There are times when companies have no choice but to rationalize in order to successfully keep the ship afloat. At the end of 2008, we are probably experiencing one. Our neighbors to the south are entering a period of recession and the repercussions are likely to hit Canada hard. In these situations, marketers need to comb through their spending and this exercise will certainly lead them to increase their online investment and shun traditional advertising more than ever.
According to numerous studies, the greatest losses are expected in newspapers, where advertising expenditure is expected to fall from 21.1% in 2006 to 13.2% in 2010. A decrease which will be almost entirely taken up by the Internet which, for the same period will increase from 7.9% to 14.2% of advertising expenditure (see table 1).
WHY THIS SHIFT TO ONLINE ADVERTISING
One of the important advantages of online advertising is that it is still inexpensive when compared to its counterparts in newspapers, television and magazines, for example. Indeed, the Internet allows many businesses with minimal marketing budgets to still be able to promote their businesses thanks to the flexibility and low barriers to entry of online advertising. Think about it, for a majority of Canadian companies it is impossible to carry out a commercial on television since the costs associated with the production are much too high. By turning to the Internet, they gain better control over their costs.
The Internet is also an environment in which people are active rather than passive. They are attentive and their brain is generally more awake than when they watch television for example. Speaking of which, it would seem that one of the activities that many Americans do while watching television is…sleep. Have you ever seen a user sleeping while browsing? Probably not. The fact that the Internet user is active makes him a consumer who will potentially look for a product/service and therefore be more inclined to be influenced by an advertisement than when he is passive. The Internet therefore makes it possible to do more advertising in “pull” rather than “push” mode and to target a particular clientele rather than targeting a large audience that is probably not very interested in what is offered to them.
We should also note that the time spent on the Internet now exceeds the time spent in front of any other media combined among men aged 18 to 34 and this should be the case among women by 2010. Considering this fact, it is quite normal that the percentage of online advertising compared to other media tends to increase.
With the constant growth of e-commerce, we cannot overlook the fact that it is also possible to know exactly the return on investment of each type of online advertising. Metrics quality and ROI accuracy by ad formats/websites/etc. suggests that many marketers will invest more in media that allows for more accurate measurement. Indeed, it is much easier for them to justify themselves by demonstrating the benefits of each dollar invested.
ALL FORMATS ARE NOT CREATED EQUAL
Even if online advertising is growing strongly, the fact remains that not all formats will necessarily receive the same attention from marketers. Thus, the use of online video advertising and promotion in social networks should be marked by the strongest growth of all media between 2008 and 2010 with growth of 128%, 70% and 137% over these three years. On the other hand, banner (display) type advertisements will obtain a much more moderate growth.
PROFITABLE, ONLINE ADVERTISING?
Some marketers are hesitant to invest online for fear that their investments will bring them little results. However, online advertising is proving day after day to be among the most profitable marketing approaches. For example, companies like GM are massively transferring their budget to the Internet, going from 197 million in 2007 to 1.5 billion within 3 years. This approach will significantly reduce the company's advertising budget in other media.
Online advertising is also extremely profitable in conjunction with other media. A CMOST (Cross Media Optimization Study) study conducted by the IAB Canada in conjunction with Dove demonstrated that the ROI (Return on Investment) of its campaign for the Essentials product line would have been maximized for brand awareness by the allocation of 40% of the budget to online advertising. These numbers are a far cry from what the vast majority of businesses invest online.
INTERNET ADVERTISING… ON MOBILE DEVICES
Finally, more and more advertisers want to explore mobile phone marketing. In this sense, it is important to remember that mobile phone technology is leading more and more people to browse the Internet with their phone. According to Nielsen Mobile, 57% of mobile phone users who saw advertising on their phone saw it on the Internet, followed by text messages with 52%. By advertising online, advertisers therefore make sure to reach this customer segment, which risks encouraging even more advertisers to invest in online advertising.
In conclusion, although the economic slowdown is likely to accelerate advertising spending on the Internet relative to other media, it is important to mention that this change will not happen overnight. Indeed, advertising on the Internet is still very young for many advertisers and their agencies who must get to grips with the medium before investing massively in it. Moreover, it would be wrong to say that the Internet will completely replace television, newspapers and magazines… it will eat away only a portion of them until a point of equilibrium. Until then, however, they will certainly have to redouble their efforts to convince advertisers that they offer results as convincing as online advertising.
