4% of Users Account for 67% of Display Click Throughs

About eight percent of Internet users account for 85 percent of all clicks on Web ads, comScore reports. Just as significantly, just four percent of clickers account for 67 percent of all click through activity.

Predictably, there will be two major ways to look at the findings. The first is that online display ads "don't work." The second is that value is not captured by simple click through statistics.

The number of people who click on display ads in a month has fell from 32 percent of Internet users in July 2007 to16 percent in March 2009.

When first studied two years ago, about 3 percent of Internet users clicked on at least one display ad during the month. These clickers were segmented into heavy, moderate and light clicking segments.

In 2007 comScore, Starcom and Tacoda found that heavy clickers, representing six percent of U.S. Internet users, accounted for the top 50 percent of clicks. Moderate users, representing about 10 percent of Internet users, accounted for 30 percent of the clicks.

Light clickers, representing 20 percent of users, accounted for 16 percent of the clicks. By March 2009, those numbers had dropped substantially.

About four percent of Internet users in the most-recent survey would be considered "heavy" clickers. About four percent are moderate clickers. Some eight percent are light clickers.

The issue is what to make of the value of the 84 percent of Internet viewers who do not actually click on ads.

The results, comScore says, underscore the notion that, for most display ad campaigns, the click-through is not the most appropriate metric for evaluating campaign performance. Rather, advertisers should consider evaluating campaigns based on their view-through impact.

Other comScore research has shown that online display ads generate significant lift in trademark search, online and offline sales, and brand-site visitation across all verticals, among those internet users who were exposed to the online ad campaigns, whether they clicked on the ad or not.

“A click means nothing, earns no revenue and creates no brand equity," says John Lowell, Starcom USA SVP. “You want people to visit your website, seek more information, purchase a product, become a lead, keep your brand top of mind, learn something new, feel differently."

Regardless of whether the consumer clicked on an ad or not, the key is to determine how that ad unit influenced them to think, feel or do something they wouldn’t have done otherwise,” says Lowell.

"Remnant" Inventory Fastest-Growing Online Ad Segment, Says ThinkEquity

Non-premium display advertising (often known as "remnant" inventory) is likely to remain the highest-growth segment of online media over the next five years, with the greatest potential to create significant opportunities and market dislocations, say ThinkEquity analysts William Morrison and Robert Coolbrith.

Premium display includes graphical display advertising inventory sold through a direct sales force such that ad placement, impression volume, and time-frame within which the advertisement will run are guaranteed.

Non-premium display advertising is sold without specific time-frame or placement guarantees, typically by a third party. Historically, there has been an order of magnitude to 20 times price differential between premium and non-premium channels.

"On a percentage basis, we expect non-premium display to be the highest-growth category in online media, through a combination of significant volume mix shift and pricing growth versus other media types," they argue.

Also, look for big changes in the ecosystem. Online advertising exchanges should eventually come to dominate the inventory aggregation function traditionally performed by online advertising networks, although some networks' proprietary inventory aggregation channels should remain relevant in niche and high-value market segments, ThinkEquity says.

Likewise, ad network and ad agency and even publisher business models should increasingly converge. Among other things, the major Internet media companies (Google/Doubleclick, Yahoo!, Microsoft, and AOL/PlatformA) are likely to continue consolidating and

capturing the overwhelming majority of the non-premium market.

Exchanges increasingly are being used as inventory aggregation platforms with traditional horizontal ad networks(ValueClick, Advertising.com, Tribal Fusion) increasingly abdicating their supply-side aggregation role and acquiring media directly on the exchanges and “meta ad networks” (MediaMath, Varick Media Management, X+1) that are focused on data,

optimization, and arbitrage, ThinkEquity notes.

The premium CPM (cost per thousand) advertising segment has been losing market share to performance-based advertising (typically to non-premium inventory) since 2001, with the share shift accelerating during the past three years, ThinkEquity says.

Click the image for a larger view.

Small Business Sees Web Site Investments as "Advertising"

In 2008 small and medium-sized organizations spent $6.7 billion on online advertising and will increase that spending relatively slowly between now and 2013, according to researchers at Borrell Associates.

By 2013, SMEs will be spending about $7.4 billion on online advertising, representing relatively slowish growth of nine percent over a five-year period, an annual growth rate of a bit more than 1.5 percent annually.

That might surprise you, if only because the rate of growth is slow slow it might be considered "flat." But Borrell suggests something else is happening. SME spending on Web sites will grow about eight percent a year.

You might not consider Web site spending as advertising, but Borrell Associates says this is precisely how SMEs think about the matter. It isn't so much a shift of advertising from traditional methods, including telephone directory listings and direct mail, to the Internet. It is that small businesses see their own Web sites as a form of "advertising," perhaps a functional substitute.

Consider this a sort of shift to "earned media" (awareness gained through promotional efforts rather than paid advertising). The other angle is that small businesses rightly see their Web efforts as partly a direct sales channel, partly direct marketing and partly a substitute for other sales activities such as printing and distributing flyers, postcards and other direct marketing messages.

Ad Priorities Radically Different Online

I estimate that direct response advertising accounts for about 80 percent of all ad dollars spent online, while in traditional media the situation is reversed," says Gian Fulgoni is chairman and co-founder of comScore. "There, branding dollars are estimated to make up about 75 percent of the market."

Why the disparity? "I believe that the very nature of the speed of the Internet and the young technical minds that first created online advertising both led to a focus on immediate response," he says. "The click metric is a good example of that."

“Time to purchase” is different for direct response ads, which aim at closing a sale or a transaction right here and now, and branding that builds brand equity that pays off over time.

Fulgoni thinks both are required. "For direct response ads to work well, it’s important that a brand’s equity have been communicated in advance of the consumer’s purchase decision," he says.

How do Internet media do brand building? "I believe it’s vital to take into account all of the marketing stimuli that affect consumer purchase behavior, not just that which occurred just prior to purchase."

"We should be wary of attributing 100 percent of the credit for a purchase to a click on a search ad," he says. Search might well have closed the deal, so to speak, but there is often a lot of other marketing activity that led the consumer down the path to purchase and, without which, closure might not have occurred.

The Atlas Institute, Microsoft Advertising’s research division, says “users exposed to both search and display ads convert at a higher rate: an average of 22 percent better than search alone."

http://www.comscore.com/blog/2009/04/branding_versus_direct_response.html

Social Media Campaign Generates 28% Sales Lift

Packaged-goods firms are cautious about social media, as the return on investment is tough to measure. But MySpace recently hosted a $1 million campaign for a personal care product that achieved exposure to 76.9 million people, about 40 percent of the U.S. Internet user base, creating 1.1 billion impressions and generating $1.28 million in incremental sales, Advertising Age says.

Of 76.9 million people exposed to the campaign in four months, 765,000, or fewer than one percent, visited an advertiser page on MySpace.

But the campaign produced $1.28 million in offline sales, as measured by loyalty program provider Dunnhumby, which compared purchases among shoppers not exposed to the campaign with purchases among those who were.

That amounted to a 28 percent return on investment, not counting returns from repeat sales among consumers the brand won via the campaign. About 17 percent of the sales were of products advertised in the campaign; the rest of the sales lift went to the parent brand, in a "halo effect."

One question: whether that level of return will hold up for larger campaigns.

http://adage.com/digital/article?article_id=135940

Google IS Online Advertising

Though total U.S. ad revenue at 17 public companies increased nine percent in 2007, online revenues grew 28 percent, says Henry Blodget, Silicon Alley Insider author. Total ad revenue for the 17 firms was $58 billion, while online revenues were $18 billion.

Offline revenue grew about $1 billion while online grew $4 billion. Google got $2.7 billion of that total, while online ad revenue at Yahoo, Microsoft, and AOL grew $1.3 billion. In other words, says Blodget, Google captured twice as much revenue as its closest three competitors combined.

Google.com's U.S. revenue growth was more than twice as much the growth of ad revenue in all of the 13 offline media companies Blodget tracked.

Ads: $5 Million a Day Shifts to Online

One way to look at current trends in where advertising is being bought is to note that "ad dollars are leaving the cable, broadcast TV and the newspaper business at a rate of roughly $5 million per day, says Paul Woidke, Comcast Spotlight VP.

Search Advertising: Big Growth in 2008

JPMorgan analysts now forecast 31.9 percent growth in search advertising revenues for 2008. Analysts at JPMorgan initially had thought growth would come in at about a 19-percent clip. So they sense acceleration. Me too.

"Nothing But Net"

Online ad spending is growing at a faster rate than broadband access, according to PMorgan Internet analyst Imran Khan. In a nutshell, the story is that Internet stocks will do well in 2008.

JPMorgan expects 34 percent earnings growth in 2008 for the Internet stocks it covers versus 8 percent earnings growth for the S&P 500.

From my perspective, the story is that online advertising is going to grow because attention is shifting that way. And advertising follows attention.

Search Ads Will Drive U.K. Spending Growth

Internet searches will contribute around three-quarters of the growth of U.K. advertising in 2008, according to Group M, a unit of WPP Group, says the Dow Jones news wire.

U.K. advertising will grow by six percent in 2008, and all but 1.5 percent of that will come from search engine ads.

Group M also said the value of the Internet advertising market will come close to that of the television advertising market in 2008.

Newspaper advertising revenue is expected to decline by 2.8 percent in 2008, after a 3.4 percent decline in 2007, Group M forecasts.

Mobile to Lead Japan Online Ad Growth

Online advertising in the Japanese market is lower than in other markets, but growing at a faster rate.

Japan’s leading advertising agency, Dentsu Group, says search spending accounted for 27 percent of Japan’s online ad marketing in 2007, a figure significantly lower than in the United States (40 percent) and the United Kingdom (60 percent), eMarketer notes. By 2010, Dentsu predicts search will reach just 30 percent of Japanese online ad spending.

Dentsu also estimates that Japan’s mobile ad market grew by 42.5 percent in 2007. Mobile advertising is expected to remain the fastest-growing segment through 2010. Dentsu forecasts double-digit growth for the entire Japanese online ad industry to 2011, when growth is expected to slow to 9.6 percent.

48% Increase in Local Online Ad Spending This Year

Borrell Associates expects a 48 percent increase in local online ad spending in 2008, bringing spending to $12.6 billion. Local search and online video advertising will drive much of the activity, Borrell says.

Local search advertising will more than double to $5 billion, while locally placed online video will triple to almost $1.3 billion.

A major component of local video advertising will be long-form pieces for home, automotive and health-related categories, the firm argues.

Most yellow pages publishers, cable companies, newspapers, radio stations and TV stations are still pinning their hopes on their traditional sales reps being able sell online ad packages. But local sales entities might have to create separate online-only sales forces to get the job done.

Most sales entities face the same problem: it is tough to grow sales for new lines of business when those new lines represent a small percentage of the overall sales opportunity and might even cannibalize the existing business.

Newspapers Not Dead Yet

But the trend line is clear enough. Newspaper advertising has been declining for decades.

But changes of this sort, where some older ways of doing things are replaced by newer ways, can take quite some time to play out, and will inevitably create new opportunities.

"Long distance," for example, has been in a long rate-per-minute decline, but usage has continued to climb. That meant the strategic task for every AT&T executive for years was simply to moderate the decline to the extent possible and prepare for some new business model.

The difference between long distance calling and newspaper advertising revenue is that newspaper ad volume is not rising, as long distance calling continues to do.

But the newspaper ad market is sizable enough that it still offers opportunity for players such as Yahoo, which has a deal with seven newspaper chains representing 176 daily papers across the country.

Yahoo is sharing content, advertising and technology, initially by newspapers posting their classified jobs ads on Yahoo’s classified jobs site, HotJobs, while newspapers use HotJobs technology to run their own online career ads.

Over time, the intention is to optimize newspaper content for search and indexing on Yahoo.

Who Will Sue Google for Incorrect Traffic?

Spain's top media company Prisa said Monday it had taken legal action against Nielsen for miscounting traffic to its ElPais.com Web site as well as readers of its newspaper.

Prisa said its Internet arm Pisacom and El Pais were suing Nielson "based on the damage caused by the unjustified downward revision in the number of unique visitors of ELPAIS.com during the current year."

"The lawsuit argues that due to the serious negligence on the part of Nielson in its measurement of audience figures for ELPAIS.COM, El Pais and Prisa suffered serious damages due to lost advertising this year."

Data from marketing firms like Nielsen are important in determining the amount websites charge for advertising, with sites with high viewing figures being able to charge higher fees to sponsors. Networks sometimes have such disputes with the firms doing the counting.

One has to wonder when somebody will sue Google for mishandling a search ranking.

UK Leads in Digital TV

The U.K. is well ahead of most other European countries in its use of digital media, by some measures. By the start of 2007, more than 76 percent of U.K. TV households were receiving digital TV services, a rate higher than other Western European countries, Japan or the United States, for example.

According to Ofcom, U.K. adults also spend more time on social networking sites than other Europeans. Two in five U.K. adults regularly log on to these sites, clocking up an average of 23 visits and 5.3 hours each month.

In the U.K. market, 33 percent of users send picture messages via their mobiles and 16 percent use them to connect to the Internet. About 10 percent of U.K. adults use mobiles for e-mail.

Ofcom also believes that online advertising in the United Kingdom accounted for 14 percent of total advertising revenues in 2006, passing magazine advertising for the first time and registering more than total spending on outdoor, cinema and radio advertising combined.

Advertisers in the U.K. market also spend more money per consumer on Internet advertising than any other country, at £33. According to Ofcom, this is twice as much as France, Germany and Italy combined.

Online advertising revenues generated in the U.K. market in 2006 also beat the combined totals of Germany, France and Italy at £231 per head.

Media, Voice, Mobile, Broadband Tipping Points

In a historic first, online media companies collectively will sell more ads in local markets this year than such individual hometown media as newspapers, broadcasters and yellow pages, says Borrell Associates. That's a tipping point, a stage of development when critical mass for some new phenomenon is reached.

Five years ago business phone systems hit a tipping point: most new systems were IP-capable. A couple years ago another tipping point was reached and new phone systems mostly are IP-only. These days most new phone sales are for IP systems.

Likewise, Internet usage and access hit similar tipping points earlier this decade. Most people now use the Internet, and that wasn't true 10 years ago. Also, there was a tipping poin when broadband caught and then surpassed dial-up access as the dominant access medium.

Then there was some tipping point reached where access speeds accelerated beyond the "affordable mass access in the hundreds of kilobits per second range" to "affordable mass access in the megabits per second range."

You can see tipping points for text messaging and mobile phone use as well, even though it is only within the last decade that most people started carrying mobile phones and only within the last five years that most younger users began texting heavily, dragging older users along with them.

One watches for tipping points for all sorts of practical reasons, including evidence that it now is time to restructure the way marketing, sales, production, business models, distribution, industrial design, menus and all sorts of very practical things get done.

And the point is that all media are approaching tipping points of their own, and for reasons largely analogous to how communications is changing because of Moore's Law, IP, peer-to-peer, cheap storage, optical fiber, wireless and Web services.

In the newspaper local advertising area, a new tipping point appears to have been reached.

Online-only media companies will have claimed 43.7 percent of the $8.5 billion spent in 2007 on local advertising, usurping the long-time lead of newspapers. While newspapers three years ago controlled 44.1 percent of the local market, they will capture only 33.4 percent of sales this year.

The growth of the online media companies “came mainly at the expense of newspapers and yellow pages publishers,” who have lost a combined 19.6 points of local advertising share in the last three years, says Borrell.

Having spent some time working at newspapers, as well as at publishing companies with multiple products, a concrete way to view tipping points is the impact on structuring of sales forces.

Typically, newspapers and other local media try to build their online businesses by selling new media to their legacy customers. Sometimes they try to use a single sales force to sell online and legacy products. That doesn't work, long term.

In fact, it doesn't quite work even short term, as sales forces direct their behavior to where they can make the most money, and that never is in the emerging businesses.

So one winds up with a strategy akin to launching a Boeing 777 into the air by rolling forward slowly on a long runway. No matter what you do, you crash at the end, because there never is enough runway if you don't get your airspeed up pretty quickly.

Companies that rely on their legacy sales forces to sell the new products--even though it seems logical--will crash their planes at the end of the runway. The only way to succeed is to cut the cord. Build separate sales teams with separate incentive structures; not "converged" sales teams.

One does not "incrementally" jump a very wide ditch. One leaps. One makes it or not. But it can't be done incrementally and slowly.

Increased Online, Event, Direct Marketing in 2008

According to BtoB magazine's 2008 Marketing Priorities and Plans survey, 60.1 percent of marketers plan to increase their overall marketing budgets next year predominantly in online, events and direct, despite the softness in the overall economy. Some 29.6 percent plan to keep budgets flat, and 10.3 percent plan budget decreases.

Last year, 62.6 percent of respondents said they planned to increase their marketing budgets in 2007; 29.4 percent said budgets would be flat, and eight percent said they planned to decrease their marketing budgets.

In 2008 the primary marketing goal is customer acquisition, cited by 62.4 percent of
respondents, followed by:

Brand awareness (19.3%)
Customer retention (11.7%)
Other objectives (6.6%)

Of those planning budget increases next year:

27.8% plan a 5% to 9% increase in spending
24.6% plan a 10% to 14% increase
12.7% plan a 20% to 24% increase
10.3% plan an increase of less than 5%

The biggest budget increases will be seen in online marketing, with 79.1 percent of marketers planning to boost their online budgets next year, up from last year, when 75.6 percent of marketers said they planned to increase their online budgets in 2007.

BtoB's survey found that the average percentage of the marketing budget spent next year on online marketing will be 33.8 percent, up from 26.5 percent in 2007.

Among the online areas that will see increases next year are:

Web site development (74.0%)
E-mail (70.1%)
Search engine marketing (64.3%)
Video (39.5%)
Webcasting (39.1%)
Banners (36.4%)
Sponsorships (29.6%)
Social media (26.2%)

Event marketing will see a spending boost in 2008 with 49.5 percent of marketers planning budget increases in this area, as will direct mail with 49 percent of respondents planning to increase their direct budgets in 2008.

Microsoft Gets Viacom Online Ad Deal

Viacom Inc. has selected Microsoft Corp. as its Internet advertising partner in a five-year agreement initially valued at an estimated $500 million, also involving online games, shows and movies.

Microsoft will help Viacom place advertising on Viacom's U.S. Web sites and be the exclusive seller of its remnant display advertising, or ad space Viacom has been unable to sell.

As part of the deal, Microsoft will also license on a non-exclusive basis long and short-form television and movies from Viacom for the MSN portal and the Xbox 360 game system's online network.

Microsoft has also agreed to buy ads on Viacom's broadcast and online networks over five years and help Viacom establish itself as a publishing partner on Microsoft's casual Internet gaming sites.

Major Multitasking

If you try to add up all the hours people report spend online, consuming media, sending messages and so forth, you realize that if those people have jobs or go to school, they must be multi-tasking. More important for anybody whose business touches advertising, online advertising spending lags time spent by users on their media. Over time, that gets rectified as advertisers move more money in an online direction.

Hence Google's interest in the mobile Web.

EU Will Study Targeted Advetising: Much Hangs in the Balance

Targeted online advertising, an important revenue driver for all sorts of media and mobile services, is going to get serious regulatory scrutiny from European Union regulators next year, according to Astrid Wendlandt, Reuters reporter. At stake is the viability and robustness of media revenue models based on targeted messages, obviously key for Web sites such as Facebook, search providers, online media companies and mobile service providers alike.

The European Union's Article 29 Working Party already has ordered Google to curtail the amount of time it stores past Web searches to 18 months.

The EU's moves are a salient reminder that Internet services, especially media and content services and applications, increasingly are falling under the purview of regulators. Some have argued that Internet communications should be free of such rules. More important are regulations affecting content and media services. Historically, regulators have decided whether communications were legal, and under what terms. Now regulators essentially will be deciding what content and media forms are legal, and under what terms. One can argue that all regulators are doing is protecting privacy. It is more than that. Regulators also will be deciding "what" the basis of a new business can be; "who" can be a part of it and "how big" new media might become.

Skirmishes over "VoIP" will pale in comparison.