Online advertising seems to have taken a backseat these days, as questions arise whether Net surfers actually read/click on the ads. The dot-com shakeout did not help, and what was once touted as a booming industry is now lambasted with disparaging remarks questioning its efficiency and accusations of not living up to its promise.
Is online advertising really as ineffective as critics say? Or are critics too harsh and too fast in dismissing what could potentially be a lethal marketing medium?
Recently, advertising kingpin DoubleClick announced it would restructure its business in the United States and lay off some 10 percent of its employees, due to "changing market conditions". The company has also warned that earnings would be lower for 2001.
ZDNet Asia asked Adsociety Limited and Engage Asia for comments. Adsociety, launched just less than a year ago, is a majority-owned venture of Pacific Century CyberWorks (PCCW). Hong Kong-based Engage Asia is a majority-owned operating company of CMGI Inc. Both are providers of online advertising and media solutions. Not surprisingly, both vehemently denied that online advertising is dying.
CEO and founder of AdSociety, Patrick Jonathon Wong, admitted that the growth of online advertising has indeed slowed down over the past quarters and some Internet ad companies aren't meeting revenue projections and are even laying off employees. However, Wong believes that it is fallacious to conclude that online advertising isn't working.
The flood of spending coming from dot-com start-ups trying to build brand has slowed significantly, Wong says. In 1999, these companies spent millions bombarding the market with advertising, but by mid-2000, many were out of business. Funding was difficult to come by, even for dot-coms with rational business models, and marketing budgets were often the first to be cut.
"In 1999, many cited low click-throughs as evidence that advertising wasn't effective ... In 2000 however, people learned that we also need to take into account measuring behavior, not attitudes. The bulk of advertising is for branding, not direct response.
""You don't measure the effectiveness of a taxi ad, for example, by the number of people that hail the cab and direct the driver to the store advertised on its roof. Branding is about changing people's attitudes over time. This is measured by attitudinal metrics such as message recall, message association, and purchase intent," Wong avers.
Engage Asia agrees. It divides advertisers' objectives into two broad categories - advertising which is focused on building brand image, and advertising which is focused on generating direct response, customer data acquisition and online sales.
Marc Miller, general manager, South Asia, Singapore, says that a major problem the company faced is that marketers' expectations from online advertising has been direct response, customer acquisition and e-commerce, yet campaigns have been largely focused on brand image (in terms of the message, creative execution and media buy).
Miller admits that online advertising has yet to deliver strong brand impact, and he attributes this mainly to limitations on ad file size and bandwidth. But this will change, Miller says, with the introduction of large, heavy file sized (70-100Kb) Flash-enabled ad formats such as 'Superstitials' and 'Messaging Plus'. (Messaging Plus is the advertising system that CNET Networks employs).
Miller's advice is for marketers to change their strategy and look at campaigns that focus on branding.
"To some extent the great strength of online advertising - the ability to accurately measure return on investment - is also a weakness, since traditional media are not held to the same levels of accountability," Miller adds. Online advertising, says Wong, combines the multimedia capabilities of TV, the depth of information of print, and the interactivity, targeting and measurement capabilities of the Internet.
Miller agrees. Online advertising, with its power to target vertical audiences based on demographics, psychographics or demonstrated behavior, is able to reach "the right people with the right message at the right time with minimal wastage".
He adds that the real-time feedback loops of this medium allows savvy marketers to test different messages across multiple online media channels, pushing campaigns towards that which produces tangible results and eliminating that which isn't working.
"With the technology available today it is easily possible to see how these different messages, offers and online channels translate into tangible results, through means such as voluntary customer data capture (as a lead generation vehicle) or e-commerce. As these tangible benefits can be seen in real-time, then so can campaigns be changed in real-time towards those messages, offers and media channels which produce the best results. This insight into customers' motivators could never previously have been done in real-time, nor could the response be measured so finitely," Miller declares.
Besides, marketers follow eyeballs, Miller says. As the number of Web surfers globally increases, "marketers will, by necessity, use online advertising to reach their target market".
AdSociety also remains optimistic that advertisers will invest more online.
"What we are finding now is a slow but steady trend that the dot-com revenue is being replaced by the spending of traditional advertisers. This means that when all is said and done, the online advertising industry will weather the market correction.
"The fact that the number of companies advertising online in the last year has more than doubled is encouraging," Wong says.