Companies that advertise on the internet are taking a risk. Online advertising is still young, and whatever the whiz kids pitch you about its unique targeting opportunities and the wonders of optimizing on the fly, it's still a long way from being a precise science. Veterans of web marketing are the first to admit that there's a real shortage of agency people with the ability to talk a client through the different options in plain language, explain what mix of media makes sense for a given set of goals, discuss the relative pros and cons of banners, buttons, sponsorships, keyword buys, interstitials, rich media ads and email, and demonstrate how all of those dovetail with an offline marketing plan.
Revolution decided to track down the web's most prolific advertisers and see what they had to say about their successes and failures. Some were more candid than others, but their comments make for a useful snapshot of the state of play in mid-2000.
Our ranking of the top spenders is done by banner ad impressions. Clearly, they are just one part of the online media story, but a big part nonetheless: over half of all ad dollars spent on the internet are spent on banners.
"There's nothing wrong with a good banner that has a strong value proposition addressed to the right target audience," says Todd Watson, digital brand manager at IBM, a company often singled out for its intelligent use of online advertising.
Of course, banner ads still have their critics. "There definitely is frustration in the industry about the banner as a piece of real estate," observes Jupiter Communication's Michelle Slack. "Although it's still the backbone of most media buys, there's great interest in what else is out there, in what else companies can be doing."
Hence the deals we've seen recently between offline giants like Pepsi or Coke and online empires like Yahoo! and AOL. Says Slack, "For the traditional advertisers, they're more interested in driving a deeper relationship with consumers and in branding. They're a a lot more interested in these more complex deals." On page 32, John Gaffney looks at one creative solution for companies seeking richer branding opportunities: the web site "takeover."
If portals and media owners are bending over backward to accommodate big offline corporations, that's partly because the likes of Kraft, Miller and Ford are a feather in your cap. As Slack explains, "You hear a lot from the portals these days about the number of deals with traditional advertisers versus dot-coms, because the perception is that a lot of the dot-coms are going to go out of business, so you don't want too much of your advertising tied to them. I think that's why there may be a little bit more flexibility around the traditional companies allowing them to do more integrated buys."
And integration is the word on everyone's lips. For publishers it means setting up cross-media divisions to sell space across online and offline properties. For advertisers and their agencies it means taking advantage of those synergies by getting the young turks in the online division to bang their heads together with the traditional guys or the direct marketing guys to assemble marketing plans that span all media. As Rishad Tobaccowala of online media agency Starcom IP puts it: "The ultimate, which is what clients want, is to use a little online, a little radio and a little TV.
How can I combine them so that 1+1+1=4? Give me ideas where I use the web as a component but not the only thing."
But banners are likely to remain a part of those plans for some time to come. And in buying them, the trend in the past year has been toward performance-based buys based on more than CPM (cost per thousand impressions).
Hybrid buys that have an element of cost-per-click or cost-per-conversion have the advantage of sharing the risk between advertiser and media owner, and in the latest survey of the Association of National Advertisers, 62 percent of advertisers said they bought on the basis of a hybrid model.
Last year this kind of buy didn't even register in the survey.
But if that suggests that CPMs are on the way out and in the future media owners will be paid only when users click through and become customers, consider an interesting statistic from AdKnowledge. Its Q1 2000 report broke down purchases completed by users who had been exposed to an ad campaign.
Across multiple campaigns over six months, it discovered that more conversion events came from users who viewed an ad but did not click it, than from people who actually clicked through. In fact, 32 percent of post-impression conversions came from users who didn't bother to click through but still made a later purchase. As AdKnowledge points out, this means that advertisers who base their decisions only on clicks or post-click conversions may miss important effects of their campaign.
Nonetheless, average click-through rates of around 0.4 percent (according to NetRatings) are hardly inspiring, especially when you compare them to response rates for email marketing. Currently, email campaigns - whether they involve an ad placed in a media owner's newsletter, a promotional message sent to names on a purchased opt-in list, or a retention email for existing customers - are the highfliers of online marketing.
But email is like a beautiful travel destination that gets ruined when everyone discovers it. Last year, on average, each email user received 40 marketing messages.
Jupiter predicts that by 2002 we'll each be getting that many per month, and that by 2005 we could be getting over 30 every week. With that level of clutter, "in-box fatigue" will set in and response rates will decline.
In the meantime, marketers are making hay while the sun shines, spending $164 million on email in 1999, and a predicted $600 million this year, rising to $1.3 billion in 2001.
Meanwhile, IBM's Watson believes that in all this, privacy concerns should be at the top of every e-marketer's mind. After all, this was a year when DoubleClick nearly brought the whole industry into disrepute by linking anonymous profiles to real-world names and addresses - an attractive idea from the direct marketer's perspective, but a smoking gun for the privacy police.
Watson's advice? "We think it's going to be absolutely critical that web marketers and advertisers take into serious consideration the privacy practices of all the media properties on which they advertise and any of the vendors with whom they're working," he says. "If you're gathering any kind of personally identifiable information, ultimately you are responsible for how that information is handled."
And remember, data can be useful, but it won't hold all the answers. "This is data-assisted, not data-driven," says Tobaccowala. "It's a case of 'Data, data everywhere, but who will help me think?' Sooner or later you have to take leaps of marketing faith." l
HOW THE RANKINGS ARE CALCULATED
This ranking of the most active online advertisers covers the period November 1999 through April 2000, and was produced for Revolution by AdRelevance, a division of Media Metrix. The ranking is based on banner impressions, i.e., the number of times a particular ad is rendered for viewing by a user.
AdRelevance uses software "probes" to scan a set of 500 major sites and the 3,500 pages connected to them, which report back on how frequently a given banner is served. Once that is multiplied by the traffic at sites where the ad was shown, AdRelevance arrives at a figure for total impressions.
Expenditure figures are calculated on the basis of rate-card CPMs (costs per thousand impressions). Since few ads are bought at that rate, figures shown here represent a measure of the value advertisers are receiving rather than the money they have actually spent.
Interestingly, the top 50 advertisers listed here represent over 50 percent of all the ad impressions served online.
DEFINITIONS
Impression: The number of times an ad is rendered for viewing. A calculation of traffic multiplied by rotation.
Spending: The estimated cost of placing ads. A calculation of impression multiplied by standard rate card CPM.
Creative : Unique execution of an ad: includes banners and buttons, but does not include text ads
TOP 20 ONLINE ADVERTISERS NOV '99 TO APR '00 Impressions Spending Unique Advertiser (Millions) (Millions) creatives 1 WingspanBank 1,800 $38 200 2 Lowestfare 1,500 $28 150 3 LifeMinders 1,500 $42 1,200 4 Amazon 1,400 $34 570 5 oneandonly 1,200 $27 140 6 AmeriDebt 1,100 $26 230 7 HealthQuick 1,100 $23 100 8 NextCard 1,000 $32 340 9 Capital One 1,000 $23 290 10 eBay 930 $28 360 11 Fidelity Investments 890 $20 220 12 PETsMART 860 $11 250 13 Net2Phone 850 $29 92 14 The Sports Authority 840 $19 120 15 GetSmart 810 $19 170 16 ClassMates 750 $23 80 17 Corbis 740 $15 130 18 HealthAxis.com 720 $14 190 19 WebMD 720 $15 180 20 MSN 590 $10 820
Top online advertisers Nov '99 to Apr '00 (rankings 21 to 100) Impressions (Millions) 21 Beyond 670 22 AT&T 660 23 Cassava Enterprises 660 24 About 630 25 USWest 630 26 Network Solutions 620 27 E*TRADE 620 28 First USA 600 29 MBNA America Bank 570 30 Ameritrade 560 31 uBid 550 32 Family Wonder 550 33 Office Depot 550 34 Sears and Roebuck 550 35 OnHealth 500 36 NeoPlanet 490 37 APB Online 480 38 Datek 470 39 1-800-FLOWERS 470 40 Kmart 460 41 drugstore 460 42 drkoop 430 43 DVD EXPRESS 400 44 SURETRADE 390 45 ValuPage 380 46 eNews 380 47 US SEARCH 380 48 Vitamins 360 49 SEGA 360 50 Travelscape 340 51 Netmarket 340 52 Boxerjam 340 53 AltaVista 330 54 PeopleFirst Finance 330 55 Providian Financial 320 56 SkyDesk 310 57 Match 300 58 Audio Book Club 300 59 Autoweb 300 60 Gateway 290 61 ZDNet 290 62 Columbia House 290 63 Worldly Information Network 290 64 ShopNow 290 65 LAUNCH 280 66 Ashford 280 67 Hotel Reservation Network 270 68 E-Stamp 270 69 World Wide Web Associates 270 70 G^o2Net 250 71 mylackey 250 72 CarsDirect 250 73 RadioShack 250 74 FogDog Sports 250 75 MP3 250 76 Snap 240 77 Fleet 240 78 TD Waterhouse 240 79 barnesandnoble 230 80 Warner Bros. 220 81 Alexa Internet 220 82 Doubleday Direct 220 83 Sprint Communications 220 84 Headhunter 220 85 Reel.com 210 86 iMotors 210 87 Lanac 210 88 CyberRebate 210 89 eCOST.com 210 90 Sony 200 91 Hypernix 190 92 TWEC.com 190 93 Hewlett-Packard 190 94 American Express 190 95 Dell 190 96 Verio 190 97 Travelers Bank 190 98 Career Mosaic 180 99 Micron 180 100 Netdirect 180
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