The long view by Christian Panayi
Published July 6, 2007 at 12:17 pm · Filed under Features
In the final part of his series on online marketing Christian Panayi looks at the role of online advertising The widespread use of broadband has led to massive growth in consumer spending online and a shift in media consumption habits, as consumers spend more time online.
This, combined with the ability to target audiences and measure campaign effectiveness more easily than with any other medium, has made online advertising an essential part of the marketing mix for both brand building and customer acquisition purposes.
Online advertising space is available across a variety of properties owned by publishers for whom the internet is a valuable new source of revenue. Any online site or property with a defined user base, decent traffic and inventory levels and a core customer proposition has the potential to become a publisher.
These include portals such as MSN and Yahoo!; vertical-sector sites or vertical channels within portals (e.g. Yahoo! Finance); premium websites with specific content and a defined audience base; and media-rich email, e-newsletters and e-bulletins
There are two pricing models for online advertising - a fixed fee for a specified period or a Cost Per Thousand Impressions (CPM), where an impression is a single view or exposure of a page on your site - with rates varying according to factors such as the site’s profile, monthly traffic levels, audience profile etc.
Advertising campaigns can be organised directly with the media owner, through a traditional media agency or via an intermediary ad network provider.
Ad network providers offer a number of advantages for both advertisers and publishers, especially those that don’t have their own in-house sales team and ad serving technology. Essentially they provide the infrastructure, expertise, resource and relationships to bring together advertisers and publishers, matching advertiser opportunities to relevant publishers based on audience-fit and brand conformity.
They provide the technological platform for ad serving, tracking and reporting, and a single point of contact for campaign management and transaction processing, significantly reducing publishers’ and advertisers’ administrative requirements.
The majority of publishers tend to partner with an ad network both for initial set up and ongoing sales representation. And while big brand advertisers running large multi-channel campaigns tend to use media agencies, the media agencies themselves invariably source advertising space from an ad network as part of their overall media strategy. SME advertisers without a media agency partner tend to opt for direct engagement and/or the ad network route.
The future
The need to accurately measure the effectiveness of online advertising through a robust ad serving platform that offers real-time 24/7 reporting of adviews, impressions, clicks, sales, clickthrough and conversion rates is essential, as rising keyword costs in the Paid Search space compel advertisers to review their marketing activity.
Advertisers are looking for greater accountability from the internet as the proclaimed ‘most measurable medium’, as they move towards integrated campaigning across search, affiliate marketing, online advertising and email marketing.
Online marketing providers will need to respond to this demand by delivering effective solutions that address key issues, such as sales allocation and de-duplication across channels, and by optimising the advertiser’s spend based on what is really influencing the customer to purchase.
In this context, 2007 is a significant year for online advertising. The internet has traditionally been seen as the wrong medium for brand building.
However, the development of streaming media, and its ability to be viewed by broadband users, is causing Internet and TV advertising methods to converge, challenging traditional ways of delivering online advertising. Internet video advertising is set to move towards a hybrid of TV and multimedia techniques, integrated between or within content and increasingly using either dedicated Internet video or product placement.
Pricing models for online advertising will also be affected. Time-based pricing (an approach more akin to TV ratings measurement) will challenge the traditional CPM/tenancy pricing models and the increasing demand for low-risk CPA-based activity from acquisition-focused e-tailers. Its success will depend on the effectiveness of existing methods for tracking sales resulting from ad views as opposed to simple clicks.
The potential for online advertising will increasingly attract advertisers from traditional offline markets, with a clear differentiation between dedicated sales-based sites and other markets like the B2B and FMCG sectors. For e-commerce-enabled sites, sales generation through direct response activity will still be the primary focus.
However, growth in brand building online is likely to come from sectors like B2B and FMCG, for whom total e-commerce fulfilment is not viable or available. B2B advertisers will therefore have to spend much more time and effort examining and supporting channels that influence sales, as well as improving their branded online presence.
Over time, such advertisers may move towards greater e-commerce enablement, but, in the meantime, brand building will be the primary focus of their online efforts and this will come with its fair share of growing pains. Eventually, however, brand-building and direct response retail activity will converge as the ability to measure the impact of each on sales generation becomes more widely available and accurate.
Christian Panayi is Head of Marketing at DGM, one of the UK’s largest and longest established on-line marketing groups. DGM was the first affiliate network provider in the UK and continues to work with some the nation’s largest companies, as well as smaller SMEs.
