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Wed 29 Nov 2000 04:00 AM

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Redefining the value proposition

What constitutes a successful online ad campaign? Advertisers are starting to find that perhaps it’s the same measures already used for years in the offline world.

What constitutes a successful online ad campaign? Advertisers are starting to find that perhaps it's the same measures already used for years in the offline world.

It’s the business to consumer marketing mantra: Attract. Addict. Convert.

And add to that: Burn through the advertising budget, if recent totals for online advertising are any measure.

The Internet Advertising Bureau, a New York trade group, recently counted the first quarter of 2000 as the 16th consecutive quarter of growth in online ad spending.

The bureau’s figures, prepared in conjunction with consultant PricewaterhouseCoopers, show online ad spending in 1999 rose to $4.6 billion, a 161% increase over the $1.7 billion spent in 1998. Other projections show online ad expenditures ballooning to more than $43 billion in the next four years.

Online advertising is maturing, and not because of the billions of dollars being spent. Increasingly, advertisers recognise that they’re building brand recognition, maybe even more than driving sales.

They’re getting new metrics to gauge the effectiveness of their ad spending and are testing the synergies between online, TV, and print advertising.

What’s more, online advertisers are forcing ad agencies and measurement companies to be more scientific with their campaign audits, focus groups, and message recall statistics.

Banner ads are the biggest online expenditure, although advertisers also may opt for affiliate spending, unsolicited ‘pop-up’ ads, and e-mail promotions.

Users don’t need to click their browsers very far to be assaulted by a flurry of banner ads, which try to use just the right words or offers to convince Web surfers to ‘click here.’

These enticements, often no larger than a postage stamp, are easily the most prevalent form of online advertising, accounting for 56% of 1999 spending.

But that’s about as far as most eyeballs get, since by industry calculations, only about 0.5% of online users actually click through on those banners to be taken to the advertiser’s site. And even that scant percentage is believed to be shrinking, raising some scepticism about the future success of banner ads.

“Banners don’t work,” says Steven Blyth, senior VP of operations and chief technology officer for Supermarkets Online Inc., a discount grocery site in Greenwich, Conn. “They’re not cost effective. You get some traffic, but they don’t turn into the best consumers on our site.”

Blyth’s experience stands in contrast to another prominent Web, print, and broadcast advertiser.

“We’ve seen click through rates that have been quite stable over the last year and a half,” says Michael Sievert, chief sales and marketing officer for E-Trade Group.

Sievert says E-Trade’s relative success with banners comes from working with targeted partners, rather than by casting its net far and wide. This lets the online financial services company, “pinpoint how consumers got to our site and target our creatives for that,” he says.

In any event, click through rates have been steadily declining, in stark contrast to the boom in online ad spending. By industry estimates, spending will continue to grow this year, while click through rates will gauge little more than browser indifference.

So why do the Web’s biggest advertisers continue to throw billions at banners for such a crummy return?

Because, says a defensive group of media directors, ad agencies, and marketing executives, there are other ways besides click through to measure online advertising’s effectiveness. Not all online adverts, they add, are designed to drive traffic to a site or spur online sales.

“Click through is only an indicator of how good your creative is or how well it’s targeted, but it’s not an end all,” says Gerrard Broussard, senior partner and director of media analysis for marketing firm OgilvyOne Worldwide. “In some cases, it’s just the beginning.”

Other emerging metrics that measure the effectiveness of online ad spending are cost per click or per customer, as well as traditional marketing measures such as message recall, brand awareness, and purchasing interest.

Proponents of Web advertising say that never before has a medium lent itself so readily to customisation. They call it the greatest direct marketing tool ever.

For example, a visitor to the Web site of a woman’s magazine who clicks onto another link from that site could be served up banner ads for women’s sports clothing at the next site.

By monitoring where traffic comes from (and where it doesn’t), account representatives say their clients can tweak their images and placement accordingly.

Businesses also are just starting to understand and exploit the Web’s synergies with print and broadcast media, as well as how one can drive traffic to another.

The Web is also new enough that ad agencies have yet to standardise on a set of reporting or measurement techniques.

Still questionable is whether companies report where visitors to their Web site come from and where they go after leaving the site, or whether the life span of a cookie is 30 days, 60 days, or more.

There’s also no agreement over what constitutes an audit, who administers it, or what key criteria it should contain.

There are two good explanations for the run-up in online ad spending: traditional businesses such as Procter & Gamble and Bristol-Myers Squibb are starting to spend their ad dollars online, and experienced online advertisers are devoting more of their overall ad budgets to online advertising.

Supermarkets Online’s Blyth says his company’s online advertising budget this year is a little more than double last year’s, and that $2.5 million is earmarked for spending with America Online alone.

Sievert says E-Trade’s overall marketing budget has grown sixfold in two years.

E-Trade spent $78.2 million in the second quarter of 1999, an amount that soared to $177.5 million in the second quarter of 2000. Although he says online advertising is a significant part of that budget, he doesn’t divulge how much, noting that the company’s overall media mix is proprietary information.

Still, many observers think that a high click through rate means nothing. They point to a recent online banner placed by WorldCom with the provocative invitation, “Surf Naked.” The ad garnered a huge number of click throughs but not a lot of new customers.

That goes to show that clicking doesn’t translate into buying. “You can encourage clicking behaviour but not purchasing or brand building behaviour,” says Rich LeFurgy, chairman of the Internet Advertising Bureau and a general partner with WaldenVC, a San Francisco investment firm. “So click throughs have roundly disappointed people if you were looking at that as a measure for advertising effectiveness.”

The trouble is that advertising buyers need some sort of measurement to determine where they’ll get the biggest return for their dollar. By using click through as a constant measure, ad buyers at least have some relative measure with which they can compare the success of various Web sites.

“Marketers are prisoners of metrics, and we got them addicted to click through,” says Nick Nyhan, president of Dynamic Logic, an advertising consulting firm that measures advertising impact and value.

“But people are seeing that there’s life beyond the click, that an ad can have value if it’s just seen and not clicked, and [it can] still impact branding, awareness, and purchasing.”

Nyhan says those sorts of metrics can’t be derived from a cookie. They require surveying or interviewing with a ‘control exposed’ methodology, comparing data from a group that has been exposed to a marketing message with one that hasn’t been.

Ongoing research has shown that the Web can be exploited as a brand building tool even when the advertisements are small and banner ads are at the top or even the bottom of a Web site.

“The banner’s small size and often lousy creative leads many to believe it can’t be effective,” LeFurgy says. “But the data show its effect as a brand building device, and that’s statistically unrelated to click throughs.”

Broussard backs up that assertion. Johnson & Johnson, for example, doesn’t expect Web users to click on its banner and buy baby shampoo online. “But maybe the next time you go into the store, there’s more of a relationship [between advertiser and customer] from that feel good type of content,” he says.

Advertisers also may be on a spending tear as they try to figure out where to place their advertising, determine the best mix of online and other media, and see how the Web can be exploited to achieve strategic objectives.

“Click throughs are much higher when messages are placed within related content,” Broussard says. “I know that sounds intuitively simple, but we’ve seen lots of instances where it doesn’t go that way. But one should also think about how to use the Web with other media, since a combination of consumer touch points is what’s most effective.”

It’s that sort of mix that media behemoths such as the Walt Disney Co. are trying to exploit. “With ABC .com and ABC-TV, it’s a circular way to reach the consumer,” says Scott Schiller, senior VP of branded advertising and sponsorship sales for Go.com, the portal for ABC, ESPN, and other Disney companies.

“You can watch Who Wants to Be a Millionaire?, go to the Internet and play the game, and then turn back to the show. In the meantime, you pick up brand awareness or sweepstakes participation,” Schiller says.

Schiller knows that ESPN, an all-sports cable network, draws an audience that’s 98% male, while ABC is strong with women ages 18 to 49. Ads can be placed on the Web sites and broadcast networks to achieve Schiller’s circular effect. “If you buy both [media], you can build reach and brand awareness against certain demographics.”

That sort of cross fertilisation isn’t available to non-conglomerate, specialised sites such as Supermarkets Online, and Blyth says that print and other offline advertising hasn’t proven very effective for his business.

What works well for Blyth’s company is affiliate relationships, in which a cooking site or a domestic arts Web page contains prominent links to the Supermarkets Online page. An effective ad would read: “Save $50 on your first visit. Click here.” The affiliate site then either gets a fixed fee for the referral or a percentage of the subsequent transaction.

“Our affiliate program gives us the most bang for our buck,” Blyth says, noting that his company pays a small commission to site operators for referring customers to Supermarkets Online. The best return is always from grocery savings or food-oriented sites, he adds.

Supermarkets Online evaluates each affiliate to determine how much it will pay for referring customers.

“We pay some affiliates more because you can’t reach that audience as effectively any other way,” Blyth says. “Each venue gets evaluated separately, depending on the audience and whether it’s strategic to build that relationship.”

Supermarkets Online also has begun measuring the effectiveness of its banners and affiliate programs using cost per click, which essentially determines how much it costs to attract a customer to the grocery discount site.

Supermarket Online’s cost per click now averages 13 to 15 cents per customer, though it sometimes drops as low as 11 cents per customer. Ideally, Blyth wants to drive that cost to below 10 cents per customer.

Slicing and dicing market data is an advertising agency’s stock in trade. The problem with online advertising is that some agencies measure clicks, while others measure eyeballs, impressions, or unique visitors.

Measurements and audits are different. “Putting a piece of software on a file server and recounting the data isn’t an audit,” says Pete Petrusky, director of new media at PricewaterhouseCoopers.

“An audit is a process-based approach: how do you know the insertion order was entered correctly, that the right banner was loaded, or that someone didn’t tamper with the log files?”

For now, there are no standardised metrics to compare results and processes across multiple sites. So whether it’s an accounting firm or a publishing or media audit bureau, independent verification is important to ensure an advertiser gets what it pays for.

“Given the amount of continuous spending in this industry, continuous accountability is required,” Petrusky says. “If I’m devoting X percent to online, I want to make sure it’s worthwhile.”

In fact, clients are demanding services that help them better allocate their buying across different media and measure the aggregate impact. “Our customers are pushing us to provide that crossover impact,” says Charles Buchwalter, vice president of media research at Ad Relevance, an online ad-tracking service.

They want to know whether Web advertising drives traffic to a TV show or to the second of a three part series in a weekly magazine, or whether a four color spread in The New York Times boosts traffic and transactions at the Web site.

Such answers typically would come from members of focus groups who are asked what prompted them to go a site, to turn on a TV show, or to buy a magazine. “As this industry matures, marketers no longer look at online as being the saviour, but just another part of their media mix,” Buchwalter says.

And that sort of maturity may start to obviate the ‘attract, addict, convert’ marketing mentality. Online ad industry professionals are trying to address larger marketing issues such as how to get customers to make return visits to Web sites or how to use the Web to build stronger relationships with customers. They also want to figure out how to get customers to do something more than just browse the site, such as make a purchase.

Like any new market, time will be the key that unlocks the numerous unknowns. “Many clients view this as an investment in time and learning so that they’ll be able to measure and build on the resulting data,” says OgilvyOne’s Broussard. “They’d like to know more, better and faster, but these things take time. There’s no catch-all solution.”

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