Online Advertising’s Troubled Soul

If you could look into the soul of online advertising (if such a thing could have a soul) and gaze upon its hopes and fears, dirty secrets, and private longings — if you could see it stripped naked of pretense and posturing — it would probably look a lot like the Forecast 2002 conference last week.

New York’s online advertising industry filled a room in a midtown hotel to confront the industry’s most pressing (and chronic) issues. The atmosphere was like being on a lifeboat launched from a sinking ship; we’ve survived… but where do we go from here?

The day was organized into the industry’s most painful pathologies. Panelists, onstage in overstuffed armchairs, parried with a restive audience. Though no questions were put to rest, the agenda itself framed our most pressing issues.

Branding Versus Direct

That blast from the past: the tired (and resolved) issue about whether the Internet is a branding or direct response medium. The answer is that it is both, of course, but that the Web’s future will be built on creating solutions for established advertisers to build their brands. The question may be long in the tooth, but that the industry still debates it is a clear sign of our immaturity.

Pricing/Buying Models

Performance-based pricing models (cost per click, cost per action, etc.) are killing Web publishers, who are forced to bear the risk of bad creative. Salvation is in establishing cost-per-thousand (CPM) impressions as the standard for online media buying.

Or is it? Since audience-based models are more familiar to traditional advertisers and CPM is a system based on nearly unlimited inventory (which inevitably drives down price), alternatives, such as The New York Time’s surround sessions, might be the best way to monetize the value publishers provide. However, with media buyers currently in the driver’s seat, it is unlikely that such models will be adopted industry-wide anytime soon.

Measurement

Publishers and third-party ad servers often report impression counts with large discrepancies, creating confusion and sometimes ill will. Conferees agreed that a call to a third-party ad server should be a standard way to count an impression, but the issue is far from settled.

Creative

The cost of delivering rich media executions can be prohibitive, and the shriveling of the average online advertising budget has made matters worse. Everyone knows the static 468 x 60 banner is only a starting point — but the future is still unclear.

Consolidation

At one point, someone pointed out that when TV was in its infancy, there were only three networks. They had to cooperate to develop the medium for advertisers. With an estimated 8,000 Web sites accepting advertising, the task of creating pricing and measurement models is much more complex. Three publishers (AOL, MSN, and Yahoo) are poised to dominate the Web. Does this mean matters will simplify? If so, at what cost?

Forecasts

Conferees participated in a survey with questions such as: How much will be spent on online advertising in 2002? How much will be spent on emerging platforms, such as iTV and personal digital assistants (PDAs)? My reaction was: How the heck should I know? The survey only emphasized that online advertising forecasts tend to be the product of a lot of guesswork — and even more revisions as conditions change.

By the time cocktail hour rolled around, some of the most influential people in the business had confronted the issues, and each other, head on.

Few, if any, problems were resolved. Hopefully, we may be a few steps closer to understanding the problems that hold the industry back. Our collective soul may be troubled, but we are all driven by hope.

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