Lessons From Online Practice: New Advertising Models for All Media by Chris Trayhorn, Publisher of mThink Blue Book, August 1, 2008 The Online Advertising Playbook aggregates and synthesizes what has been learned about online advertising during its first 10 years. The book answers a challenge posed to The Advertising Research Foundation (ARF) by a number of marketers and perhaps most clearly expressed by Gillette’s Pat McGraw: “I really don’t need another highly charged sales pitch on the power of Internet advertising. What I would like to know is how it works and why it works.” The ARF reviewed, studied and learned from a collection of over 1,200 academic studies, industry research and professional articles and has developed strategic principles and guidelines for effective online advertising, each illustrated by case studies spanning the full spectrum of marketing objectives, from lead generation to loyalty. This paper includes quotes from participants in and contributors to the development of the Playbook. Looking forward is especially important now, as the industry is crossing an inflection point from the conventional mass media interrupt-and-repeat model for advertising to a family of advertising models centered on relevance. Why now? The first reason is obvious: Consumers are spending more time online. Jupiter Research reports that online consumers spend roughly the same amount of time on the Internet as they do watching television – about 14 hours per week. High-speed connections, of course, are a major reason why; nearly 80 percent of U.S. residential Web users went online with broadband connections, and those broadband users spent about one-third more time online than dial-up users. Broadband is ubiquitous and always on. Faster speeds provide richer, more interactive consumer experiences as well as access to and use of more entertainment options, information and services – both commercial and social. A second reason why advertising models are shifting is that broadband and new technologies encourage consumers to create, contribute and share their thoughts and experiences and engage with other people. Blog-tracking service Technorati claims there are more than 67 million blogs, with 175,000 created daily. Today every PC or Mac ships with video-editing software that can burn discs or easily convert video to a variety of distribution formats. Entire multitrack recording studios rivaling the most professional operations fit onto a few discs. Image-, music- and videosharing sites like Flickr, MySpace and You- Tube abound. Movie studios, music labels, advertisers and conventional media no longer fully control content, nor do they have a lock on the means of production and distribution. The “disruption” of these industries and their economic models is daily news in the business section. A final reason for the emergence of new advertising models is that broadband penetration and consumer adoption of new technologies have encouraged advertisers to experiment with and employ banners, search text advertisements, Email, interactive rich media and streaming audio and video, and consumers to learn about brands, participate with brands in new ways and create new brand meanings. At first, marketers quite naturally considered online media as extensions of space-and-time media: TV, radio and print. Advertisements during most of online advertising’s first 10 years filled measured spaces on Web pages with variously sized banners, rectangles, buttons or leaderboards. For a short while following the dot-com collapse, the Internet was nearly written off, due to the failure of many highly touted website businesses, many of which were based on advertising-supported revenue models or assumptions about consumers. We know now the problem was not the Internet but rather those Web companies’ business plans, management and unreasonable expectations for success. Post-collapse, as consumers and companies continued moving online, more practical business models emerged and started proving themselves, such as search advertising (now 40 percent of online ad spending) and e-commerce. Along with these came refinements in targeting advertising, understanding how websites build and hold audiences, and deeper insights into online consumers and their media and buying patterns. New technologies and broadband adoption enabled advertisers to make enormous creative leaps and develop landmark campaigns, such as that for BMW Films. These leaps are likely to continue, as marketing and advertising organizations are increasingly staffed by individuals who grew up with the Internet. Online properties have played some role in forming young marketers’ and advertisers’ world views, just as television, film, radio and print did for prior generations. We can see that the sine qua non for interrupt-and-repeat-advertising – one-way communication from advertiser to consumer – is vanishing from online advertising. Marketers are moving to three new models of advertising. The first, the on-demand model, is based on consumers’ abilities to select and choose their content and interactions with brands. The second model is the permission-based (opt-in) model, centered on engagement, not exposure. The final model is one of advertising-as-service to consumers. On-Demand Model Central to this model is the consumer as content aggregator, filterer, scheduler, exposer and disposer. The era of consumers reading, watching or listening according to the media’s set schedules seems almost quaint; today, nearly every media organization is promoting its ability to be seen or heard whenever consumers want. TiVo and DVRs are emblematic of this trend. Even network television is experimenting with on-demand models. Episodes of some programs, even wildly popular ones, are sold on Apple’s iTunes or made available from a network’s own online distribution systems, such as CBS’ Innertube, or on a show’s official website. A regular train commuter might choose to spend her Monday morning ride watching video podcasts of business news programs that were originally broadcast over the weekend. In fact, many media have enjoyed a serendipitous benefit from the on-demand trend: Their archives have become hot properties as consumers seek to dig back into previously aired programming. The broad adoption of Internet search tools supports the on-demand model. Before search engines and quality websites, consumers were at the mercy of manufacturers, retailers and distributors for brand information. If the store was closed or consumers missed an advertisement, they were out of luck. Today consumers routinely access, evaluate and act on brand information found via search engines and Web pages 24/7. Another important aspect of the ondemand model is content personalization. Consumers want to leverage and harness the power of brands by customizing content to their interests, needs and tastes, often by managing site preferences such as “I want to see the weather in the 10016 and 90210 ZIP codes on my home page,” or “Update me only when there’s new information about Brand X.” With choice comes responsibility. Jeffrey Cole, director of the University of Southern California’s Center for the Digital Future, writes in the Playbook that “people like choice, but not too much choice”. Too much choice can be frustrating, overwhelming or immobilizing and counterproductive from a brand viewpoint. Furnishing consumers with tools to manage a reasonable number of choices is far better than giving them every possible option. For brand marketers today, it is not just about stimulating demand for their products and services but also about inspiring consumers to include those brands in the choices they make. Because consumers’ media consumption is becoming so individualized, there are many implications for brand advertising. Playbook contributor Rishad Tobaccowala, CEO of marketing strategy firm Denuo, pointed out that there is a need to revise widely held views on targeting. He argues, “In an on-demand world, you have audiences of one whom you need to re-aggregate into large enough audiences to target with both scale and relevance.” This idea stands the traditional view of segmentation on its head and signifies that new types of thinking are needed to exploit the advertising opportunities inherent in the ondemand model. Engagement Model The engagement model centers on two key ideas: high relevance of brands to consumers and the development of an emotional connection between consumers and brands. Additionally, engagement occurs – as do all relationships – in a social context that can influence the quality and duration of the engagement. “Consumers want to get involved with brands they care about and give brand marketers explicit permissions, through an opt-in program, to involve them with the brand,” writes Playbook co-author Joe Plummer. For these consumers, brands provide opportunities (not always taken) that go beyond typical transactional relationships to a hierarchy of privileged statuses and rewards. The “brand ambassador” is probably the highest status brands bestow on their best consumers. Ambassadors have insider access to marketers and gain recognition and social standing in the larger brand community. Microsoft’s Most Valuable Professional program, which numbers more than 2,600 members in 81 countries, is a classic example of the ambassador-type of engagement program. Ambassadors are not limited to high tech. Companies like Del Monte Foods also maintain small, very focused communities that give guidance and direction. Because engagement hinges on emotions and relationships, marketers adopting this model conceive it differently from traditional advertising. The standard learning- and-persuasion measures commonly applied to 30-second TV spots or online banners (e.g., brand awareness, knowledge of brand attributes and purchase intention) are losing ground. Marketers are increasingly interested in understanding their brands’ social aspects. These include the ability to involve, inform and entertain and, in the longer term, co-evolve with consumers through the creation and ongoing development of brand meaning. Engagement is much more than “I know you.” In its ideal form, it is about bonding, shared meaning and identification. Harley- Davidson is perhaps the ultimate example. Professionals writing about engagement view it as an opportunity because, once consumers have chosen to receive brand communications, the strategy is to make it worth their while by providing compelling brand experiences. Marketing Insight Corp. CEO Vincent Barabba says that consumer choice can “… lead to greater and more meaningful engagement between the consumer and the provider of products and services.” A similar and more urgent thought is expressed by Digitas Chief Marketing Officer David Edelman: “… consumers are seizing control. Marketers have no choice but to reframe their perspectives and deliver engaging experiences that inform, educate or entertain. It is about defining an engaging concept … making it come to life … and enabling consumers to call it their own.” Engagement strategies are applicable both for B-to-B and B-to-C marketers. Visa USA, for example, created its Business Breakthrough program to target small businesses and dramatize the benefits of working with Visa to become more efficient and profitable. Visa held a competition to identify one- to five-person businesses that needed improvements in areas like marketing, organizational development, technology or accounting. After selecting finalists, they hooked the businesses up with appropriate consultants and created video case studies. Research shows that this target audience watches videos more than larger business customers and that they are more eager to participate in contests and related events. In just three months, the campaign generated more than 2 million visits to the Business Breakthrough site. In an example of consumer packaged goods, Nestle Purina PetCare’s family of websites includes informational sites as well as sites exploring the emotional connection between pet owners and their pets. The company furnishes customers with free picture-sharing tools, personalized podcasts, ringtones and desktop wallpaper – all designed to strengthen the three-way bond among brand, pet and consumer. Notably, Purina has gone even further, building engagement experiences off its proprietary websites; the company launched a page of Purina downloads on iTunes and maintains a presence on Yahoo’s pet portal, where it contributed the “Pet Weather” widget that, in addition to the forecast, provides owners with witty sayings from their dogs or cats and gives them the ability to personalize. Says Arc Worldwide account director Chris O’Brien, who handles Purina’s interactive, “If you bring them the right tools and the right information, you are going to build an affinity for your brand.” As these examples show, the engagement model is not mere diversion or mindless entertainment but a disciplined approach for achieving brand objectives. Engagement depends on leveraging consumer insights to focus the relationship and guide the experiences through which brand meaning is created, grows and endures. Solid engagement strategy is rooted in consumer data, drawing upon multiple sources that assist marketers in evaluating their engagement efforts, and takes place through multiple communication channels and touch points. Advertising-as-a-Service Model Advertising-as-a-service aims to provide consumers with information and capabilities that smooth transactions or enhance brand engagement. Playbook contributor David Kenny, Digitas chairman and CEO, aptly describes this approach as first identifying the services and information consumers need and then creating the messages and experiences relevant to those needs. Planning campaigns begin with questions from the consumer’s viewpoint: What services does a consumer need? How does the service need to function? What is the best platform, or combinations of platforms, to deliver the service? These questions apply to almost every product category. These messages and experiences occur across media and in both branded and third-party forms. One task for brand marketers and their agencies, therefore, is helping consumers manage the variety of sources brought to bear during brand learning and decision making. Advertising-as-a-service can also include personalized services. Like the good country doctor who treats patients from birth through old age, marketers are increasingly able to capture their consumers’ histories and use them to provide targeted services. Some online retail websites, for example, pop up a help window when shoppers have performed a certain number of searches in a short time. It may be that they are having difficulty finding an item or just are not sure what they want. Land’s End is one retailer that furnishes shoppers with a service that answers the question “How will this look on me?” Consumers can customize virtual models with their sizes and proportions to see how a particular item of clothing is likely to fit. And service can get even more specific, based on behavior. These are but a few instances where a little guidance may be very helpful and tip the balance from browsing to buying and improving the brand experience. The downside to the good country doctor is that, as personal as he is, he cannot provide service beyond a local area. Marketers do not have that problem; they can use technology to scale their services to large numbers and are not limited by geography or time. Advertising-as-a-service is perhaps the most personal of the three models discussed and, for this reason, might be considered the most altruistic. Brands are helping consumers make decisions in their enlightened self-interest. Marketers still need to make sure that they deliver a helpful service at the appropriate times and avoid the trap of substituting technology for consumer insight and connection. Applying the Models First, it seems clear that while each model may be used alone, there are interrelationships among the three and they can be used in whatever combinations marketers deem best for their brands. Second, the new models shift attention away from traditional one-way direction of advertising centered on reach, exposure, cost-per- -thousand and standard brand metrics to measures that evaluate the quality of the relationships among consumers and brands, of which there are many. In Kenny’s words, “Engagement trumps awareness.” Third, the new models emerge from new technologies, but they are not determined by technology. Technology is an instrument of strategy and execution. MSN Corporate Vice President Joanne Bradford points this out in her Playbook contribution: “Start with the consumer to understand what drives people’s passion for your products and services, and then determine how you can use technology to deepen those relationships.” Fourth, deepening those relationships depends on collecting and aggregating data on individuals and combining those findings with additional sources of consumer information and insight. These new models provide marketers with flexibility and a range of options they can apply as consumers and situations warrant. “The best thing,” Joe Plummer writes in the Playbook, “is for brands to experiment with the model, or combinations of models, that suit the brand best.” This paper is adapted from The Online Advertising Playbook, co-authored with Joe Plummer, Taddy Hall and Robert Barocci. ENDNOTES Plummer, Joe, Steve Rappaport, Taddy Hall and Robert Barocci, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Dawley, Heidi, “Timewise, Internet Is Now TV’s Equal,” MediaLife Magazine, February 1, 2006. Nielsen//NetRatings. “Over Three-Fourths of U.S. Active Internet Users Connect via Broadband at Home in November,” December 12, 2006: [URL: http:// www.nielsen-netratings.com/pr/pr_061212.pdf]. Technorati, “About Technorati”: [URL: http://technorati. com/about/], 2007. Cole, Jeff, “Changing Rules and the Rules of Change,” Joe Plummer, Steve Rappaport, et al, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Wagner, Randy, Brandweek Interview, January 22, 2007: [URL: http://www.brandweek.com/bw/search/ article_display.jsp? vnu_content_id= 1003535335]. Tobaccowala, Rishad. “Learn as You Do,” Joe Plummer, Steve Rappaport, et al, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Barabba, Vincent, “The Challenges of Change: Relevance, Empowerment and Authenticity,” Joe Plummer, Steve Rappaport, et al, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Edelman, David C., “From the Periphery to the Core: As Online Strategy Becomes Indistinguishable from Marketing Strategy, Organizations and Agencies Will Never Be the Same,” Digitas, Inc., 2007. Champagne, Christine, “Dear Visa: How Visa Used Video Case Studies to Give Free-of-Charge Advice to Small-Business Owners,” OMMA Magazine, Feb. 2007a. Champagne, Christine, “Going to the Dogs … and Cats,” OMMA Magazine, February 2007b. Kenny, David, “Advertising as a Service,” Joe Plummer, Steve Rappaport, et al, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Plummer, Joe, “Measures of Engagement,” New York: The Advertising Research Foundation, 2006. Bradford, Joanne, “Future: Fast Forward,” Joe Plummer, Steve Rappaport, et al, The Online Advertising Playbook, New York: John Wiley &Sons, 2007 (in press). Filed under: White Papers Tagged under: Perform, Stephen D. Rappaport, White Papers 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.