Fearful Buyers, Laggard Technology Hurting Industry

LOS ANGELES — Lack of usable tools and a preponderance of risk-averse clients have become some of the industry’s biggest hurdles, said a panel of online publishing and agency executives speaking here at the @d-Tech convention.

One of the more recent criticisms of the online ad industry stems from the fact that advertising formats vary wildly throughout the space, making it difficult for agencies’ creatives and buyers to develop multi-site campaigns and media plans. According to a recent NetRatings study, more than 7,000 formats exist.

But panelists charged that buyers’ uncertainty over how best to utilize the Internet, coupled with the fact that little campaign planning goes toward the online channel, ensures that there’s little in the way of format standardization and evolution in the space. Yet the fact that buyers haven’t caught on doesn’t mean that the industry hasn’t been vocal enough — instead, panelists said that agencies’ fear over current economic conditions discourages trying new things.

“The whole point of an effective market is we serve what there is demand for,” said Ken Goldstein, executive vice president and managing director of the Walt Disney Co.’s Disney Online. Despite the fact that billboards have lower action rates than banner ads’ clickthroughs, “people have been buying outdoor for some time, and I don’t see it dropping off anytime soon.”

“It’s an economy of fear right now, and there are not a lot of risk takers in organizations,” he said.

Added Avenue A President Clark Kokich, “their opinions are colored by what they think is acceptable to middle management. You can risk your job or just do the same thing as last year.”

Contributing to agencies’ reluctance to test large online ad spends is that much-lauded, interactive rich media ads have yet to take off, panelists said. While many believe that tracking the variety of interactions that consumers can have with rich media ads could prove the format’s value to buyers, the technology remains unperfected.

“The technology and thinking are a little ahead of the marketers,” said Lon Otremba, executive vice president of interactive marketing at AOL Time Warner’s America Online. “It requires a lot of back-end work and technology, which marketers like in concept but find a little difficult.”

Mediasmith media director David Smith said that the first time his agency launched a fully-tracked Flash campaign for an advertiser, “it cost more money to put together a tracking solution than the entire ad … we’re looking for solutions from technology providers.”

While strides are being made in combining third-party, campaign-wide ad serving data with user-side demographic data (provided by researchers like comScore and NetRatings), vendors again are dropping the ball by not yet having tools in place to leverage that information. The panelists said that despite the effort to create reach and frequency metrics for selling online inventory — similarly to offline media — the system flounders when it comes to actually delivering multi-site campaigns based on the same metrics.

“The ad servers are not ready to handle an individual campaign based on views, on a certain frequency,” said Smith, who’s also chair of the Advertising Research Foundation’s committee on reach and frequency. “Publishers … don’t have publisher-side tools available [to manage inventory allocated to reach-and-frequency-based buys]. We need a whole new algorithm. And … the Fortune 500 advertisers, year to date, are spending less than they did last year to date. This is a problem, folks. We can’t have the curve go this way. We’ve got to get these tools out there.”

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