compete on service, and not on price. Although Internet shoppers have been spoiled by discounts in the past, during the holiday season they are more concerned with receiving their orders before the holiday, saving time, and avoiding crowds than they are with saving a few percent on price. According to Jupiter, retailers should take advantage of this shift in priorities with creative focuses on service, convenience, and selection to deploy a product that incorporates low-tech suggestive selling. Pushing gift suggestions in relationship categories (e.g., parent, spouse, or child) in retention-based email and banners can help speed and simplify customers’ purchasing decisions. Merchants that insist on offering discounts should offer freeshipping or discounted shipping upgrades, which emphasizes service and value without compromising list price and generates a better response fromconsumers than merchandise discounts do.

“Marketers have learned from last year’s experience and this year have redistributed their online holiday budget and developed much more targeted and efficient marketing campaigns using more measurable media channels,” according to Marissa Gluck, senior analyst, Jupiter Research. “However merchants must savor the opportunity that the holiday season is one of the few occasions where they can compete on service, and not on price. Although Internet shoppers have been spoiled by discounts in the past, during the holiday season they are more concerned with receiving their orders before the holiday, saving time, and avoiding crowds than they are with saving on price.”

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