Numbers start to add up for online advertising
Just because something is cheap doesn’t mean that it’s good value. But the cost-effectiveness of online advertising is starting to yield powerful results for businesses that use it intelligently, as Simon van Wyk writes.
Prices for online advertising, particularly the beleaguered banner ad, which have plummeted over the past couple of years, appear to have finally hit bottom. In fact, they’ve hit bottom so hard they’ve had a rebounding effect. They’ve become so cheap that they’re making online advertising incredibly cost-effective.
But, to butcher a well-known conundrum, if a banner ad appears on a website in the desert, does it make an impact? Banner ads may be cheap, but does anyone pay attention to them? Well, more and more studies are showing that the answer to that question is yes.
Landmark research conducted by Morgan Stanley Dean Witter in 2001 reported that banner ads “look like a surprisingly cost-effective branding tool, cost-effective in generating brand recall and brand interest, though not as good at creating awareness.”
In terms of direct marketing, the report found that direct mail, email and coupons are better tools than banner advertising. But although most solo direct mail, shared direct mail and coupons appear to perform better than banners, email ranked near the top of cost-effective direct marketing.
Creative fees
The report theorized about why, if Internet advertising works for branding, more advertisers weren’t using it, pointing out “Agencies gain more creative fees from TV spots than banners. Advertisers don’t yet trust the Internet’s efficacy and continue to be wary of the new, new thing, a problem common to any new media.”
The report concluded that “The Internet may be the ultimate direct marketing tool, but through email, not static banners.”
In the wake of that report, large-scale reports by Internet advertising heavyweights including the Interactive Advertising Bureau (IAB) and DoubleClick in 2002 and 2003 have confirmed and amplified upon those results.
A 2002 report compiled by Web researcher comScore, for example, found that not only can online ads work for branding, but “the oft-maligned banner unit itself can wield a sizable amount of clout for consumer packaged goods (CPG) firms.”
The research, based on a survey of 50,000 people, found that online ads increased purchase intent, brand awareness and advertising awareness for Purina dog food.
Consumers exposed to banner ads from Purina were almost 50% more likely to name the brand as the first dog food brand that came to mind. Among participants that received one to five impressions, brand awareness rose from 22.3% to 28.2%; among those receiving six to 20 impressions, awareness rose to 35.4 percent.
The research also determined that consumers actually remembered elements from the banners they were served. More than 5% of respondents recalled seeing a Purina ad in unaided tests after having received one to five impressions.
As the report pointed out, “That’s an important finding for the online advertising industry, since part of the concerns associated with advertising on the Web has been a long-held belief that consumer rarely even take notice of banner ads.”
Combo advertising
Other studies have identified the synergistic power of online ads. Rather than simply competing with mainstream media, online ads can be a valuable add-on to traditional media buys. In a US study sponsored earlier this year by the Online Publishers Association, Millward Brown Intelliquest found that when used in tandem with online advertising, television ads become more memorable.
Consumers who also saw online ads were 32% more likely to remember a TV ad than if they saw the TV spot alone, while only 23% of those that saw just the television ad were able to recall it.
The results also indicated the online ad had a greater impact than the TV version. A day after seeing it online, participants demonstrated a 45% increase in recalling having seen an ad; viewers of the TV spot alone showed no day-after increase in recalling the ad or the advertiser.
Optimising cross media spend
The Interactive Advertising Bureau (IAB) recently released more results from its landmark Cross Media Optimization Studies (XMOS). The XMOS is aimed at giving marketers “the ability to determine the optimal mix of interactive, TV, radio and print advertising drawn from real world, in-market results.”
The three key findings from the research, conducted with multinational brands including McDonalds, Kimberley Clark and Colgate Palmolive, are: 1) best marketing ROI is achieved when online advertising is 10-15% of the marketing mix; 2) adding online advertising expands reach and coverage; and 3) increasing online allocation produces better overall results by increasing the ROI.
Greg Stuart, President and CEO of the IAB, has stated that, “From a cost-effectiveness standpoint, XMOS demonstrates that online advertising is the deal of the century for major brand marketers. In other words, same budget, better results.”
Influencing purchases, wherever they occur
A DoubleClick study conducted last Christmas concluded that interactive marketing has a strong impact on purchases that aren’t necessarily made online. According to the study, websites are the number one way consumers research purchases and come to the purchase decision.
Importantly, the study concluded that online ads and email marketing are more effective than TV or print in driving people to those websites, particularly in the car and pharmaceutical categories.
This is backed up by recent research from Research.net, which found that executives prefer the Internet (73%) for finding out about new products and receiving information about companies, compared to magazines (57%), newspapers (29%) and radio (8%).
Finally, the lure of the Internet appears to be part of the reason TV is not as effective an advertising medium as it used to be. Rex Briggs, principal of Marketing Evolution, which has conducted extensive online advertising research for companies including Microsoft, said in a recent interview, “People today are multi-tasking more than ever before while watching TV. More and more, they’re leaving the room during commercials, channel surfing, doing their email while watching their favorite show, and so on.
“There is no doubt in my mind that if you could strap people to their chairs, toothpick their eyes open, and force them to watch TV commercials, then there would be nothing out there that could touch TV, but unfortunately, we can’t do this. This means that TV is not nearly as effective as, in theory, it could be.”