When the Internet Advertising Bureau (IAB) released its “Internet Ad Revenue Report” earlier this week, the common misperception that “banners are dead” was shaken to its foundation.
According to the report, Internet advertising reached over $4.62 billion (US$) in 1999, representing an increase of 141 percent over the $1.92 billion spent on online advertising in 1998. Notably, more than half of the money spent in 1999 was for banner ads.
To gain some perspective on the dramatic rise in Internet ad spending — along with some insider views on upcoming trends — the E-Commerce Times spoke with several leading advertising agencies throughout the United States.
Not Why, But How
The Internet Ad Revenue Report — based on a survey involving more than 1,200 Web sites — shows that fourth quarter advertising revenues skyrocketed to $1.7 billion, compared to $1.2 billion in the third quarter, up 161 percent from the same quarter in 1998.
According to IAB Chairman Rich LeFurgy, “Growth measured in billions of dollars is certainly terrific news for the Internet economy. No longer are advertisers and marketers asking why they should advertise online — they are now asking how big a part of their budgets they should devote to online exposure.”
James Kiernan, Interactive Media Supervisor at the New York office of ad firm FCB Worldwide went a step further, saying, “Advertisers are now reallocating dollars to the Internet that were originally planned for TV, broadcast and print.”
Kiernan told the E-Commerce Times that the chief reason for the increasing interest in Web advertising is sophisticated new methods for accountability. It is possible to do a better job gauging return on investment for online ads than for traditional advertising, Kiernan said, by gathering information on shoppers’ responses all the way to the sale.
It’s a Small World
The agency representatives dismissed the view that the Internet is a vast, anonymous realm where advertising efforts get lost in space. Kiernan said that some of FCB Worldwide’s clients, which include 3Com, Amazon and AT&T, “have been hesitant about interactive advertising campaigns in the past, but now they see the benefits of one-to-one targeting.”
“Internet advertising makes it possible for businesses to stay close to their customers — to recognize their individual needs and preferences and create highly personalized, interactive relationships,” said Joy Fauvre, Senior Vice President of Marketing for MediaPlex (NasdaqNM: MPLX).
“Time is also a significant factor,” Fauvre added. “In any other medium there’s a time lag between seeing an ad and responding to it. The Internet is ‘real-time.'”
Banners Yet Wave
Banner ads accounted for 56 percent of the advertising dollars spent in 1999, despite the fact that ad agencies must fight the persistent perception that the money is being wasted on unresponsive Web surfers.
“Banners do work,” insists Pam Eleftherio, Media Director of Carat-Freeman Interactive.
The effectiveness of banner advertising can now be measured using technology that records the number of times a banner ad is viewed, as well as the number of times users click through to the advertisers’ Web sites, Eleftherio explained. “We’ve become more sophisticated in our capabilities to track results through back end reporting that goes ‘beyond the click,'” she said.
The improved accountability allows researchers to gather information about the choices made by shoppers at various points along the path to the final sale.
Currently, the industry average click-through rate (CTR) is .2 to .3 percent, with a 10 to 20 percent conversion rate. However, that rate is widely perceived to be going up.
After banners, the Internet Ad Revenue Report says that 27 percent of advertising money went for sponsorships, while interstitials were at 4 percent for the year. Net advertisers spent 2 percent of their advertising budgets on e-mail campaigns, and of the remaining dollars spent, 11 percent went to other types of online advertising.
Web advertising is most effective using a combination of methods, but the ads that achieve the best results seem to be those in sync with the “pull” nature of the Internet, say the experts. While TV ads “push” their messages to passive viewers, effective online ads target user interests and offer choices.
The beauty of Internet advertising is that it allows companies to “establish permanent relationships with lifetime customers,” said Beyond InterActive Account Supervisor Rick Corteville, by pulling interested shoppers toward products and companies that can meet their needs and wants.
“Interstitials and pop-ups went against the ‘pull’ nature of the medium — they didn’t translate into conversions as well as banner ads,” Corteville said.
Streaming Media Ahead
As faster Web connections and increased bandwidth become more widely available, many insiders are looking to a moving picture future for online advertising.
According to Corteville, streaming commercials are already gaining a strong Web presence. “Hewlett-Packard has a TV commercial available for viewing on their landing pad. Many of our clients are planning to do that in the next three months as well.”
Increased use of expandable banner ads — allowing customers to obtain further information without leaving the original site — lies ahead, according to Corteville. He added that more attention is also being paid to the design of Internet ads, to give them the same look and feel as a company’s outdoor billboards, print ads and TV commercials.
While e-mail promotions accounted for only two percent of online advertising budgets in 1999, Think New Ideas Media Planner Joanna Pitt says that e-mail will become a more important tool in the near future.
“There are a lot of new technologies — mini-movies and movie trailers can be embedded in e-mail messages. Users won’t have to go anywhere else or even open separate files to view them,” she said.
Show Me the Money
According to the Internet Ad Revenue Report, 93 percent of online advertising transactions were cash-based in 1999. The remaining revenues came from barter/trade, at 6 percent, and packaged deals, which accounted for the remaining 1 percent of the year’s transactions.
Consumer-related advertisements grabbed most of the advertising dollars for the year, coming in at 30 percent. Next up was financial services, at 19 percent, followed by computing, at 19 percent, new media, with 6 percent, and business, at 7 percent for the year.