Thursday, May 05, 2005

Can old ad dogs learn new-media tricks?

Another day, another prediction that online ad sales will roughly double in the next five years to $26 billion.

It’s not a bad growth story. But it’s not that great, either, considering how much time people spend on the Internet and how little of the advertising pie goes to online media.

"When at-work Internet use is taken into consideration, consumers spend more than one-third of their time online – roughly the same amount of time they spend watching TV,” says Charlene Li, the Forrester Research analyst who predicts the coming surge in online ad sales. “Yet, marketers spend only 4% of ad budgets online versus 25% on TV."

This gap represents a terrific opportunity for broadcasters, newspapers and other legacy media companies to build both traditional and new media revenues by helping advertisers integrate interactive online capabilities into their marketing programs. This will require some creativity and some work, but the effort will strengthen these companies by equipping them with a virtually inexhaustible supply of valuable services and ad inventory.

The problem for Internet advertising is that the lion’s share of marketing dollars are spent on branding, the kinds of TV, newspaper or magazine ads that tell you how happy, sexy, healthy, wealthy or wise a given product will make you.

“Advertisers aren’t used to brand advertising on the Internet,” says Charlene. It is time-consuming to locate appropriate venues and requires lots of effort to spend relatively small amounts of money (ad agencies hate that). Moreover, the results of a branding ad, as opposed to one where the customer’s click signals a successful impression, are difficult to measure.

Attitudes are starting to change. After quizzing 99 marketers for her newly released report, Charlene found that nearly half of them plan to shift greater percentages of their future budgets to the web from traditional advertising channels like magazines, direct mail and newspapers. “McDonald’s knows it can’t sell hamburgers on the Internet,” says Charlene. “But they are very interested in using online to reinforce their branding.”

Investigating the appetitite for advertising in other media beyond the Net, Charlene found 64% of respondents are interested in advertising on blogs, 57% through RSS and 52% on such mobile devices as phones and PDAs.

If new media advertising is going to accelerate to the point that its market share is commensurate with the time consumers spend online and on their cellphones, companies operating those media are going to have to embrace systems that make it easier to rate, compare, buy and measure performance.

The legacy companies, which continue for the time being to attract the majority of the media dollars, will have to learn to sell new and traditional media together in seamless, customized, holistic packages that not only make the pitch but close the sale and build rich customer databases in the bargain. In other words, say good-bye to off-the-rack advertising schedules.

For example:

:: Show an ad for a new car and then direct the consumer to a web site where he can see a 360-view of the car, check features and prices, and then make an appointment for a test drive.

:: Tie the launch of a soft drink to the release of a new album by a popular artist. Encourage TV viewers and radio listeners to go to a website or call a toll-free phone number to download a one-play MP3 that can be downloaded online or via mobile phone. Encourage viral distribution of the MP3 by offering a coupon for a free soda if the registered user sends the song to four friends, who in turn also would receive a free-soda coupon.

:: Help merchants build direct-mail databases by directing consumers via traditional media to a website where visitors register for a free sample of a product and enter a sweepstakes.

If Charlene is right, many advertisers are ready to begin experimenting with the vast possibilities presented by new media. The swiftness, smoothness and success of their journey, ironically, will be in the hands of the legacy media companies.

If the legacy companies make the effort to become comfortable and competent with the many new possibilities, they will strengthen their franchises in an era of increasing competition for audiences and advertising dollars. If they don’t seize the opportunity to evolve successfully, they run the risk of being rendered increasingly irrelevant.

Evolve or dissolve. The choice is theirs.


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