Of Fence-sitters and Forerunners

The economy is slowly reviving, the virtual world is be coming real, mobile

devices are becoming a part of daily life, and Internet users are increasing by

the day. All these statements make one think of one of the most talked-about

trends of the dot-com days–online advertising. When the dot-coms were booming

and the Net was considered the ‘manna’ of the times, online advertising saw

rapid growth, with revenue figures of around $8 billion in Year 2000. But waves

of cold reality washed away the euphoria when the bubble burst. Advertising

budgets crashed and spenders shied away from the medium, which had turned out to

be a loser. Internet bell-weather Yahoo!’s ad revenues fell from $1 billion in

2000 to $580 million in 2001.

But given the fact that we are heading toward a digitally-connected world,

online advertising as a medium to reach the target audience is re-emerging. IDC

projects a growth rate of 21.5% in terms of revenue in the Asia-Pacific region

(excluding Japan). Jupiter research projects a more sedate 10% growth in 2003,

taking international revenues to $6.2 billion in 2003. It also sees them jumping

to $14 billion by 2007.

Clearly, online advertising is moving toward a more mature and stable growth

pattern. It may not be galloping along as earlier, but it is certainly not dead

and buried.

So what is pushing advertisers towards the same medium which they discarded

just two years ago, terming it "ineffective"? The three catchwords–cost,

targeted audiences and measurability. Online ads cost much less than other

mediums, and developmental expenses are far lower. An online campaign can be

launched a price that won’t even cover the development cost of offline

advertisements.

To take an example–an advertisement on the popular jobs site naukri.com

costs around Rs10,000 annually for unlimited impressions. The same advertisement

in The Hindustan Times’ Careers section would cost lakhs. The cost is lower

because online media is establishing itself and works on a cost-plus pricing

model. Print and other media work on value-based pricing model. Online costs are

also lower because the cost of delivery is lower. Once the site is up and the ad

put on it, the operational cost is low and the access cost is paid by the

customer to the ISP. In other words, the advertiser is not paying the entire

cost of reaching the audience–which is true of most other media vehicles.

Although offline media also offers scope for targeting the ‘right’

audience, the Internet can target not only specific demographic and industry

groups, but also geographic, behavioral, professional and company-specific

audiences. And as media professionals and website managers are finding better

ways to do so, the effectiveness of online advertising is increasing.

Skeptics argue that it does not reach the masses. But then, all products (and

all advertising) is not meant for the masses.

The biggest plus is that measurability of responses is far higher and far

quicker on the Net. So, advertising primarily meant for response generation

finds a very effective vehicle in the Net. With measuring techniques becoming

more scientific and the confidence in them growing, viewer profiles and

preferences are recorded. And the advertiser can target the right kind of

people, at the right time, for the right response. While this benefit was always

expected from the Net, it is becoming a reality only now. Some major drivers of

online promos will be classifieds, matrimonials, jobs and travel ads.

No wonder then, that major advertisers are including the Net as an important

component of their media mix. Samsung Electronics launched a multi-million

dollar integrated campaign in May 2002, which included 375 million impressions a

month across 110 websites. Volvo turned heads in the ad world when it launched

its S60 model through intensive online ads–motivated in large by budget cuts.

The campaign is reported to have resulted in more than 500,000 e-mail newsletter

sign-ups. Today, online advertisements comprise of 10% of its marketing outlay.

Companies like Pepsi and P&G are working out new approaches toward online

advertising, emphasizing on more focussed targeting of viewers.

Log on to cnn.com and you see a free trial offer from Time magazine (print

media advertising in the online media!). Log on to aol.com and you hear and see

a video urging you you to use AOL’s broadband. Log on to indiatimes.com and

you can buy printers or book tickets or get invited to a golf tournament. Log on

to rediff.com and get home loans, check out scooters, buy a mosquito repellant

or find someone to flirt with. Log on to ciol.com and see Intel, HP and Symantec

advertising–along with bazee.com. It also features an extended ‘Enterprise

Connect’ program run by IBM. The range of messages is vast...and growing.

The banner ad–which many advertisers thought was ineffective–has been

supplemented with a large number of attention-grabbing options. Vertical

banners, large rectangles, pop-ups, full-screen videos and other new promotional

variants constitute almost 20-30% of all advertising. Flashy eye-catching

formats give many more creative options to the advertiser.

Ads no longer wait to be clicked on; they slither down the page, flash colors

and give value-additions like discounts as well as freebies. The signpost of the

Web–search engines–have added their own form of advertising by way of paid

listings. The interactivity of the Web offers immense possibilities that the

advertiser can exploit more easily, with broadband becoming more widespread.

Sure, bottlenecks remain–the reach of the Net is lower than television or

print, privacy issues of logging profiles are not addressed, visitors still surf

the Net and, therefore, choosing the right site remains a problem...but the

bottle is certainly more visible now.

Online advertising is a developing powerful medium. It will continue to be

so. And perhaps, this is the right time for the fence-sitters to join the

forerunners.

Shyam Malhotra



The author is Editor-in-Chief of Cyber Media, the publishers of Dataquest.



(Inputs from Saswati Sinha)