The Playbook for Attracting More Online Ad Dollars

Online advertising has taken a hit in this recession and, while it has fared comparatively well next to other forms of advertising, it’s also clear that there’s plenty of potential for expansion. According to research from WPP, while the Internet makes up approximately 20 percent of U.S. consumers’ media consumption, only about 12 percent of U.S. ad dollars are spent online.

This disparity has many causes and has generated numerous dissenting views on how to close the gap. I believe two important mind-set shifts need to take place to expedite an online shift of ad dollars:

1. Advertisers and agencies must understand the value of branded advertising online: The bulk of traditional advertising is focused on enhancing a brand, whether through 30-second TV spots, billboards or magazine placements. The primary objective is to get in front of a large audience with minimal targeting beyond the overall demographics of people consuming the selected outlets.

One major limitation of the traditional approach is a lack of transactional capabilities; a URL or 1-800 number usually serves as the call to action. This forces the audience to shift to another medium to get more information or interact directly with the brand.

Online ads, on the other hand, can easily fulfill both transactional and branded requirements. Premium Web publishers now have just as much prestige as any TV channel or magazine and their sales teams are consistently discovering new ways to package value for brand advertisers. Site visitors receive solid brand exposure and anyone who’s interested simply needs to click their mouse to learn more or commence a transaction.

Through advancements in rich media and HD video, even the long-established quality advantages of traditional media are disappearing with each passing year. And there’s no comparison when it comes to the Web’s targeting abilities. In other words, brand marketers are running out of reasons not to focus their efforts online. We need to help them recognize that.

2. The digital marketing ecosystem must cooperate to maximize the value of online inventory: The explosion of online video and social media has created new opportunities for online advertising to become more prevalent in our daily lives. The catch is that the corresponding explosion of all these user-generated pages has added inventory to the marketplace faster than it can be sold. This has pushed down the cost-per-thousand impressions that advertisers pay.

How the digital marketing ecosystem of publishers and agencies responds to this challenge will make or break our chances for success. Rather than pointing fingers and assigning blame, everyone must understand their roles and work together to maximize the revenue these millions of pages can generate.

For guidance on the best approach it is worth examining the travel industry, which has become the most popular category for consumers to conduct online transactions. Some publishers are decrying ad networks for dropping the price of online ads, which is similar to some airlines’ accusations directed at Priceline.com when it launched in 1998.

It wasn’t long, however, before airlines and hotels recognized that sites like Priceline and Hotwire play an important role in filling unsold inventory. As popular as the “name-your-own-price” approach has become, it still has limitations that will prevent it from ever becoming the sole method to purchase travel online. But it serves its purpose well, just as ad networks do for the online ad industry today.

Rather than fighting the advancement of players that make up a mature online marketplace, online publishers and ad agencies must instead work together and find new ways to utilize them.

It’s a tough market for advertisers and publishers, and blurring value chains and “frenemies” make it challenging for companies to plot their strategy for survival. But at the highest level, everyone in the digital marketing ecosystem shares a common goal. A rising tide lifts all boats, after all, and only through close cooperation will online advertising reach its full potential.

David J. Moore is chairman and founder of 24/7 Real Media, and currently serves as chairman of the Internet Advertising Bureau. He can be reached at david.moore@247realmedia.com.