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Michael Sands is tired of hearing how much the Internet is like television. But the marketing head of online travel company Orbitz hears this mantra time and again at meetings and industry conferences across the country. He says the refrain comes largely from publishers pushing the idea that the Net is more about connecting people with a brand rather than ringing up sales -- just like TV. "There's a notion that accountability is not the direction to go in," scoffs Sanders, who adds: "That's frightening. Worse, it's a capitulation."
While publishers can wave the flag with new studies purporting to illustrate the power of online branding, advertisers appear to be voting with their wallets. In its latest project on August 8, Internet tracking firm Jupiter Media Metrix formally cut its online-ad spending projection for 2002 from $7.3 billion to just $5.7 billion. The decline in revenues, combined with a glut of online ad inventory, has tipped the balance in favor of deals built on clickthroughs and other performance measurements. Many Internet sites are on their last legs and are desperate to strike any kind of deal to stay afloat. "Publishers who wouldn't have considered performance-based payments are now open to them. Times have changed," says Andrea Ching, assistant media director at OgilvyOne, the interactive arm of Ogilvy & Mather.
That's a boon to companies such as Orbitz, the online travel conglomerate that enjoys the backing of dozens of major airlines. The company spends a whopping 50% of its $100 million marketing budget online. Orbitz only cuts cost-per-click (CPC) and cost-per-acquisition (CPA) deals. Moreover, Orbitz often insists on a 24-hour or weeklong trial before it will sign on as a long-term advertiser. If Orbitz doesn't see results as good as, or better than, its top performers, it pulls its ads, often giving very little notice. "That's the way you have to play this game. You get a good return on investment and you make investors happy," Sands says. What about branding? Forget it. "If a publisher can meet our economic terms, Orbitz will sign a deal," says Sands. "Whether we like it or not, math overcomes branding."
BANNERS AND METRICS. Many publishers disagree. "Advertising is not a science -- it's an art," says John Henderson, vice-president in charge of marketing at Sony Digital Entertainment. Henderson believes the ugly economic environment has caused many advertisers to overlook the power of branding -- plus the chance to establish a relationship with customers. And the latest research would seem to support this view. In July, the Internet Advertising Bureau, online ad agency DoubleClick, and MSN each published research that consistently showed that even the humble banner ad boosted brand awareness by factors comparable to traditional ads. The new, larger ad formats that take up big chunks of online real estate did even better: Eighty-six percent of Internet surfers remembered a brand better after they saw a large-format online ad.
Experts warn, however, that moves away from accountability in advertising will only hurt the Internet in the long term: Accountability is the one thing that differentiates online advertising from the less exact forms of offline advertising. Moreover, if publishers convince advertisers that the medium's only benefit is improving brand, they may come up short against more traditional media. "With the Web's advertising impact on par with traditional media, its shortcomings in audience measurement and complexity of executing large-scale buys will come into sharper focus," says Forrester's Jim Nail.
So where is the happy medium? The key, experts say, is developing more sophisticated "back-end" metrics, which analyze the data from advertisers' sites, including which pages were visited, which products were sold, and whether the user was a new customer or a returning customer. Advertisers then need to match up the particular ad that drove the user to the site in the first place. Once there are enough data for a statistically significant sample, advertisers can determine where the most valuable customers are coming from and increase ad spending in that location. "Cost-per-click deals are cheap because they mitigate risk to the advertiser. But a CPM deal (cost per mill, as in "thousand") might have more value if it brings in higher-margin customers. The key is knowing where the good customers are coming from," says Maggie Boyer, vice-president in charge of media at digital marketer Avenue A.
ARE CLICKS THE TRICK? One online marketer who has taken this lesson to heart is NextCard. The online credit-card vendor built a sophisticated database marketing system that allows it to track the performance of every ad it runs. "As a marketer, this is fundamental," says David Dowhan, NextCard's group vice-president for customer acquisition. Dowhan remains amazed that more companies haven't done the same. "For whatever reason, most haven't put the underlying infrastructure in place to figure out how to market." NextCard's system can tell marketers how many customers signed up for the card and how much money the company makes from each customer. In particular, the system analyzes which customers transfer outstanding balances from higher-rate credit cards to their NextCard accounts. The higher the outstanding balance, the more money NextCard makes.
In the end, systems such as these could give advertisers more conclusive answers to the question: What do you want, clickthroughs or branding? That hinges on the development and installation of better tracking and analytical systems -- something that advertisers and publishers have mostly chosen to ignore in lieu of basic clickthrough or CPM measurements.
At the Jupiter Online Ad forum in New York last week, DoubleClick CEO Kevin Ryan used his keynote address to tell the audience that the online-marketing industry "didn't accomplish all that we could accomplish." However, that clarity might come too late to save many struggling Web publishers clinging to the CPM flag.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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