Big Brands Believe by Chris Trayhorn, Publisher of mThink Blue Book, September 1, 2006 TV commercials and print ads aren’t dead yet. Major brands still believe in traditional media. After all, a blockbuster commercial with a catchy jingle can positively boost brand equity. No one cares to dispute the power of a well-placed Madison Avenue ad. But nowadays, marketing teams are increasingly feeling pressure to account for the dollars they spend; they need to show the hard results for money in a real way. No wonder many marketers are starting to expand their ideas about what constitutes the best-spend blend. While dollars spent on old-fashioned media can positively impact brand image, many major marketers are frustrated by the paucity of accountability in that arena. Enter the Internet. A decade ago, it was a way to blast banners and burn through a huge amount of cash. Now with access to high-speed connections the norm, and rich-media taken for granted, marketers believe more and more that the low cost, high measurement and constant tweakability make the Internet a magic formula for marketing. The growth of online ads isn’t showing signs of slowing down and traditional commercial markets are feeling the loss. For example, the up-front market, the time period during which TV networks show their fall lineups and try to sell ad space, is losing its luster. This year the Walt Disney Co. network did well during the up-front, selling $2.3 billion in airtime, a $200 million increase over last year. But the final network TV up-front haul came out to only $9.05 billion, compared with $9.1 billion last year. “This year the interesting thing is it isn’t just about TV anymore; there are a lot of other places to be worked into these TV buying deals,” says Stacey Shepatin, senior vice president and director of national broadcast at agency Hill Holiday in Boston. She points out that CBS put the NCAA games on the Web and drew a huge audience. “Content is on the Web, on iTunes and on cell phones. Clients want to be able to reach consumers wherever they are getting their content and for some clients, mobile phone and the Internet make more sense than network TV.” Shepatin says the networks will be aware of this shift and work out up-front packages to please marketers. AD SPEND UP Beyond anecdotal evidence of the trend, data backs up the new reality. While many industry observers like to speculate, few have actually pinned down hard numbers. But Universal McCann’s forecaster, Bob Coen, recently revised his estimates for overall U.S. ad spend downward. However, he’s bullish on Internet ad spending and has revised those particular estimates upward. Coen now forecasts that Internet ad spend (excluding search) will amount to $9.705 billion this year, which is a 25 percent increase over 2005. In December, Coen predicted that online advertising spending would total $8.7 billion in 2006, or an increase of 10 percent over 2004. But in the first quarter of this year online advertising spend increased more than 19 percent from the first quarter of 2005, according to Coen. To give you an idea of the contrast, he now predicts that overall ad spending will increase to $286.4 billion in 2006, a 5.6 percent increase from 2005. In December, he had forecast 5.8 percent growth. The Internet numbers are enough to leave even skeptics believing that this online ad thing has real momentum. Other numbers also prove the point. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers announced that Internet advertising revenues reached a new record of $3.9 billion for the first quarter of 2006. The 2006 first quarter revenues represent a 38 percent increase over the first quarter 2005 at $2.8 billion and a 6 percent increase over the fourth quarter of 2005 total at $3.6 billion. Some types of companies are quicker to catch on than others. Not surprisingly, high tech companies are among the first to get hip to trending their ad spends toward the online universe. Yahoo’s chief marketing officer Cammie Dunaway agrees that a commitment to “performance- based marketing,” like the Internet, is more effective than just doing branding on network TV alone. Yahoo has also ventured into getting its brand seen in off-line environments, with a Sheraton hotel deal in which Yahoo sponsors the wi-fi lobby Internet connections. Yahoo plans to continue its much-lauded street marketing stunts but will also continue to refine its online and search efforts. “I really believe in interactive. Soho Square [New York] is our overall agency that pulls in WPP partners,” Dunaway says. Yahoo did a lot of promotion for its music product and in addition to buying TV spots on the broadcast of the Grammy’s and throwing parties in Miami, it did a lot of online work. “We had great online creative as well; you could throw Green Day’s equipment with your cursor – we had a fun, engaging online element. OgilvyOne [also in New York] handles online, and ours is very extensive. We do so many online campaigns! Great branding makes your search work harder. In 2006, our marketing will be a blend. We’re do search engine marketing as well as branding – ad campaigns, buzz marketing and partnerships like Sheraton,” Dunaway adds. Those looking to reach a youth demographic, including large brand advertisers, are spending billions online. Sprite was an early blog advertiser and trailblazed IM ads featuring a hip-hop cartoon personality known as Miles Thirst. John Vail, director of the interactive marketing group for Pepsi-Cola North America, says the company isn’t as much about clickthroughs. To gauge effectiveness, the soda giant is participating in an experiment run by Yahoo and market research company ACNielsen that tracks the online behavior and offline purchases of about 36,000 U.S. families. PepsiCo Inc. doubled its online display advertising spend in 2005, allocating just 2 percent of its total U.S. spending. But Americans spend close to 20 percent of their time online, so there is a gap. Advertisers aren’t really taking advantage of the fact that a fifth of our time is spent online. So there’s a great opportunity for even more expansion. PRINT IS NO LONGER THE KEY But at least one advertiser has woken up to the reality of the way consumers are currently choosing to view media. Absolut vodka, known for its iconic print ads, is at the cutting edge. It has radically altered its marketing strategy away from print to the Internet. The company says it changed directions because consumers’ tastes were changing and many competitors were entering the marketing. “Online plays a more important role than print. Print is not the key media anymore,” according to Patric Blixt, communications manager for new media at Absolut in Stockholm. “Our consumer is more focused on the Internet and mobile communication so we’re shifting also. We’re evolving the iconic advertising, making it more inclusive and modern with the same wit and creativity we used in our off-line advertising.” While Absolut won’t abandon print, outdoor and TV advertising, those media will take a back seat to the Web. “Even if the print media budgets remain larger, the print is now much more seen as the first window into the Absolut world, driving interested users to the whole brand experience online,” Blixt says. Absolut will increase its online spend to about 20 percent of its media budget. This would account for about an $8 million outlay in the U.S. as the brand spends upwards of $40 million annually. And Absolut is probably smart to target consumers online. But marketers of electronics would be wise to follow suit. More than 50 percent of Americans were ready to upgrade their home electronics this summer, according to research from Pioneer and Roper. Before they hit the stores, however, 90.2 percent of them went online for product research. A survey from the Pew Internet & American Life Project finds that 45 percent of American Internet users have turned to the Web for help with a purchase in the past two years and that 57 percent considered the Internet “the most important source of information,” so many marketers know the Internet is a smart place to be. Automakers are another group that is riding the wave of the sea change. Ford Motor also dropped its magazine ad allotment from 23.5 percent to 21 percent last year but increased its spending on the Internet to 3.5 percent from 3 percent, according to AdAge.com. The company’s overall ad budget remains flat. General Motors also plans to spend 20 percent of its marketing budgets online this year. Automakers, like Audi and Lexus for example, have been quick to champion emerging media and buy advertising on blogs and podcasts. TECH TALK You’d think that technology companies would be at the forefront of parlaying their expertise into taking advantage of the way media is developing. While guerrilla marketing and sponsorships are becoming more popular with tech companies, Internet ad buys are also a big part of their focus. Microsoft is also keen to take advantage of online ads. This year it will spend a hefty $500 million to promote its new “People-Ready” message. However, the long-awaited release of its new operating system (“Longhorn” which was later renamed “Vista”) isn’t slated until 2007, and a new version of Office might not see corporate offices for some time. The company hasn’t announced when it will air ads for either product. But vice president Mich Matthews says Microsoft will spend a nice chunk of its “People-Ready” budget across more ROIeffective media, namely the Internet. Google has begun selling advertiser image ads, which are displayed on its publisher partner sites. And according to Sheryl Sandberg, vice president of global online sales and operations for Google, the search giant recently introduced a “click to play” advertising service that lets brand advertisers pay fees when visitors click to play video ads, which are often construed as brand ads. Ad options in the online universe will continue to grow. The variety of newfangled online ads is proliferating. Blog spending increased in 2005, with over $16 million reportedly spent. Podcast advertising earned more than $3 million last year and is forecast to grow, with a projected 2010 revenue of more than $300 million, per research from PQ Media in Stamford, Conn. Companies such as EarthLink, for one, are experimenting with ads on Internet video blogs. And mainstream household names like Whirlpool are testing the waters of podcastlandia. Meanwhile, traditional media is far from dead. Instead, it is adapting. TV is beginning to mimic the Internet. Not only is it becoming a more on-demand media format (along with TiVO), but it’s also shaping up to be more measurable, too. Several media buyers, such as Zenith and Starcom, have signed on to receive Nielsen’s minute-by-minute ratings data, which will show exactly what viewers are watching. They’ll be able to find out which commercial breaks viewers actually watch. Some agencies are expected to also negotiate prices based on where a commercial falls within a program, or within a commercial break. eMarketer data shows that large projected increases amount to 24.4 percent in online ad spend, compared with much smaller growth (4.2 percent) for all media. Things have changed since the late ’90s as advertisers have become more comfortable with the Internet as an advertising medium. It was very easy for them to pull dollars from the Web or ignore it completely, but you just can’t do that today. During the previous boom, “traditional advertisers hadn’t yet embraced the medium, so growth slowed,” says Denise Garcia, an analyst at WR Hambrecht + Co. “That’s not going to happen again because Procter & Gamble, large auto manufacturers and other companies have said they are decreasing spending on traditional media, like television, in favor of online media.” Despite frequent reports of its demise, TV advertising is far from dead. JWT, in fact, has bought up all the front-page ads on the news blog site HuffingtonPost.com for one week, inviting users to view, comment on and share some of the agency’s best TV ads. The ads invite users to view JWT commercials for clients such as Ford, HSBC and JetBlue. After clicking, visitors are taken to a separate section where they can see nine different JWT spots, leave comments and forward the link to a friend. Jonah Peretti, a partner at HuffingtonPost.com, said the effort is a joint experiment to see if social media sites are fertile ground for TV ad messages to enjoy a viral effect: “If you make excellent advertising, good content and put it in an environment [where] it can be shared, you can learn a lot about how to improve what you’re doing.” DIANE ANDERSON is a senior editor at Yoga Journal. She previously worked for the Industry Standard, Brandweek, HotWired and Wired News. She lives in San Francisco. Filed under: Revenue Tagged under: 13 - September/October 2006, Advertising, Branding, Etail, Features, Industry Trends, mtadmin About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.