Internet: the lifeline of ads in this time of recession

There are moments where a company has no choice but to ration to maintain their boat afloat. In this end of year 2008, we are probably living through one. Our neighbors down south are entering a recession period and there is a strong chance the repercussions will hit head on in Canada. In these situations, marketers must look over their expenses with a fine toothed comb and this exercise will certainly encourage them to increase their online investments and avoid traditional advertising more than ever.

After numerous studies, the biggest losses are foreseen in newspapers where ad spending is expected to drop from 21,1% in 2006 to 13,2% in 20210. A drop that will practically be compensated by the internet, since for that same period will increase from 7,9% to 14,2% (see table 1).

Why this shift towards online advertising?

An important aspect of online advertising is its inexpensiveness in comparison to its counterparts print and television. The internet allows a number of organizations that have minimal marketing budgets the capability of promoting their business due the suppleness and low entry barrier of online advertisement. Think of it, the majority of Canadian organizations can’t produce a television ad because of the high associated costs. They turn to the internet, and gain a higher control over their expenses.

The internet is also an environment where users are more active than passive. They are more attentive and their brain is generally more alert than when watching television for example. On that note, it seems that one of the activities a number of Americans do while watching television is….sleep! Have you even seen a person surf the web while sleeping? Probably not. The fact the person surfing the web is active makes them a consumer that will potentially search for a product or service and is therefore inclined to be influenced by an ad more than when they are passive. The internet therefore facilitates the “pull” over the “push” advertisement strategy and targets a particular clientele over a larger population that probably has little interest in what you offer.

Also note the time passed on the internet now surpasses the time passed all other media amongst men 18 to 34 years old and will be the case for women from now to 2010. Considering this fact, it is perfectly normal that the percentage of advertisement online in relation to other media will increase.

With the constant growth of ecommerce, we cannot disregard the fact that knowing the exact return on investment of each advertisement type online is a possibility. The quality of the metrics and the precision of the ROI by ad type/internet site/and so on brings you to the belief that marketers will invest in media that will allow for precise measurement. Essentially, it is a lot easier for them to justify a budget by showing the return of each dollar invested.

All types were not born equal

Even if online advertisement is in full growth, not all types will necessary gain the same attention from advertisers. Online video advertisement and social media promotion will be the strongest among all other types combined between 2008 and 2010 with a growth of 128%, 70% and 137% respectively for these 3 years. On the other hand, ad banners will see a much more moderate growth.

Online advertisement, really profitable?

Certain marketers hesitate to invest online in fear that their investments will bring little results. However, online advertisement is proving day after day as one of the most profitable marketing approaches. As an example, companies like GM are transferring massive amounts of their budget towards the internet passing from $197 million in 2007 to $1.5 billion in 3 years. This approach will considerably reduce the ad budget of the organization for other channels.

Online advertisement is also extremely profitable in conjunction with other channels. A CMOST (Cross Media Optimization Study) study, lead by the Canadian IAB in relation with Dove demonstrated that the RCI (return on capital invested) on the Essentials line of products campaign maximized the brand notoriety with 40% of the budget spent on online advertisement. These numbers go a long way that the large majority of companies should invest online.

Internet advertising….on mobile devices

Finally, more and more marketers want to explore marketing on mobiles. In this sense, it is important to remember that mobile technology is encouraging more and more people to surf the internet on their cell phone. According to Nielson Mobile, 57% of cell phone users that have seen an advertisement were on the internet followed by 52% via SMS. By advertising online, marketers ensure tapping this segment clientele which will incite a lot more advertisers to invest online.

Granted that the economic slowdown runs the risk of accelerating the internet advertising expenses in relation to other media, it is important to mention that this change will not happen overnight. Internet advertisement is still very young for many marketers and agencies alike that need to win over the media before making a massive investment. Moreover, it would be wrong to say that the internet will completely replace television, newspapers and magazines…it will only take an equal portion from it. From now to then however, traditional media will need to double their fervor to convince advertisers they offer results as conclusive as online advertisement.