Finding the Silver Lining

Ever notice how fast bad news travels? Along with the day-to-day body count, wars of aggression, dimming stock markets, and Microsoft merger deals, the world of online advertising is constantly being smacked around in the news.

A few weeks ago, Jupiter Media Metrix reduced its forecast for online ad spending for the next year to $5.7 billion dollars (down from $7.3 billion). The reason cited was that advertisers have no clear way to evaluate the effectiveness of online advertising.

Of this downward shift, no specific numbers were given regarding how many of those dollars were earmarked for rich media campaigns, and perhaps that information would be a best guess anyway. Regardless of the technology used to advertise on the Internet, how to convince advertisers that online advertising is a viable advertising approach worth a larger percentage of their marketing budgets remains the problem.

Of course, this lack of confidence in the medium has had a major effect on the economy in general. As advertisers started pulling ad dollars back from the online world, many of the online businesses that based their whole being on ad dollars started to feel the pinch. Heck, many of these businesses went belly up within a few weeks! It was a death knell for the score of companies whose whole game was giving away computers in exchange for captive eyeballs to look at constant ads.

The dominos have continued to fall. Apart from the disappearance of Web-based businesses that folded due to ad-budget cutbacks, the companies that create and serve the ads have also found themselves on the downward slope. For rich media, this decline in “traditional” online advertising also signaled an opportunity to finally show the world that rich media ads could deliver where static GIF ads had failed. However, the advertising decline was already far enough along to deny any significant breakthrough in results.

In the last few weeks, Enliven has trimmed back its staff. Point&middotRoll is looking for new business, and, although I haven’t heard specifically, I suspect that Bluestreak and Unicast aren’t as busy as they would like to be. Will the market recover before these companies, and others, are forced to close up shop? It will be sad to lose companies that have been pioneers in this market and have introduced technology that has not yet reached its full potential as a method for advertising.

What will happen next is certainly open to possibilities. There is little doubt that the technologies that drive online advertising will continue to evolve, although perhaps a little more slowly than in the past. The possibility is good of a fire sale of those technologies and the companies that created them. Serving technologies, extranets, and advertising technologies may end up being sold piecemeal while the rest of the company fades into oblivion.

Eventually, the market will correct itself. Those brave enough to venture forth will emerge from the ashes and, by learning from the mistakes of the past, will usher in the next era of new approaches for effective online advertising.

Of course, all of this pain could be avoided if advertisers would start considering the world of online advertising from a new perspective — and with renewed patience. I’m not suggesting that advertisers just throw good money after bad. I am suggesting that advertisers tune into the real potential of online advertising, in general, and rich media advertising in particular. A focus on branding and providing instant access to information, and on interacting with consumers, will pay for itself. Driving traffic has already been shown to be ineffective and will, I suspect, never meet the desires of most advertisers who choose to focus in that direction.

For this rebirth to happen, those creating and selling online ads also have to stop blowing smoke at their customers and come clean about reasonable expectations for online ads. The churn and burn of many ad-serving companies, the result of a scorched earth policy, has caused many advertisers to stand by the old axiom, “Fool me once, shame on you. Fool me twice, shame on me!”

The bottom line is that online advertising can be effective and can result in very positive results for advertisers. However, advertisers also have the responsibility to listen to the people they are hiring to help them. Ad agencies and rich media ad developers have learned what works and what doesn’t. They can also tell the difference between a good idea and a bad one. Second-guess these professionals at your own risk.

Online advertising is an effective branding tool; rich media advertising is even more so. Being able to measure the effectiveness of an ad in ways that are meaningful to advertisers is what will bring advertisers back to the Web and keep them there. For now, we all need to find new models or techniques that can provide the numbers those advertisers are looking for.

Well, for now that’s my take on the future of online advertising. Let me go and see what I can do about world peace.

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