IQ News: More Online Ads Equal More Visitors, Survey Says

Cash-strapped e-tailers looking to improve their bottom line should think twice before shaving their Internet ad budget, said Charlie Buchwalter, vice president of media research for AdRelevance, a division of Media Metrix. According to a report released today by the Seattle-based Internet ad measurement service, a strong positive correlation exists between online advertising and visitors to e-commerce sites. “It doesn’t appear to be a good strategy to ratchet down online advertising budgets,” said Buchwalter. “Those who are advertising online intelligently and aggressively are translating that into increased traffic.”
The report, which looked at Internet ad impressions and traffic patterns for online retail sites between January and May 2000, revealed that as the number of ad impressions for e-tailers grew, so too did traffic to their sites. The online retail segments of books/music/movies and computer hardware and software scored a high correlation between ad impressions and visitors of 0.82 and 0.87, respectively. The retail category of flowers/gifts/greeting cards showed a slightly lower, but significant correlation of 0.78. Buchwalter acknowledges that online advertising isn’t the only driver of traffic to sites. The increase could be a result of other factors, such as direct marketing or traditional advertising, as well.
In the wake of the predicted dot-com shakeout, some online retailers have decreased their Internet ad spending to make up for budget deficits and push for profit. But, this might hurt rather than help, explained Buchwalter. Although these measures may produce positive cash flow in the short term, they may result in reduced consumer awareness and fewer visitors in the long term. “There is no question that dot-coms are struggling,” Buchwalter said. Because of this, “there is a tendency for them to pull in their horns and cut online advertising budgets.” But, he continued, “You won’t get the profit unless you get the traffic to your site.”
According to the report, successful online-only retailers such as Amazon.com and eBay have created a brand name by running regular online campaigns consisting of 168 million average monthly impressions. On the other hand, less successful companies that struggle with brand identity and differentiation issues often have little to no online advertising and tend to operate in highly saturated or fragmented categories.
“Many of the more successful online retailers appear committed to online advertising, which they use to both drive traffic and build awareness for their brand,” Buchwalter said. “Online retailers that don’t quite have the same level of brand recognition, however, can still be competitive using online advertising.”
Dot-coms that have attempted to build their brand with big-budget television campaigns, yet have not seen a significant return, might want to refocus their efforts, advised Buchwalter. The study suggests that their ad dollars might be better spent on online campaigns. “If you look at the relative costs of television advertising versus online advertising, it’s a staggering spread,” said Buchwalter. n