Commentary
8/14/2008
07:30 PM
Fredric Paul
Fredric Paul
Commentary

Online Advertising: The Good, The Bad, And The Ugly

bMighty is in the business of selling online advertising, so we tend to take it pretty seriously. That's why I didn't know what to make of three seemingly contradictory articles on the topic, all from the same source.



bMighty is in the business of selling online advertising, so we tend to take it pretty seriously. That's why I didn't know what to make of three seemingly contradictory articles on the topic, all from the same source.The three pieces all hail from Adotas, which focuses on the Internet advertising and media industry, but the similarities end there. The "Good" piece argues that the current economic troubles won't hurt online advertising, the "Bad" article says advertisers don't trust the metrics of their online campaigns, and the "Ugly" story warns that the vast majority of consumers like traditional ads better than new-media ads.

Confused yet? I am.

First, the Good: In an interview with Frank Addante founder of ad network Rubicon Project , the reasoning goes like this:

ADOTAS: How do you think the softening economy will affect online advertising?

ADDANTE: I dont think it will. Because there is a discrepancy between where consumers are spending their time and ad spending there is a natural reconciliation that needs to occur. The audience is now, for the most part, all online. Meaning, this is where the best reach is and where the ad dollars should be spent. There might be a softening in the overall advertising spend (including creative agencies) but I dont think online advertising will be affected. Also, because one-third to half of all site traffic comes from international traffic, online advertising as a whole is less susceptible to feeling the repercussions of the U.S. economy.

There is also less risk in online advertising. For instance, big brands are able to execute on campaigns that typically would take more money and time if produced for television. Online advertising campaigns offer the opportunity to produce content at a lower production cost and in smaller fractions.

A great example of this is Google and Overture. I believe these companies thrived (and innovated) in the last recession because they were providing services that offered efficient ways to make money online.

Next, the Bad: In a piece called Why CFOs Dont Believe in Online Advertising, author Stephan Pretorius argues that many "business managers... are not convinced about the value and accountability of online advertising." Because metrics are often collected in silos "the numbers simply arent adding up in many cases." To restore credibility, Pretorius says, advertisers need to 1) track everything, 2) integrate the data, 3) compare apples to apples, 4) de-dupe the conversions, and 5) make your metrics relevant to your business.

Finally, the Ugly: This one really hurts. According to coverage of a segmentation analysis study by Mediamark Research & Intelligence, only a pathetically small 9% of Americans prefer to get their ads via emerging media vs mainstream media. That means 9 out of 10 would rather watch a TV commercial or see a billboard. On the plus side, emerging media fans tend to be young, fashion-forward trend-setter types.

So, what are we to make of all this?

Well, you could say it means that online advertising isn't ready for prime time. But I say it means that despite the enormous growth in online advertising over the past few years, there's still a lot of potential as metrics get better and even more people become accustomed to new media messages. Growing companies are in a perfect position to benefit from the growth of the medium.

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