The gloom and doom of the Internet industry is kind of depressing. But what upsets me the most is that it has become fashionable lately to talk about the demise of online advertising and falsely link the current market correction to the idea that online advertising isn’t effective.
This is slander, and I won’t stand for it.
It’s true that growth of online advertising has sputtered over the past couple quarters. And it’s a fact that some bellwether Internet ad companies, like DoubleClick, aren’t meeting revenue projections and are even laying off employees.
There are a couple reasons why this is happening. First of all, the flood of spending coming from dot-com start-ups trying to build brand has slowed to a trickle. Last year, companies desperate to make a name for themselves in a hurry spent millions carpet-bombing the Net with their messages. Many of these companies are now out of business. Even for healthy dot-coms with rational business models, times are hard. Funding is difficult to come by, and public companies are being punished in the stock market. Marketing budgets are often the first to be cut.
A big problem is that dot-com revenue isn’t being replaced quickly enough by the spending of traditional advertisers. According to AdZone Interactive, which tracks ad spending, seven of the Fortune Top 10 companies have spent less than $10 million for online advertising. Even those that have built their companies on advertising, such as Coca-Cola and McDonald’s, are still toe dippers when it comes to the Net.
But the slowdown in online advertising spending isnt alarming in itself. What is disturbing is that many analysts, journalists, and even industry people are interpreting the slowdown as a sign that Internet advertising doesn’t work.
That simply isn’t true. People who say that online advertising doesn’t work are relying on insufficient and misleading metrics.
Let’s start with CTR. Everyone cites the decline of the average CTR as evidence that advertising isn’t effective. But no one seems to mention that the number of advertisements on the web has increased exponentially. If early click-through averages were maintained, users wouldn’t be doing anything other than clicking on ads.
Yet the big issue with click-through is that it measures behavior, not attitudes, thus it’s the wrong metric for most advertising campaigns. The bulk of advertising offline is for branding not direct response. You don’t measure the effectiveness of a taxicab ad, for example, by the number of people that hail the cab and direct the driver to the store advertised on its roof.
Branding is about changing people’s attitudes over time. This is measured by attitudinal metrics such as message recall, message association, and purchase intent. And there is substantial and mounting evidence that online advertising is a highly effective method for branding products.
If you are looking for evidence, the oft-cited IAB Advertising Effectiveness Study is a good place to start. It was the first to show the branding effectiveness of online advertising. Recent studies, using more sophisticated instruments, have substantiated this claim.
DynamicLogic’s AdIndex measures any change in purchase intent, message association, and awareness caused by a consumer seeing an online advertisement (they dont have to click). Based on the aggregated data of multiple advertising campaigns, the company found that online advertising causes a lift in key attitudinal measures by an average of 12 percent.
I can back this data up. In some campaigns we have run using the AdIndex measurement system, we found substantial increases in purchase intent among target consumers. We can look at these effects ad by ad, so the system helps us optimize branding campaigns using metrics other than click-through.
When all is said and done, the online advertising industry will weather the market correction. Big advertisers will become more educated about the Internet, solve some marketing integration issues, and invest more online. The fact that the number of companies advertising online in the last year has more than doubled is encouraging.
Online advertising will continue to evolve, and strategies and tactics will become more sophisticated. We have a long way to go. But you’re just plain wrong if you trash a highly effective, and efficient, marketing vehicle.
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