In an advertising market that is as gloomy as a misty morning on an English moor, there is one chink of light. New figures released two weeks ago showed that the online advertising industry is continuing to grow apace. The latest six-monthly update from Price Waterhouse Coopers reveals that, having overtaken cinema last year, Internet advertising in the UK is now challenging radio's status as the fourth biggest medium behind TV, print and billboards.
According to research that was due to be unveiled last week by Microsoft's Internet arm MSN, confidence is higher than ever among sales staff at major sites such as MSN, AOL and Yahoo! and the agencies that buy space on them. After years of trying, and in some cases under-delivering, it looks as if the Internet's accountability, measurability and targeting is finally making an impression on the big brands. In certain sectors, notably cars and finance, online ads are now an integral part of any big campaign, rather than an afterthought.
ILLUSTRATION: 密純
The MSN research reveals that more than eight out of 10 brand managers intend to increase, or at the very least maintain, their current level of investment in online advertising. It seems that the efforts of the Interactive Advertising Bureau and the big online players to promote the medium are starting to pay off. Nearly seven out of 10 marketing directors and six out of 10 media buyers and ad agencies said that a better understanding of the value of online advertising was the key driver in encouraging them to spend more.
But despite the continued growth curve, with revenues up 76 per cent on the corresponding period last year and predicted easily to top pounds500 million by the end of this year, the sound of champagne corks popping was curiously absent. That is because many in the industry still feel they are treated as a poor relation by mainstream advertising agencies. Despite the staggering growth of advertising revenues over the past two years, the amount of time people spend on the web is still far outstripping the amount spent by advertisers to reach them. Recent studies suggest that the Internet now accounts for at least 15 per cent of all media consumption among those with a web connection, with some estimating that those with high-speed broadband spend more time online than watching television.
For those at the sharp end, such as Fru Hazlitt, UK managing director for Yahoo!, the battle for recognition remains a source of frustration. At a recent round-table event she said that some in the ad industry were still punishing online publishers for their attitude during the brief period of the dotcom boom when they went around telling everyone that traditional media were doomed. And this is partly tied up with the ongoing battle to convince those in the mainstream creative agencies that online ads are as valid as any other.
The enthusiasm revealed by MSN's Online Pulse research is also tempered by the fact that many now see online advertising as a so-called "direct response" medium. In short, the uncharitable might see it as on a par with mailshots and the sort of adverts for loans that plague late-night multichannel TV. Much of the recent growth in ad spend has been driven by the increase in the amount spent on search marketing, where companies pay to have a link to their site listed alongside relevant search results.
The challenge now for the likes of MSN and Yahoo! is to continue to convince big advertisers that the Internet can be used as a so-called branding medium as well as a direct response one -- in other words, to create the big branding statements that have tended to be the preserve of cinema, TV and billboard ads.
"I agree that there's still a long way to go, but we've increased one whole percentage point in a year and we're now hot on the heels of radio. That shows how much potential there is for the business," says Chris Ward, director of MSN U.K. "The industry has risen to where it is today on the back of direct-response advertising. We need to consolidate on that, there's still a lot more to do there. But if we can do the same on the brand side as we've done on direct response, then that increases the cake massively," he adds.
To this end, MSN has reorganized its home page to cut down on clutter and provide one premium advertising slot. The growing recognition of other services, such as Hotmail and instant messenger, as viable advertising media is helping to increase the market, he believes.
There has been some progress -- most car launches, for example, now have a large online branding element because manufacturers realize that most people go to the web to research their new car.
Entertainment has been another massive growth area, with new cinema releases and album launches getting a big online presence, says Ward.
Innovations such as video and sound are also making online ads more attractive and eye-catching -- the current campaign for White Chicks, for example, features clips from the movie embedded in the ad. And an advertorial deal for the film Shark Tale is also prominently displayed on the MSN home page.
Music, in particular, is tipped for further growth with the growing popularity of online download services. The next big target area is "fmcg" (fast moving consumer goods) brands, the everyday staples such as washing powder, that still tend to concentrate almost all their budgets on TV.
For Ward, the challenge is for the big portals to stop scrapping among themselves for market share and to collectively bang the drum for the internet as an advertising medium.
"There's still scepticism among some brand managers. They need hard evidence that they can show their boss in the lift. It's important not only for MSN but for the industry as a whole to provide that evidence." Overall, though, the outlook is sunny, says Ward. "If anything, it's got a momentum now. There have been enough examples of big brands with great creative work for it to demonstrably work for them. The word has got out. There's a steamroller effect. We need to look in the medium term at online being an 8 percent to 10 percent medium. If you look how far we've come in just five to six years, it's eminently achievable."
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