European Ad Market Grows as Banners Decline

Banner ads are expected to decline as a proportion of the total online ad market in Western Europe, from 53 percent in 2001 to 40 percent in 2006, according to the Yankee Group. E-mail marketing and experimentation with other advertising techniques will pick up the slack.

Overall, online advertising in Western Europe is growing in parallel with other regions, rising from $1.5 billion in 2001 to $4.2 billion in 2006, the Yankee Group found, but its report “Europe Looks Beyond the Banner Ad” advises the advertisers, creative agencies and content developers to move toward the multichannel interactive market because the banner ad is becoming increasingly ineffective, and thus less profitable.

Even direct email, which the Yankee Group said consumers find increasingly annoying and intrusive, will not last, according to the report. Rather, the key to future success in interactive advertising is to move to more subtle forms of market segmentation and multichannel marketing, utilizing channels such as iTV, which is expected to reach more Western European consumers in 2006 than the PC-based Internet.

“While direct email marketing seems like a no-brainer for many marketers today, online consumers are likely to find this method of advertising objectionable, as many do now with direct mail — effectively junk advertising online,” said Scott Smith, director of the Yankee Group’s Internet Strategies Europe group. “With banner ad revenue now being concentrated among an increasingly smaller group of major portals, and most present interactive ad techniques spotty, uncoordinated and bandwidth-heavy, a new, comprehensive strategy is necessary to each consumers where they will be in the future. This means tying iTV, mobile and PC-based Internet together with unified creative techniques.”

Smith also said that portals and other aggregators will have to lead advertisers to the promised land.

“With their great knowledge of the market, portal titans such as MSN, Yahoo and AOL have been successful in guiding advertisers through the minefield of interactive advertising themselves, thus gaining a foothold in noninteractive marketing budgets,” Smith said. “This technique of proactively guiding the advertiser will increasingly need to be applied by other aggregators if they hope to grow their ad income.”

Research from Jupiter MMXI found that online advertising in Europe is certainly a buyers’ market at the current time. Internet advertising prices have experienced a dramatic 30 percent fall over the past year. Advertisers paid 30 Euros on average for 1,000 page impressions in June 2000, while they now pay 20 Euros. Online advertising prices will continue to fall over the next six months, reinforcing media buyers in their strong negotiating position.

Jupiter MMXI estimated that the surplus of unsold ad space is worth between 60 million and 70 million Euros every month, and the majority of European publishers have over 60 percent of unsold inventory. A recent executive survey conducted by Jupiter MMXI found that 25 percent of traditional advertisers find the online medium too expensive.

Or maybe advertisers just haven’t found a good reason to buy online space. A study by Britain’s Chartered Institute of Marketing (CIM) found that traditional commercial television is holding its own as an effective method of advertising to consumers, despite the many new media channels available. It also found that consumers believe that TV ads are the most likely to make them respond.

Television advertising is certainly familiar to consumers, and it comes without privacy or security issues that plague online ads. Just 6 percent of those questioned by CIM said they saw no television advertising in an average week, while nearly three-quarters said they never saw digital TV advertising, mobile phone ads and Internet banner ads.

“The Internet and other new media have now moved into the mainstream as an essential element in the marketing mix,” said CIM’s Claire Forbes. “However, it is clear that the new media have a long way to go before they are as important to advertisers as television.”

Television also fares well when compared with other traditional media. When it comes to being informative, interesting or entertaining, nearly three-quarters of respondents gave TV ads the thumbs up, but just 7 percent felt similarly enthusiastic about newspaper advertising. Only 5 percent were impressed with radio advertisements and 2 percent described outdoor advertisements as informative, interesting or entertaining. Consumers also perceive TV ads to have the greatest influence on their buying behavior.

“We know that consumers are exposed to anything up to 1,300 advertising messages a day,” Forbes said. “However, it seems that a large proportion of these messages go unheeded. In an increasingly cluttered world, advertisers will have to pull out all the stops to make us sit up and take notice.”

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