Online ad spend surges, and will keep going

A version of this piece was published in Marketing in 2007

The IPA’s authoritative Bellwether report was published this week, and it’s provided some much-needed good news for the advertising business.  Whilst there’s an understandable reluctance to indulge in an orgy of chicken-counting, the first upward revision of main media ad budgets in 2½ years has been greeted with enthusiasm.

It’ll come as no surprise to regular readers of this column that this is a consequence of online media’s extraordinary and continuing growth, with the recent IAB/PwC survey showing 41% in 2006.

Last week I looked at how rates of growth are declining in online as the medium matures, and there’s no doubt that this trend will continue as a natural consequence of scale. 

But given this trend, how sustainable is this sort of growth? 

The answer is pretty simple.  Very.  And for two good reasons.

First, the supply of commercial audience is continuing to grow rapidly.  Internet penetration grew around 5% in 2006, but more significantly, broadband continued to surge forward.  Ofcom’s April ‘Digital Progress Report’ reveals that 80% of internet homes are now on broadband – that’s over half of all homes in the UK, and it’s 30% more than in 2005.  Unsurprisingly, people spend a lot more (almost double) time online when they’ve got broadband compared to dial-up, and the impact on audience has been significant.

Comscore reports 15% more time online per user in 2006 than in 2005, and that’s fed through to a 20% increase in audiences.

This is important, firstly because it’s an anti-inflationary pressure in the media market, meaning that dizzying levels of growth are still not feeding through to general inflation online.  But its real significance comes at a business level for mass marketers whose businesses rely on the ability to communicate daily with mass audiences.  More and more of people’s time is spent online, and that continues to exert pressure to divert budget that way.

Second, and more importantly, the internet isn’t just a marketing channel.  It’s a channel to market.  Investment in online advertising follows trends in consumer consumption patterns not just in media, but in purchasing too.  In 2006, Enders Analysis estimates online commerce at £30bn, up 43% on the previous year, and accounting for just under 12% of UK retail sales.

And it’s this that’s driving the real growth online. 

In the US, where brand advertising is a bigger part of the online media mix, search takes a smaller share, and online is just 5.8% of total adspend.  Here in the UK, the focus of development in online advertising has been direct response, and this has helped to drive online’s share to 11.4% - double that in the US.

This fundamentally changes the media game.  I spent several years as a TV buyer in the early ‘90s, and my focus was on acquiring media cheaply, and controlling its delivery.  Reach, frequency, ratings, dayparts, discounts against station price.  Nobody ever told me how sales were going, and even when I showed an interest, there seemed to be little connection made between what I did and its impact on sales, except at a rudimentary level if a sales week had gone badly and a scapegoat was needed.

But online, data is king.  We track everything, and we analyse the pips out of it, feeding this back into media deployment, keyword bidding and affiliate management.  And as consumers shift more and more of their expenditure online, it becomes easier to track the impact of what we do – more of it can be measured directly, and more of it is rolled into the modelling we run.

So online budgets are set to continue to grow, because that growth is based on predictive investment models derived from real consumers’ behaviour, and at the less sophisticated end, because that’s what everyone else is doing.

Forecasting buoyant GDP growth, improved corporate profits (a strong indicator of future adspend growth) the Bellwether survey makes good reading for marketers, and even better for digital marketers. 

If digital could boom whilst other media crawled along the bottom of Sir Martin’s bath, they reason, what can it do in an upturn?

Web advertising growth slows?

 A version of this piece was published in Marketing in 2007

So the internet advertising market is now worth over £2bn, and champagne corks have been popping all over Clarkenwell.  The publication of the IAB’s survey of internet adspend has attracted vast amounts of press coverage trumpeting both the overtaking of national press, and the inclement weather faced by other media.

But all this brouhaha has missed out on two important conclusions that can be drawn from the survey – that online market growth is slowing, and that the survey massively underestimates the true scale of the business.

Recent years saw growth in internet advertising peak in 2003 when the market increased by 136%.  The following two years saw growth of 77% and 66% respectively, before 2006’s recently reported 41% uptick. 

So is online marketing a busted flush?

What we’re seeing is a sign of the market maturing.  Each year growth is based on a higher figure, so whilst the percentage growth may be declining we’re still seeing increasing amounts of actual money being added to the market each year.  On top of this, we’re going to see continued levels of substantial growth, with most observers expecting around 30% for 2007. 

And as the market matures in scale terms, it’s continuing to mature in practice too.  Techniques for online marketing have become extremely complex and specialised, and the gap between the advanced practitioner and the beginner is creating real barriers to entry – it’s very tough to develop the skills, commercial arrangements, market knowledge and technologies from scratch in a way that is competitive with the market leaders.

So the undignified scramble we’ve seen over the past couple of years as every traditional agency puts “digital at the heart of their business” is going to leave many disappointed, as they discover that rather than being paved with gold, it’s hard work and genuine innovation that’s keeping digital growing.  Being competitive in this space has proved to be substantially more difficult than in traditional media, where if you couldn’t match the rates, you could at least reduce your fees to buy your way into a market. 

At least as interesting as the growth story though, is the invisible market value.  Just as with an iceberg, the largest part of it is the bit you don’t see.  These figures measure adspend, and ignore the value-add from affiliates, CRM and partnerships, website build, viral marketing and search engine optimisation. 

As you’ll know from your inbox, CRM is a huge area of activity on the internet, with email a vital tool in the armoury of marketers.  It’s a big part of marketing effort, but it doesn’t cost anything in media terms.  Similarly, distribution partnerships, where online stores are opened in other peoples’ websites (a little like a concession in a department store) are often struck on a revenue-share basis – this means they don’t turn up in adspend figures but are nevertheless a substantial income source for media owners.  And as paid-for search gets more expensive, more emphasis is being placed on SEO – the dark art where coders attempt to configure a website to rank highly in a search engine’s ‘natural’ listings – and again, this isn’t reflected in the IAB figures.  Techniques like these form a huge part of marketing in the online space – and none turn up in the IAB’s survey.

And this is where the wake-up call for us all lies.

We’re all obsessing about how much advertising money goes to the internet, and in doing so we’re missing the real impact of the web – to blur the lines between advertising, product, distribution and brand.  Figures like the IAB’s are interesting, but they tell only a small part of a story that’s shifting its focus from media spend to commercial value.

So by all means celebrate the crossing of a threshold in online’s adspend scale.  But don’t imagine this is where it ends.  There’s a much bigger game being played out online in marketing, and advertising is just one small part of it.

Consumers are selfish, irrational and disloyal. It’s their right.

 A version of this piece was published in Marketing in 2007


When Carling Black Label brought a case for trademark infringement against a group that had parodied the brand in South Africa, it was said in court that “Black Label has the luxury of having the most money, and therefore the most speech”.  The court saw the company as having a greater voice, and sought to protect the freedom of expression of the consumer.

But as we’ve seen in recent years, that balance has been swinging away from companies as the internet empowers the individual to get even.  Untrammelled by any requirements of taste, decency, accuracy or balance, consumers can say pretty much what they like – so when they’re also right, it can mean pretty fierce language and tactics which companies are rightly circumspect about confronting.

I wrote a few weeks ago about the opprobrium WalMart had attracted by using flogs (sales promotions posing as blogs) to promote themselves, and the PR storm Kryptonite suffered at the hands of bloggers when their $90 bike lock turned out to be openable with a bic biro.

Now it’s the turn of a company in Britain to get burned, and there are useful lessons to be drawn for all of us. 

You might have seen TV ads and tube cards in recent weeks for a group fighting the ‘information revolution monopoly’.  Ask, the search engine formerly known as Ask Jeeves, is trying to persuade consumers that there should be freedom of choice in where they get their information from, and they’re directing consumers to a site they’ve set up at www.information-revolution.org.

The TV ads run without a soundtrack, and look like they’ve been shot on a webcam – activists are seen holding up messages on cards to camera, suggesting people visit Ask.com.  On the site itself, a link then takes you to the information revolution microsite, where you’re presented with a manifesto and message boards where they encourage debate.

And this is where it all starts to peel apart.

From reasoned criticism of Ask’s site – “I use Google because most likely I get the result I want without…having a huge large type sponsored advertisement links like ASK and MSN do” to fry-eyed “Way to go, Jeeves, now you’re not only incompetent and stupid, you’re evil as well”, hundreds of posts have lambasted Ask’s campaign.

Whilst the campaign is tongue in cheek, this makes no impact on the messageboards, where people tend to have a very literal interpretation of advertising.  What comes through is three basic complaints – consumers are being driven to a site under false pretences, they are being patronized by a fake ‘revolution’ line which belies the selling message, and finally that the product’s no good.
In the hundreds of posts, I couldn’t find a single positive one.

We can all see what the benefit to Ask might be if we used search engines other than Google, but consumers clearly struggle to see what might drive them either emotionally or rationally to Ask.  And herein lies the real message for all of us who are secretly relieved we didn’t sign this one off.

Consumers are selfish, irrational and disloyal.  It’s their right, and so it ever has been.  They don’t mind being sold to, but they resent being misled – even if the agency and the client think it’s witty.  So you’d better do what it says on the tin, because they’re not going to take it lying down if you don’t.

Feedback will be swift, and it will be merciless.  They will revel in your discomfiture, and hijack your communications to serve their own agenda.  They will expose your every weakness, and pick it to bits.

And this is Ask’s problem.  If their product is superior, consumers can’t see it and the campaign doesn’t show it.  And where in traditional media it might have ended at that, with some swiftly-forgotten brand-tracking data, in digital the effect has been to aggravate consumers and give a platform to detractors.  As one forum contributor puts it, “I love the smell of back peddling in the morning”.

Ajax and the death of the page view

 A version of this piece was published in Marketing in 2007

Anyone who’s spent any time in digital starts to look differently at change, and it’s sometimes hard to take seriously what are seen as ground-shaking moves in traditional media – a newspaper moving to a smaller format, a radio station reducing ad minutage.  It seems the digital media world gets reinvented every six months, and we revel in that warp-speed evolution even if we don’t always know where it’ll lead.

So it’ll come as no surprise to anyone that the way we measure online media is all set to change (again).

In the beginning there was the ‘hit’.  A hit describes a call on a server to send a file, and since a web page is made up of lots of elements (pictures, text etc.) and each of these is a file, one page could be twenty ‘hits’.  So this was a pretty useless way of gauging traffic to anyone other than a network engineer, and it was rapidly abandoned (though the term is still misused) in favour of the page impression.

Now we were talking a language media folk could understand.  A page impression represented the viewing of a single web page, and since this was analogous to how people look at newspapers, everybody felt pretty comfortable about it.  It felt like it gave us an idea of the scale of usage of a site – something we could benchmark.

Of course, wily editors responded by splitting stories across multiple pages to boost the count, and media buyers (coming from a press background) widely misinterpreted it as being a substitute for circulation.

The reality was, it never really mattered how many page impressions a site does in a week unless you were buying the whole site.  Web display advertising is generally bought on an impressions basis – I might buy 100,000 impressions over a week; the fact the site delivers a million impressions overall is a matter of supreme indifference to me as long as I get what I paid for.

So we started measuring unique users, the number of people (actually computers) visiting sites, and combining this with page impressions – effectively measures of reach and frequency respectively.

And so it’s been for the last few years, and everyone was pretty happy with it.

Unfortunately it’s becoming redundant.

The way the web works, the way it presents itself to users, is changing – largely driven by three new technologies, RSS, Ajax, and Widgets.

In ‘traditional’ web pages, the only time a server actually sends a file to you is when you click on a link.  All the time you’re looking at the page, there’s no traffic from the server.  An Ajax page is different.  It’s actually an application, monitoring what you’re doing and downloading more stuff unseen by you in anticipation of things you might do next.  This means when you click on something, the response is instant as the data’s already there. 

It also means you often don’t even click – all you need is anticipated and delivered within that page.  You can see an example of this at www.ba.com – enter a destination city, and it will suggest options before you finish typing – “Lon” suggests ‘Londonderry’, ‘Long Beach’ and ‘London’, type one more letter and the redundant options disappear.

Similarly, RSS feeds information constantly into your computer – you don’t need to visit the site to get your team’s score, they’re delivered to you.  Increasingly popular, widgets are small applications you install on your PC which perform tasks, often automatically retrieving information for you like the weather forecast.

The consequence of this evolution?  The page view has become decoupled from site usage.  This has huge implications not just for publishers, but for advertisers too – because it also undermines the click as a measure of interaction. 

This is challenging because we really don’t know where it’ll lead, but ultimately it’s healthy.  People are obsessed about clicks, but they’re a pretty blunt measure of interaction.  If the impact of this change is to make people think harder about how their communications work, it can only be a good thing. 

Internet is the future of TV

 A version of this piece was published in Marketing in 2007

I grew up with TV.  Double Deckers, Grange Hill, Banana Splits, TOTP – these were the media franchises we engaged with, and acted out in the playground.  We never gave a thought to what went on behind the screen – the technology of how it was delivered, and we certainly never felt wonder at the brilliance of the innovations that delivered it to us.

But my parents didn’t grow up with TV.  My Dad was 18 when the coronation brought the first TV to their house, and its tiny monochrome screen introduced the family to a new world.  My parents’ generation was there as television developed, and recognised its advances – definition improving, the introduction of colour, live pictures from the moon.

They regarded TV as technology in a way I never did – to me it was just there, and my mates and I watched it.  And now I’m repeating the pattern.

When I look at iPods, instant messenging, Skype, internet video, I see technology.  I work hard to understand its social and business implications, but I have to teach myself to use it.

My children on the other hand have grown up with it.  My son’s frustration that he can’t rewind the TV – his indignation that people schedule programmes at times other than when he wants to sit down and watch – has to be seen to be believed.  He’s grown up with the CBeebies website, and Homechoice video on demand.  He listens to story CDs ripped onto an MP3 player in the car, and DVDs for treats. 

He doesn’t see anything special in any of this.  To him, the technology is transparent, and he knows intuitively how to use it. 

Older kids spend hours at their PCs on messenger – if you ask them what they’re doing, it’s not “using the computer” but “talking to my friends”.  They listen to the radio over the web, and watching TV over the internet on their PC is second nature.

So when the BBC announced a deal with YouTube last week to open three channels on the site it wasn’t just a logical development, it was an essential part of the BBC’s drive into the online platform.

The YouTube deal is billed as a promotional platform for BBC content, with two entertainment channels showing clips of TV programmes and ‘making of’ material, and linking back to the BBC’s websites and other content.  But it’s more than this; the ad-funded news channel launching later this year is a serious commercial venture into a new platform on a global stage.

This is particularly significant when you consider the BBC’s iPlayer platform slated to launch in the autumn, carrying catch-up TV content downloadable to your PC.  The BBC’s ambition for this is to sign other broadcasters to their platform – using the BBC to kick penetration, just as they did with Freeview.

The BBC was the critical success factor in the growth of Freeview.  They brought attractive content, marketing muscle and most importantly a vision to a moribund platform with two previous failed owners. 

Nobody could describe the internet video market as moribund.  But what it lacks in leadership it makes up for in contenders – Google, MSN, Yahoo and more recently, Joost are all jostling for position, knowing that audiences will not typically download more than one software platform to watch TV on their PC. 

There’s likely to be a significant first-mover advantage in this market, and the BBC’s move is the first serious one in this country.  If it can sign other broadcasters and get to market quickly enough, its impact could be felt rapidly as young audiences desert broadcast TV in even greater numbers.  When there’s a real benefit, these software platforms can spread incredibly rapidly – Skype took three years to go from first beta test to 100 million users, and Napster a year to get 40 million.

All of which means, if you’re in the business of targeting young people on TV, you might want to watch this space…