The World Wide Web Advertising Crystal Ball: A Five-Year Forecast in May, 1998

From the top internet ad execs -- where the industry is now, what the year will bring, where the internet advertising industry is headed and how it is going to get there -- a look into the future.

In the May 18, 1998 issue of Internet World Magazine, Nelson Wang hosts a roundtable discussion of several major Internet advertising issues with several ad agency execs including:

  • Lynn Bolger, digital media director, Ammirati Puris Lintas
  • Walt Cheruk, associate media planning director, Modem Media
  • Gina Garrubbo, executive vice president of sales and marketing, Women.com Network
  • Scott Kauffman, president and CEO, AdKnowledge
  • Dave Moore, CEO, 24/7 Media Evan Neufeld, senior analyst, online advertising, Jupiter Communications
  • Kyle Shannon, chief creative officer of Agency.com

    Overall the discussion focused around where the industry is now, what 1998 will bring us and where we are headed in the next five years, along with what will be needed in order to legitimize online advertising as a medium and attract the deep-pocket budgets of larger advertisers. The panel was in general agreement that this medium still has a long way to go before it can legitimately compete for dollars spent on print or television advertising.

    I think most of us on this list would agree that there are several issues that are blocking the growth of ad spending to this medium. Two of the largest obstacles identified by the forum were "Unreliable Web site ratings" and "Inadequate demographic data." We need to face the fact that many of the largest advertisers (dollar-wise) are consumer-product oriented, such as Coca-Cola; they are interested in branding to a specific audience and reach. That said, the data just isn't concrete enough for sites to be able to go to these advertisers and say that their ads will reach a market of 15-24 year olds who are active in sports (if that is what their target is--I have no idea). They are looking for concrete data that just isn't there yet, and that's why only a small portion of their budget is shifted toward online advertising. From an advertiser's standpoint, yes, we can go to a site and tell what type of audience uses it, what type of viewers may see the ads and which sites would be the best buys to target a specific audience. Some sites do register their visitors. We can also review demographics provided by sites, but--and I am looking at this from a Coca-Cola or large advertiser new to the Web perspective, now--there are problems with the way this information is gathered and with how accurate a sample it is.

    If I am a publisher and I sample 10,000 visitors who fill out a survey form, is this an accurate sampling of my site's demographics? Well, first of all, it depends on the sample size in comparison to site traffic, and secondly, how do I know that everyone was telling the truth when they filled out the survey? I am ashamed to admit that on some membership surveys I have been a 106 year old woman making $200,000 per year as a truck driver. (g) Not that there is anything wrong with a 106 year old woman truck driver making that kind of money, but the fact remains that there is the inherent possibility that this self-provided data may not be an entirely accurate representation of site demographics.

    Larger advertisers new to the Web love numbers. They want to know that they are reaching an audience of males, age 21-32 who bought a car three years ago and are in the market for a new one. They want concrete numbers that tell them the reach of their advertisements and they want to be able to compare this to a print or television campaign's cost and effectiveness before they decide to shift more ad dollars to the Web. And this is perhaps part of the problem. The Web isn't television advertising. It isn't print. It isn't radio. It's much more interactive. On one hand, we can tell the larger advertisers this until we are blue in the face, but in reality if they are thinking of shifting dollars, they're going to compare reach, targeting and ROI to that of other mediums. Heck, I'd do the exact same thing. It comes down to how much can you reach a specific audience for, what can you do and how well will it work?

    Walt Cheruk, associate media planning director, Modem Media, maintained that online ads have greater impact than those on television or in print, particularly because of the ability to embed ads online in relevant content. I think this is a key issue, and it's important to realize that no one is suggesting that online advertising replace traditional forms of advertising--but that it is merely another tool for advertisers to use to reach a specific audience. Yet, the panel raised a question: How much is the online advertising pie growing each year, and where is this money coming from? As the amount of money spent on online advertising each year/quarter etc. continues to grow, is this because corporations are increasing their overall advertising budgets? Or is it because they are shifting a larger portion of the budget toward Web advertising from traditional budgets? And if Web advertising *is* taking away money from traditional advertising budgets, why would large traditional agencies want to recommend Web advertising to their clients if it means a smaller piece of the pie for their agencies? Unless, of course, their agency provides a total offline and online promotional package in house. Which leads me to another point made by the panel: We're seeing a lot of acquisitions of online ad shops and development firms by offline agencies so that they can better serve their larger clients by offering a "one-stop shop" for larger advertisers.

    Kyle Shannon, one of the panel members and founding member of the New York ad shop Agency.com, told the roundtable discussion group that he felt that this industry should not be constrained by old ways of thinking about advertising. "If we get locked into only pursuing those things that we understand, like CPMs, then we're going to fail as an industry to provide this medium's potential".

    Further discussion involved the problem of the "reach" of Web advertising and the fact that there are inherent discrepancies in projections and measurement of that reach. One of the major problems identified was that most of the results compiled with regard to the current online population vary so widely from company to company and study to study. Also, sample sizes are simply too small to be very accurate or useful. But large advertisers are interested in far more than just the population of the Web. Ideally, they want to know just how many people in a given demographic on a given site saw (or have the potential to see) their ad, and the panel felt that we just aren't there yet. We can provide the number of unique visitors that a site gets. We can provide the number of page views a site receives. But the technology can't identify *who* the site's audience is for advertisers. Studies. This doesn't mean that online advertising isn't effective now--it IS working. These are just some of the objections of some of the major consumer-product advertisers and their reasons for *not* advertising in large amounts on the Web.

    As moderator of The Internet Advertising Discussion List, I get over 200 email messages per day--from clients, advertisers, publishers, list members etc. One question invariably comes up from publishers: How can I make more money from advertising sales, or can I make money from advertising sales? This is far too broad to answer here, but the short answer is that in order for advertisers to want to spend more money online, publishers are going to have to provide them with the numbers and targeting options that they are looking for. This may not be true of advertisers who are already spending money online and understand the value of the medium, but it is key to understanding larger advertisers who are just dipping their toes in the waters of Web advertising. This may very well be why the majority of online ad dollars (over 77%) is indeed spent on less than 25 sites--because they give advertisers the reach and numbers that they are looking for. It's a "safe" buy, and it's easy.

    Lynn Bolger, digital media director, Ammirati Puris Lintas, pointed out in the panel discussion that the focus of the online advertising pendulum has swung way over toward the ROI (Return On Investment) side and not toward branding, that Web advertising is far more similar to a direct mail campaign than it is to a broadcast medium. This is true, but there is good reason for it. There have been several very effective branding campaigns conducted on the Internet, and studies have shown that branding/commercial retention *is* effective online as a medium. Yet one of the largest problems--and why Web advertising is swayed so far toward the ROI model--is that right now it is just too difficult to track the effectiveness of branding on the Internet and too costly for the average advertiser. It is far easier and more cost effective to drive traffic, measure clicks and ROI on a online direct response campaign.

    Panelists suggested that one way to bring larger packaged-goods advertisers to the Web was to cut prices on CPMs (Cost Per Thousand impressions). In the absence of hard data (which will come in the next five years or so, the panel says), you've just got to cut prices to make Web advertising attractive compared to other media. I think it *is* critical to look at the objections of some of the larger packaged-goods companies if we want to attract them to the Web and increase ad dollars. Yet, on the other hand, they are seeking numbers from an industry that is less than 4 years old--that took other media years to develop the kind of tracking and audience measurement, demographics, etc. I think that the answer is a combination of doing everything possible to be able to provide this data, and to work toward further development of technology that provides it. There are a limited number of sites that have this technology available now--MatchLogic, http://www.matchlogic.com/, is doing quite a bit of work with closed-loop marketing and with this type of audience reach. However, the majority of sites that accept advertising can't offer this type of information to advertisers.

    1998 Predictions by some of the panel members:

    "The hybridization of media and content is going to get increasingly transparent. In some cases it's important to maintain the distinction, and in other cases we should be exploring knocking the barriers down."--Kyle Shannon, chief creative officer of Agency.com

    "What's going to happen is advertising will move away from being media-centric to what I call audience-centric, where I want to reach a person like Gina, and I can reach her once on the Web, twice on the TV, once on the radio and a personal phone call and letter. There's a 90 percent probability she'll be my customer--those types of models are going to evolve." --Dave Moore, CEO, 24/7 Media

    "The Database. The promise of Database Marketing and the implication of closed-loop marketing systems for direct response efforts is really becoming a reality."--Lynn Bolger, digital media director, Ammirati Puris Lintas

    "...Exploring what we don't know is going to become more important than exploring what we know."--Kyle Shannon, chief creative officer of Agency.com

    "...I really think we've got the wind at our back. (This industry) is where cable was in 1988, and from here on it's just a question of executing, getting some of the numbers that we need to get everybody playing." --Dave Moore, CEO, 24/7 Media

    "...It's definitely a mass medium without mass. That's now where the business is, because we know it's not going to be there on a mass level for at least another couple years." --Evan Neufeld, senior analyst, online advertising, Jupiter Communications

    --------------------

    You can read the full context of the panel discussion on the Internet World site at: http://www.iw.com/extra/roundtable.html . It's a good read.

    In my mind there are several issues of discussion that we can focus on from this:

    1. Being able to provide concrete audience data to advertisers

    2. The reach of the Web as a medium

    3. Whether an increase in online ad spending will cause a decrease in traditional spending and if so, what effect that will have? Maybe there will be more acquisitions of Net shops by offline ad agencies, and if so, where will this leave the smaller advertisers?

    4. If we are to make online advertising WORK, we need to think outside the constraints of traditional advertising models and let the industry evolve on its own. We also need to think outside the constraints of a banner and move more into studying the effects/results of sponsored content. There are currently no numbers on those types of campaigns that I am aware of.

    5. Database marketing

    6. The Internet evolving as a mass medium

    7. The opinion that branding online is currently too expensive and difficult to track for all but a few companies to enter into

    Resources for Internet Advertising Beginners

    I also wanted to briefly mention that I do realize that some of the issues that we discuss on this list are a bit advanced for those who are new to the industry. I do this for a reason, and I will not backtrack. If this list was about basic aspects of Internet advertising, we would be constantly talking about the same things in a 2 month cycle and would lose you after you learned the basics and moved on. At http://www.internetadvertising.org/info/ I've listed some resources that you can use to learn more about the industry.

    A great general promotions discussion list to learn from is The Link Exchange Digest http://www.le-digest.com/, along with other lists and newsletters that I have identified on the list info page at http://www.internetadvertising.org/info/ .

    Adam Boettiger is Vice President, Advertising & Marketing for e/y/e/s/c/r/e/a/m interactive, inc., Portland, Oregon (USA) specializing in traffic building, strategic partnering, new media planning, killer creative and design. Reach him at: ab@eyescream.com, t: (503) 292-6987 Ext. 16 / f: (503) 296-0945 - http://www.eyescream.com/ . To sign up for Adam's excellent Internet Advertising Discussion List, where this article first appeared, visit http://www.internetadvertising.org/


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