It is accountable; it can be used to target niche audiences with a direct call to action; it can be tested and modified in real time - it is in fact, in the words of one of the Think Tank panellists, "a direct marketer's wet dream".
But online advertising has not quite recovered from the days when dotcom was synonymous with dotbomb. This hangover means that many marketers are still wary of committing significant chunks of budget to online media, associating the channel with falling click-through rates and untargeted spend.
Yet the environment of the late 90s could not be more different from the accountable times we are now living in. And this focus on ROI is allowing online advertising to shine again.
Indiscriminate spending
This month's Think Tank panellists were all keen to disassociate themselves from the sort of practice that went on during the boom years. "Serious amounts of cash were washing around and the media was being bought indiscriminately, says Ian Tester, marketing manager of student website studentUK.com. "From the media owner's point of view it was so easy to sell. You had investors telling companies they had to make an announcement to the financial press saying they had done an exclusive deal with, say AOL for five years. No one was doing the ROI calculations because you simply had to have the presence."
But the post dotcom boom and bust environment has created the perfect platform for direct marketers. Profligate spend is now history and increased budget is being channelled into direct, accountable channels. Only last month the Advertising Association's quarterly survey of advertising expenditure revealed that expenditure on direct mail grew by 9.7 per cent in the second quarter of this year, amounting to £527 million. It was the only channel, bar television which was boosted by the World Cup, to grow in real terms, signalling growing recognition of the value of DM in the media mix.
It is this trend which the new breed of online evangelists see as playing straight into their ball park. Their's is the language of accountability, underlined by the trend for deals to be struck on a cost per acquisition basis (CPA) linking payment directly with results.
Accountability
Dialaphone, Line One and William Hill are just some of the companies that online direct marketing company The Deal Group has worked with using this model. Managing director Adrian Moss argues that this represents accountability in its purest form. "Advertisers don't pay a fee to site owners but are charged on the number of sales or customer registrations their adverts bring. The problem of wasting budget on mailers or inserts left unread becomes a thing of the past as with CPA there are no print costs or media purchasing overheads. The cost per acquisition compared to traditional media plummets, he says.
This payment metric is gaining popularity. Forrester Research estimates that while only three percent of ad deals are currently performance based, that will rise to 83 per cent by next year. But it has also added to the confusion about how online media is bought. Payment models now range from tenancy agreements - when an advertiser buys a fixed position for a certain amount of time upfront regardless of impressions - to cost per click (CPC), cost per thousand banner impressions (CPM) and the new kid on the block CPA.
The answer, says Carl White, European managing director of digital marketing company ValueClick, lies in a combination of the above. "We work across all the pricing metrics and it would be dangerous to shoehorn a client down any one route, he says. "If it's a branding campaign, it would still be relevant to pay on the traditional CPM model because what the client wants to pay for is eyeballs. As long as the advertisers' objectives are clear, you can pay for it accordingly."
He points to a lead-generating campaign the company worked on for Xerox across ten countries. After testing the campaign in Holland, niche sites for graphic designers were established as one of the most effective locations for ads. New technology enabled data-capture pop-ups to feed the leads straight into a database with the client paying on a cost per lead basis.
The success of this campaign underlines the effectiveness of highly targeted activity. This trend is supported by figures from the Interactive Advertising Bureau (IAB) which show that while ad revenue is still concentrated around the top ten sites, smaller sites are beginning to soak up a growing share of online spend.
"As agencies learn about this medium they become more confident about spreading money around. Often the greatest rewards can be found on the niche sites rather than the big, high-volume portals, says White.
The confidence of media buyers will also improve as adherence to trading standards and standardised site measurements become the norm. This is an issue the IAB is currently focusing a lot of attention on, particularly the importance of site audits.
"People are gradually getting round to auditing sites and providing rich user data, says Tester. "If every site could provide ten demographic benchmarks which were audited by a third party, such as average age, gender, income levels and rough ABC grouping, it would make everyone's job easier."
Not only would the internet become a more professional and accountable medium, he adds, but there would be less scepticism among media buyers.
More technology
Another shift is in the technology available. For example, pop ups are now more popular with online publishers because once closed the user remains on the existing site. Previously, the user would have fallen off the original site and be lost to the publisher.
One development which student-UK.com is currently testing is post-it overts, which sit over the top of the website but can be clicked off.
Designed to look similar to a Post-It note (something which will have immediate resonance with most students), the overt can be tailored to the user when he or she logs in, based on registration details. "So if a company is doing a sampling exercise and wants to reach women in their first year at certain universities, only that audience will see the message, explains Tester.
The efforts of media owners to develop new advertising formats with tangible benefits attached signals one of the biggest shift in the online space. From being a seller's market with media owners sitting back and watching their inventory sell itself, it is now a buyer's market with media owners willing to experiment with different formats and different payment metrics.
"Because it's a buyer's market advertisers can insist that payment is tied back to the return. This simply would not have washed in the past," says Moss.
Hybrid payment model
But not everyone is embracing change. Tester, as an online publisher, says he's not happy about straight CPA deals. "It's a huge risk for us," he says. "We know our audience best. Buyers and planners don't have that data. He points to his experiences in his previous role as marketing manager of internet dating site woohoo. "The majority were 18 to 35 year-olds and their e-commerce consumption was amazing. But despite being affluent it wasn't high ticket items but things like make-up and train tickets they were buying. So a banner ad inviting people to give their details for a test drive, probably wouldn't have worked."
He agrees with White that the answer is probably a hybrid payment model.
Media owners shouldn't be expected to take all the risk and nor should the branding impact of an online ad be forgotten. "The argument about the branding effect has been doing the rounds for years and clearly there is an effect. If it's strong, you're not going to give it away for nothing by basing payment purely on conversion."
Either way, the online environment is clearly an exciting space to be in at the moment with new opportunities constantly coming on to the market (see news p8). The scramble to secure online presence for fear of missing out has been replaced by a much more measured, scientific approach. "The internet has now found its natural position in the marketing landscape, says Simon Anderson, managing director of Unique Digital. "It has its own very clear attributes and suits long term activity which is very results focused."
Scope's Paul Stallard agrees. As senior planning director at an agency which works in both on and offline channels he believes the internet is now seen by most as "just another channel which works well for some brands and less well for others.
"I'm not sure we were ever affected by the hype, he says. "The clients we worked with saw it as a potential channel to be treated in the same way as any other. If you apply that sort of logic from the beginning you're less likely to get your fingers burnt."
Growth forecast
But before relegating the internet entirely to "just another channel" status, it shouldn't be forgotten that this is still a relatively young media which is still on a steep growth curve. A report by Forrester published in August this year projects that the EU's EUR77 billion of online trade in 2001 (representing less than one per cent of total business trade) will rocket to EUR2.2 trillion in 2006 (22 per cent of total business trade).
The UK along with Germany and France, are identified as "the big three" responsible for generating the largest chunk of internet-based trade.
Now that the internet hype has firmly been consigned to history, its true value as an accountable, measurable direct marketing channel is hard to dispute.
Marketing Direct is pleased that our Think Tank is in association with Broadsystem, leading provider of outsourced marketing solutions. For more information contact Paul Gill on 01753 433000 or www.broadsystem.com
THE PANELIST LINE UP
Ian Tester marketing manager, studentUK.com
Ian Tester has spent the last five years in the new media industry, working in publishing, retail, consulting and pure dotcom sectors. He has worked across marketing, strategy, commercial, operational and troubleshooting roles, and has acted as a consultant to a number of start-up companies.
Carl White European managing director, ValueClick
Carl White has overall responsibility for the European business with offices in London, Paris and Munich. White was previously COO of 24/7 Media Europe. Prior to this, he was a publisher and commercial director for BBC Worldwide.
Paul Stallard senior planner, Scope
Stallard's role provides strategic input for clients including Tesco.com, First Direct and HSBC. With a focus on new media, he joined Scope from academia where he worked as a researcher examining relationships between consumer behaviour, production and retailing.
Adrian Moss group managing director, The Deal Group
Adrian Moss founded The Deal Group as an online mortgage brokerage in 1999. The following year he launched ukaffiliates.com, an online 'payment for success' network, and last year Deal Group Media was born, a success-based online DM agency. Moss started his career at PricewaterhouseCoopers and was then at mortgage company I-Group.
Simon Anderson managing director, Unique Digital
Simon Anderson has worked in the new media industry since inception in the UK and founded Unique Digital, a specialist digital direct marketing agency, in 1998.
THINK TANK - WE'D LIKE TO HEAR FROM YOU
We are interested in hearing your ideas for issues to discuss in Think Tank. If there is a subject you think deserves an airing, please contact Holly Acland, editor, Marketing Direct, 174 Hammersmith Road, London W6 7JP.
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