Online Brands Turn to Traditional Ads

NEW YORK At the onset of travel site Kayak.com's ongoing search for a lead agency, company co-founders Steve Hafner and Paul English marveled at the successful traditional advertising debut of Hulu.com.The Web site was just a concept 18 months ago -- without even a name -- and is now the Internet's second most popular video destination per Nielsen, in part due to a decidedly "old-school" tactic: a 60-second spot on Feb. 1's Super Bowl. The quirky "Alien" spot featured Alec Baldwin and the resulting spikes in brand awareness and Web traffic, including a 104 percent increase in monthly unique visitors to over 9 million, prompted Kayak to consider Hulu creative agency Crispin Porter + Bogusky for the company's estimated $40-60 million creative and media account. (Ultimately, the shop didn't reach the final round.)Kayak is among a handful of online brands, including Zappos.com and Amazon.com, that are now seeking traditional agencies (and offline tactics) to create mass awareness and define more broadly what they do. Zappos and Amazon, for example, are frustrated that many consumers don't know that they sell more than shoes and media content, respectively. And while online efforts, including paid search ads, are part of the answer, they are clearly falling short in the eyes of companies with ambitious growth plans and money to spend."Amazon, Zappos and Kayak -- we all have rational money and we're looking at [the marketplace] and going, 'You know what? In these bad times, we can actually accelerate our growth,'" said Robert Birge, chief marketing officer at Kayak in Norwalk, Conn. "If I spend this money, I'm actually going to get a positive return."These clients are leaving it up to the shops pursuing their accounts to determine what tactics are most appropriate, but each has expressed an interest in TV ads. In an RFP Zappos issued two weeks ago, the Las Vegas-based company said it was seeking "traditional mass advertising (print, TV, OOH, etc.), online advertising (brand awareness, co-op partnership development), grassroots/word-of-mouth and social media." And this month Amazon launched an online contest to solicit potential TV spots from consumers.The Seattle-based Amazon declined to comment on its search, which one source described as near completion. The online retailer, which in addition to books, CDs, DVDs and electronics, sells groceries and Kindle wireless readers, hasn't had a lead agency since 2002, when it split with Publicis Groupe's Fallon in Minneapolis.Kayak is considering three finalists for its account -- Publicis Groupe's Saatchi & Saatchi here and Omnicom Group units Goodby, Silverstein & Partners in San Francisco and 180 in Santa Monica, Calif. -- with the goal of selecting an agency next month. Zappos, whose RFP went to more than a dozen agencies, including some global networks, expects to complete its process in mid-August.Such searches for traditional agencies illustrate the limitations of online advertising and the power of TV spots, not withstanding the difficulty of assessing their impact on sales. "The reason why they are looking to TV is because they're looking to broaden their audience. They're looking to bring in new customers," said Barry Lowenthal, president of The Media Kitchen here, a unit of MDC Partners' Kirshenbaum Bond + Partners. Television advertising is "about bringing people into the fold that aren't already participating in the category or, if they are already participating in the category, might not be considering your brand. It's much higher up the purchase funnel."More broadly, the reviews demonstrate a willingness among online darlings forged via customer service, search, public relations and word of mouth to embrace marketing as a worthy investment rather than a necessary expense. "These tremendous online brands are recognizing that there's even more power in marketing," said Shane Ankeney, U.S. managing director at Interpublic Group's Initiative in New York. For Amazon, the move suggests a return to the past when it worked with shops such as Foote, Cone & Belding, Wieden + Kennedy and Fallon and spent $30-40 million in major measured media annually. Without a lead shop, Amazon's spending dwindled to less than $5 million in each of the past five years and only $700,000 in the first quarter of 2009, according to Nielsen.Kayak and Zappos have never been big spenders in traditional media. Nielsen recorded no major media spending on Kayak last year and just $11 million for Zappos. (Those figures, however, do not include online outlays.)In the past, Zappos took "most of the money" it would have spent on paid marketing and invested it in customer service initiatives, such as free shipping and staffing its call center, explained CEO Tony Hsieh. And what little it spent on paid advertising went toward online direct response ads (including search)."What we've found is that if we layer in a little bit of offline brand advertising, it improves the ROI of our online direct response campaigns," Hsieh said.That said, Hsieh acknowledged that his budget for branding efforts is limited, at $7 million. That figure pales in comparison to Kayak's, which represents about half of its projected annual spend of $100 million, and leads some observers to wonder how committed Zappos is to traditional efforts, particularly TV. Still, the allure of Hulu's rapid success may spur what appears to be cautious adopters into spending more down the line. As Birge sees it, these brands "have successful business models that give them the opportunity to fund accelerating their growth and, in spite of the popular folklore, human beings do not live sitting at a browser 16 waking hours a day. They still watch TV a lot, read newspapers and magazines, drive places where they see billboards and read their direct mail. And some of those forms of media may still be pretty good formats for delivering a selling message."

Brand Marketing

Online Brands Turn to Traditional Ads

Brian Morrissey

Andrew McMains

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Brian Morrissey

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