Internet Advertising Analysis Part 14; Advertising or Direct Marketing
Internet Direct Marketing & Advertising Services
The Internet is the first media to collapse the sales cycle, from gaining awareness to gathering information to shopping and making a purchase. It also blurs the lines between advertising and direct marketing. Online advertisers have generally focused on the top ten sites when allocating their online spending. Meanwhile, the aggregate power of the growing number of niche sites (ranked 50+) has been gaining. Both categories are squeezing the mid-sized sites. Internet Advertising is positioned to go well beyond banners as bandwidth and technology allow. As the audience evolves from higher-demographic, early tech adopters into more of a mass market, then mass market advertising methods will be utilized more.
We forecast that U.S. Internet Advertising will reach over $32 billion in 2005 representing a CAGR of 42%. At that time, we estimate that the Internet will account for 14% of all U.S. advertising, up from 3% in 1999. Global Internet Advertising and direct eMarketing should be over $50 billion in 2005, up from $5 billion in 1999 a CAGR of 49%. We believe the global addressable market of advertising and marketing services is much larger than many U.S. media followers currently believe. List price CPMs (cost per thousand impressions) for the Internet will likely come down, but effective CPMs are reasonable compared to other media. Effective CPMs should go up as more inventory is sold and better comparisons with other media are made.
Traditional Advertising & Marketing Services
The traditional advertising and marketing services market is enormous. In the U.S., we estimate advertising and marketing spending to reached nearly $389 billion in 1999, and we expect $420 billion in 2000. The U.S. represents about 42% of the $363 billion global advertising budget and 76% of the $315 billion global marketing services budget. Combining advertising & marketing services, the U.S. represents 57% of the $678 billion market, we forecast for 2000. In the U.S. in 2000, we expect 8.3% growth in advertising and 7.8% growth in marketing services, for a total of 8.0%, up 70 basis points from 1999E. Globally in 2000, we expect advertising growth of 7.6%, up 140 basis points from 1999.
Online Advertising vs. Direct Marketing: The Lines Are Blurred
The Internet is “a new medium for traditional direct marketing.” — H. Robert Wientzen, President of the Direct Marketing Association. In the online world, even the simple banner ad can be (and often is intended to be) both an advertisement and a direct marketing service. The banner raises the passive consumer’s awareness of a product. Yet it also encourages the consumer to pursue action by clicking on the ad. Many buyers of Internet banners are justifying their expenditure based on direct marketing models. It is widely accepted that in both online and offline worlds, the average viewer requires nine exposures to an ad before s/he begins to recognize the company and associate it with the product or service it provides. In addition, two out of three ads go unnoticed (particularly on the Internet) by people who are more interested in reading content than advertising. Thus, one could argue that brand recognition requires that a consumer be exposed to an ad 27 times before branding begins to occur.
Figure 19 Direct Marketing vs. Advertising on the Internet
The interactivity of the Web lends itself more to responseoriented advertising than branding. In fact, DoubleClick reports that 90% of the ads served through its network are response-driven, while only 10% are intended to brand. 24/7 Media reports that about 20% of its ads served are intended to brand, while the remaining 80% are responseoriented. That differs slightly from conclusions from Forrester Research, detailed below.
Figure 20 Branding and Direct Marketing
However, the lines between advertising, direct marketing and promotional marketing, and the retail sales generated have been blurred by the Internet categories. A portion of the revenues collected from e-commerce should be allocated to the direct e-mail/database marketing/e-couponing category. Separating Internet Advertising and direct eMarketing is more of a theoretical question. However, it is important to exclude e-commerce retail sales from advertising and marketing calculations unless one also includes traditional retail sales with traditional media advertising.
The First Medium to Collapse the Sales Cycle
The Internet allows for the entire sales cycle to be conducted on one medium, nearly instantaneously. From making the consumer aware of the product to providing additional information to transacting the final purchase, the Internet can accomplish it all. If for no other reason, advertising and direct marketing on the Internet have greater potential than in the offline world. Offline consumers first see an ad on television or in a magazine, then must research the product themselves, and finally make the purchase by going to a store or calling the seller.
Figure 21 Seamless Completion of the Sales Cycle
Offline point-of-sale promotions are displays located near the checkout aisles of stores. This is often the most valuable real estate because it allows for impulse shopping and is seen by all shoppers as they are checking out. The Internet is like one big point-of-sales display, with easy access to products and the ability for impulse shopping. Impulse shoppers have found a true friend (or enemy) in the Internet. Within seconds from being made aware of a product, consumers can purchase it online. Further, with the targeting techniques available to advertisers, consumers who turn down a product because of the price can be identified and served a special offer more likely to result in a purchase. In the right hands, with the right tools, the Internet really is an advertiser’s dream come true.
Figure 22 Internet Advertising and Marketing Breakdown
Continue with:
Part 15; What Does the Internet Advertising Market Consist of , Part 16; Rich Media still has some drawbacks ,
Part 17 Inventory and Concentration , Part 18; Market Share and Concentration Data , Part 19; Global Impact, Part 20; Residential and Business Use ,
Part 21; Pageviews , Part 22; Advertising vs. Direct Marketing , Part 23; Investment Conclusion
