Let the Online Ad Times Roll (Again)

19 December 2003

By David Berkowitz

Rarely can a bar chart express any emotion, but I think the first chart below — both are from eMarketer’s just-released Online Ad Spending spotlight report — speaks volumes. Take a look at 2002 and 2003. Those bars span the width of the chart.

The 2002 bar sums up that final year of agony, when things hit rock bottom for online advertising. From that bar, you can hear clients telling you they just can’t find any room in their budgets for running an online campaign. You hear friends telling you they’re out of work. You hear family and significant others saying, “You know, you’d make a good lawyer.”

The 2003 bar tells the story of the comeback kid. It evokes the Interactive Advertising Bureau (IAB)’s Cross Media Optimization Studies offering strong evidence on why advertisers should put 5%, 10%, 15% of their budgets online. Longtime acquaintances who were struggling are now inviting you to their holiday parties. You arrive five minutes early at a seminar on paid search, and it’s standing room only.

Of course, it’s not all black and white. Unemployment’s too high, most of your friends and family still probably don’t get exactly what it is you do, and far too many top advertisers are spending a mere token of their overall media budgets online. Yet it’s the recovery year when the growth is that much sweeter. The contrast is striking. And we don’t expect to see such a contrast again — at least, not anytime soon.

The increases are only beginning. For the first time, eMarketer can look out a few years to see online advertising flirting with the $10 billion mark. That round, plump number may be more of a psychological boost than anything else, but let that not undermine its importance. It feels great to be heading in that direction, and we’ll be able to afford the champagne when we get there.

Are better times really here? eMarketer turned to one of the most respected authorities out there, Underscore Marketing President Tom Hespos.

eMarketer: What are media buyers and media planners most concerned about right now? What are the biggest issues they’re facing?

Tom Hespos: Right now, everybody’s in full planning mode with planning season well underway. Issues concerning a lot of folks are the spam legislation — it seems like the industry’s having a tough time understanding it. That’s big because people are worrying, after January 1, if I’m recommending standalone e-mail lists anymore. There’s dealing with the turnaround. Now there’s increased demand for ad inventory and being able to lock in positions for clients in 2004 — that’s a big concern right now.

eMarketer: Since you mention spam, I know it’s early, but are you starting to see any kind of consensus yet?

TH: Not really. From our end, we tend not to use standalone e-mail blasts too much — only really when clients say that we have to do it. With the spam issue in general, we’ve said, “Why do damage to our clients’ brands by doing that sort of thing?” We avoid it where we can. We’ve been steering our clients away from it for awhile now. We think the e-mail opportunities are in sponsored newsletters and things where we’re not interjecting ourselves into a third-party relationship. We have very few issues surrounding any of that.

eMarketer: How much of your job is doing your clients’ bidding, and how much of it is counseling them and trying to advise them on best practices, best value and things like that?

TH: Clients, of course, listen to our advice. Most of the time, it’s us telling them how to handle e-mail, but you’ll get the occasional one that will be more direct response-focused, and they need a quick hit of leads to bring stuff into the channel, and they’ll tell us, “We need to do some standalone e-mail.” We’ve already given them our point of view that it’s going to rub off negatively on the brand and could be perceived as spam in some cases. The way the industry works is even if you’re dealing with some of the top-tier list providers and such, there are names that creep on to the lists that shouldn’t be there. To run the risk that somebody’s going to file a lawsuit or even just send an e-mail back to your client getting upset — that never reflects positively on an agency. That’s one of the main reasons why we’ve been aiming to avoid it.

eMarketer: How much of a role does e-mail play in the total picture?

TH: It depends on the client. For direct response clients, it could be anywhere from 5% to 15%, and less so for branding clients.

eMarketer: Has there been any kind of shift in those kinds of clients?

TH: E-mail in general I would say is getting to be less and less a part of our business. This is all different types of e-mail I’m talking about to, from newsletter sponsorships to CRM initiatives and things like that. Those clients are representing a larger part of our business, but they’re also doing things like Web advertising and such.

eMarketer: Are their online budgets starting to grow now?

TH: Absolutely. We’re online specialists here; probably 80% of our business is online. We have integrated clients as well, but everybody seems to look to us for online. We haven’t seen a client come in with a budget that’s down from last year in terms of interactive. Everybody’s going up. I think there are some compelling reasons why folks want to put money into this channel. The major thing has been, I’ve been seeing this all over the industry for the past few months, the IAB’s Cross Media Optimization Studies. Those hold a lot of merit with clients. I see it in integrated communications decks all the time now, and I see it as probably the most cited reason why new clients are comfortable putting more money into online.

eMarketer: How did the iMedia Summit go?

TH: It was really great. It was a fantastic conference. A lot of the stuff I’ve been talking about with you now, such as the migration to Internet advertising, that was all discussed there. A lot of the ‘why online’ stuff was discussed. It was really eye opening. I was glad that everybody else across the industry seems to be experiencing what we’re experiencing here.

I think marketers are beginning to realize that we’ve made some significant strides, especially with standards. One of the biggest complaints that I’ve heard about Internet advertising is everybody describes it on the client side as the Wild West, and I think we’ve made some strides. Between ad units, and terms and conditions and things that really should be standard in our industry, those are really coming together, and I think the marketing community’s seeing that coupled with all the eyeballs moving to the Web, and they’re saying, “We’ve got to do something here.” I think that’s what’s responsible for a lot of this optimism right now.

eMarketer: Is there a greater appreciation and valuing the Web for what the Web is best for, as opposed to just translating all these other metrics from other media and work those into Web-related metrics?

TH: As my partner Jim Meskauskas likes to say, everybody becomes a direct marketer when they start getting their results from their campaigns. I think we’re doing a better job of letting clients know what the Web is good for and what emerging media in general are useful for. These days, they get the interaction data now — clicks and conversions, and all the granular data, but I think marketers are now more realistic about their goals and about the objectives they’ve set for the campaign. If they’re doing a pure branding campaign, they know clicks are not the metric anymore, and neither are backend visits or traffic. They’re now looking to brand studies to show what their lift might be or brand favorability or any of the other branding metrics. Agencies are starting to do a better job of keeping clients on track now with regards to what their online campaign goals are, making sure they’re looking at the right stuff. Clients are understanding that a little more easily than they were in the past.

eMarketer: It was a great move by Eyeblaster to incorporate Dynamic Logic’s branding studies into its interface.

TH: A lot of clients need to look into that and get comfortable with the methodology for doing online brand studies because there are a couple of differences between some of the companies in that space, whether it’s Dynamic Logic or Millward Brown or Insight Express or what have you. I think clients are getting more of a comfort level with that.

I’m getting inquiries at the office now about stuff like, “What’s the difference between Dynamic Logic and its competitors?” and “What do you think of the methodology? Is it sound?” Those questions are always good because it means that clients are looking at it from a branding perspective and they want to know how they should measure it.

eMarketer: That’s a lot more sophisticated than what was asked just a short time ago.

TH: Yeah. Before it was, “Why aren’t people clicking on my ad?” Now it’s, “How is this affecting my positioning in the consideration set in my category?” That’s music to my ears.

I think the consensus — I heard it from a lot of different people, especially at the iMedia summit — is that business is back. It’s our opportunity to screw up so we’ve got to be very careful about how we position things. I’ve seen this increased commitment toward being realistic about what the Web can do because overpromising was one of the things that led to our downfall the first go around.

By gathering the latest research and news from over 1,000 sources, eMarketer has established itself as the world’s leading provider of internet and e-business statistics. eMarketer’s Web site is at www.emarketer.com.