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October 2, 2000 |
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Advertisers Seek More Bang For Their Web Bucks
Agencies develop sophisticated ways to gauge an ad's success at brand building, driving sales
By Terry Sweeney
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t's the business-to-consumer marketing mantra: Attract. Addict. Convert. And add to that: Burn through the advertising budget--if recent totals for online advertising are any measure.The Internet Advertising Bureau, a New York trade group, recently counted the first quarter of 2000 as the 16th consecutive quarter of growth in online ad spending. The bureau's figures, prepared in conjunction with PricewaterhouseCoopers, show online ad spending in 1999 rose to $4.6 billion, a 161% increase over the $1.7 billion spent in 1998. Other projections show online ad expenditures ballooning to more than $43 billion in the next four years.
Online advertising is maturing--and not because of the billions of dollars being spent. Increasingly, advertisers recognize that they're building brand recognition, maybe even more than driving sales. They're getting new metrics to gauge the effectiveness of their ad spending and are testing the synergies between online, TV, and print advertising. What's more, online advertisers are forcing ad agencies and measurement companies to be more scientific with their campaign audits, focus groups, and message-recall statistics.
Banner ads are the biggest online expenditure, although advertisers also may opt for affiliate spending, unsolicited "pop-up" ads, and E-mail promotions. Users don't need to click their browsers very far to be assaulted by a flurry of banner ads, which try to use just the right words or offers to convince Web surfers to "click here." These enticements, often no larger than a postage stamp, are easily the most prevalent form of online advertising, accounting for 56% of 1999 spending.
But that's about as far as most eyeballs get, since by industry calculations, only about 0.5% of online users actually click through on those banners to be taken to the advertiser's site. And even that scant percentage is believed to be shrinking--raising some skepticism about the future success of banner ads.
"Banners don't work," says Steven Blyth, senior VP of operations and chief technology officer for Supermarkets Online Inc., a discount grocery site in Greenwich, Conn. "They're not cost-effective. You get some traffic, but they don't turn into the best consumers on our site."
Blyth's experience stands in contrast to another prominent Web, print, and broadcast advertiser. "We've seen click-through rates that have been quite stable over the last year and a half," says Michael Sievert, chief sales and marketing officer for E-Trade Group Inc. in Menlo Park, Calif. Sievert says E-Trade's relative success with banners comes from working with targeted partners, rather than by casting its net far and wide. This lets the online financial-services company "pinpoint how consumers got to our site and target our creative [content that includes images, slogans, and music] for that," he says.
In any event, click-through rates have been steadily declining--in stark contrast to the boom in online ad spending. And by industry estimates, spending will continue to grow this year, while click-through rates will gauge little more than browser indifference.
So why do the Web's biggest advertisers continue to throw billions at banners for such a crummy return? Because, says a defensive group of media directors, ad agencies, and marketing executives, there are other ways besides click-through to measure online advertising's effectiveness. And, they add, not all online ads are designed to drive traffic to a site or spur online sales.
"Click-through is only an indicator of how good your creative is or how well it's targeted, but it's not an end-all," says Gerrard Broussard, senior partner and director of media analysis for marketing firm OgilvyOne Worldwide in New York. "In some cases, it's just the beginning."
Other emerging metrics that measure the effectiveness of online ad spending are cost per click or per customer, as well as traditional marketing measures such as message recall, brand awareness, and purchasing interest.
Proponents of Web advertising say that never before has a medium lent itself so readily to customization. They call it the greatest direct-marketing tool ever. For example, a visitor to the Web site of a woman's magazine who clicks onto another link from that site could be served up banner ads for women's sports clothing at the next site.
By monitoring where traffic comes from (and where it doesn't), account representatives say their clients can tweak their images and placement accordingly. Businesses also are just starting to understand and exploit the Web's synergies with print and broadcast media, as well as how one can drive traffic to another.
The Web is also new enough that ad agencies have yet to standardize on a set of reporting or measurement techniques. Still questionable is whether companies report where visitors to their Web site come from and where they go after leaving the site, or whether the life span of a cookie is 30 days, 60 days, or more. There's also no agreement over what constitutes an audit, who administers it, or what key criteria it should contain (see sidebar story, "Agencies Concentrate On Measuring Ad Effectiveness").
There are two good explanations for the run-up in online ad spending: Traditional businesses such as Procter & Gamble Co. and Bristol-Myers Squibb Co. are starting to spend their ad dollars online, and experienced online advertisers are devoting more of their overall ad budgets to online advertising.
Supermarkets Online's Blyth says his company's online advertising budget this year is a little more than double last year's, and that $2.5 million is earmarked for spending with America Online alone. Sievert says E-Trade's overall marketing budget has grown sixfold in two years. E-Trade spent $78.2 million in the second quarter of 1999, an amount that soared to $177.5 million in the second quarter of 2000. Although he says online advertising is a significant part of that budget, he doesn't divulge how much, noting that the company's overall media mix is proprietary information.
Illustration by JD King
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