High-Tech Advertisers Have Best Grasp of Online Advertising

High-tech companies have been more successful with their online advertising strategy than either digital economy or traditional companies, according to findings from Nielsen//NetRatings.

Data from Nielsen//NetRatings’ AdSpectrum service divided online advertisers by industry: digital economy (e.g., RedEnvelope, high-tech (e.g., Hewlett-Packard) and traditional (e.g., Proctor & Gamble). The findings revealed that lower exposure to ad campaigns combined with a higher reach resulted in higher click rates.

“Through a low reach, high-frequency model, dot-com advertisers have numbed Web surfers by exposing them to the same ads over and over again,” said Allen Weiner, vice president of analytical services, NetRatings. “This contributes to low click rates and ineffective branding.”

Lower reach (the percentage of active Web users who saw an ad) combined with a higher frequency rate (the number of times Web surfers viewed an ad banner) resulted in lower click rates, according to the data. The high-tech industry garnered the highest reach (17.1 percent), the lowest frequency (9.4 percent) and the highest click rate (0.30 percent). Traditional companies followed with 11.0 percent reach, 11.6 average frequency and 0.22 percent click rate. The digital economy industry scored a low reach of 12.6 percent, the highest frequency rate at 17.3 and the lowest click rate of 0.16 percent. Other forms of offline media generally have an average frequency rate of between three and four points.

“Savvy advertisers working with skilled agencies can try to avoid the current ad fatigue by using rich media and the new larger advertising sizes to refresh creatives,” Weiner said. “Since reach is the cornerstone of most branding efforts, the use of the Web for awareness building will be hindered until either networks band together to provide easy purchasing across multiple channels or the pool of channels dwindle, allowing each channel to capture a higher proportion of unique visitors.”

Nielsen//NetRatings data also found traditional companies made up more than half of all online advertising in March 2001, accounting for 56 of the top 100 online advertisers. Digital economy companies spent $104.8 million, or more than 37 percent and high-tech companies spent $51.4 million, or 8.4 percent.

The top five advertisers in the traditional category consisted of financial services companies. Equifax led with 636 million impressions served, followed by Providian Bank, with nearly 504 million impressions. Yahoo led the digital economy companies with more than 554 million impressions. Microsoft led the high-tech category with more than 1.2 billion impressions served in March.

Top Five Online Ad Spenders by Category US Home Panel
	Traditional	Impressions (000)
1.	Equifax Inc.	636,045
2.	Providian Bank Corp.	503,597
3.	E*Trade Group Inc.	253,667
4.	JP Morgan Chase & Co.	200,532
5.	NextCard Inc.	163,097
	Digital Economy
1.	Yahoo Inc.	554,359
2.	AOL Time Warner Inc.	511,436
3.	Amazon.com Inc.	440,668
4.	Classmates Online Inc.	294,262
5.	eBay Inc.	246,311
	High-Tech
1.	Microsoft	1,232,407
2.	Bonzi Software	284,369
3.	Sony Corp.	197,191
4.	Intuit Inc.	46,336
5.	Compaq Computer Corp.	45,826
Impressions do not include house ads Source: Nielsen//NetRatings

Speaking of traditional advertisers, research by Jupiter Media Metrix’ AdRelevance division found that consumer packages goods (CPG) firms are increasing their online advertising presence on niche Web sites in an attempt to more effectively target. CPG firms purchased 55 percent of their online ad impressions on niche Web sites during the first quarter of 2001, compared to 44 percent during the third quarter of 2000. Jupiter analysts take this as a sign that CPG companies are still experimenting with online advertising and favoring sites that feature content that is a more obvious fit with their products.

The AdRelevance data also found that while CPG advertisers have focused a higher percentage of their online ads on niche Web sites, portals have not suffered. CPG firms have doubled their online ad impressions since the third quarter of 2000 and have significantly increased the number of impressions they purchase on portal sites. Portal sites still offer an extensive and diverse user base with audience segmentation among subsites, and CPGs have not stopped experimenting on portals because they offer more of an opportunity to scale campaigns due to their high level of page views. While CPG firms have decreased their share of online ads on Web portals since the third quarter in favor of niche Web sites, retail companies consistently purchase almost 50 percent of their impressions on portals and few on niche sites, AdRelevance found.

The online advertising market as a whole is in for moderate growth increases in the future. According to eMarketer’s eAdvertising Report, online advertising spending will grow to $7.6 billion by year-end 2001, a 7 percent increase from the $7.1 billion spent in 2000. But the report also predicts a fairly bright future, with online advertising expenditures growing substantially over the next several years, increasing to $10.3 billion in 2002. By 2005, eMarketer estimates online ad spending will top $23 billion.

With a 7 percent growth rate this year, online advertising will still beat traditional media, which is expected to remain flat or increase 1.4% – 2.5%, according to a number of media analysts, according to eMarketer senior analyst Jonathan Jackson.

Additional findings from the eMarketer include:

• The average internet user is exposed to 610 ad impressions per day
• 74 percent of Web advertising space goes unsold
• More than 99.7 percent of banner ads do not get clicked
• Nearly 90 percent of online ads are direct-response oriented
• The online medium garners 10 percent of consumers’ daily media usage, but only 2.9 percent of media dollars