Online advertising seems to have taken a backseat these days, as questions arise about whether Web surfers actually read or click the ads. The dot-com shakeout did not help, and what was once touted as a booming industry is lambasted with questions about its efficiency and accusations of not living up to its promise.
Recently, advertising kingpin DoubleClick said it would restructure its business in the United States and lay off some 10 percent of its employees because of "changing market conditions." The company has also warned that its earnings would be lower for 2001.
In addition, Internet bellwether Yahoo, which reported earnings Wednesday that barely beat analysts' lowered estimates, has been criticized for relying too heavily on online-advertising revenues. The company has said its transition from relying on such revenue from pure Internet companies to drawing from traditional businesses was not as quick as it had hoped.
But despite the struggles of online giants such as DoubleClick and Yahoo, providers of online advertising and media solutions vehemently deny that online advertising is dying.
Patrick Jonathon Wong, CEO and founder of AdSociety, a majority-owned venture of Pacific Century CyberWorks, admitted that the growth of online advertising has indeed slowed over the past quarters--some Internet-ad companies aren't meeting revenue projections and are even laying off employees. However, Wong, whose company launched less than a year ago, believes that it is fallacious to conclude that online advertising isn't working.
Slow? Yes. Dead? Hmm...
The flood of spending coming from dot-com start-ups trying to build brand has slowed significantly, Wong said. In 1999, these companies spent millions bombarding the market with advertising, but by mid-2000, many were out of business. Funding was difficult to come by, even for dot-coms with rational business models, and marketing budgets were often the first to be cut.
"In 1999, many cited low click-throughs as evidence that advertising wasn't effective," he said. "In 2000, however, people learned that we also need to take into account measuring behavior, not attitudes. The bulk of advertising is for branding, not direct response.
"You don't measure the effectiveness of a taxi ad, for example, by the number of people that hail the cab and direct the driver to the store advertised on its roof. Branding is about changing people's attitudes over time. This is measured by attitudinal metrics such as message (ad) recall, message association and purchase intent."
Hong Kong-based Engage Asia, a majority-owned operating company of CMGI, agrees. It divides advertisers' objectives into two broad categories--advertising that focuses on building brand image, and advertising that focuses on generating direct response, customer-data acquisition and online sales.
Marc Miller, Engage Asia's general manager for South Asia and Singapore, says marketers' expectations from online advertising has been one of the biggest problems for his company. They want to see direct response, customer acquisition and e-commerce, yet campaigns have been largely focused on brand image, in terms of the message, creative execution and media buy.
Miller admitted that online advertising has yet to deliver strong brand impact, and he attributed this mainly to limitations on ad file size and bandwidth. But this will change, Miller said with the increasing use of Flash-enabled ad formats in large, heavy file sizes such as 70KB to 100KB.
Miller's advice is for marketers to change their strategies and look at campaigns that focus on branding.
"To some extent, the great strength of online advertising--the ability to accurately measure return on investment--is also a weakness, since traditional media are not held to the same levels of accountability," he added.
Right people, right message, right time
Online advertising, Miller said, with its power to target individuals based on demographics, psychographics or demonstrated behavior, is able to reach "the right people with the right message at the right time with minimal wastage."
He added that the real-time feedback loop of this medium allows savvy marketers to test different messages across multiple online media channels, pushing campaigns toward those that produce tangible results and eliminating those that aren't working.
"With the technology available today, it is easily possible to see how these different messages, offers and online channels translate into tangible results," Miller said. "Campaigns (also can) be changed in real time toward those messages, offers and media channels which produce the best results. This insight into customers' motivators could never previously have been done in real time, nor could the response be measured so finitely."
Besides, marketers follow eyeballs, Miller said. As the number of Web surfers globally increases, "marketers will, by necessity, use online advertising to reach their target market."
AdSociety's Wong also remains optimistic that advertisers will invest more online.
"What we are finding now is a slow but steady trend that the dot-com revenue is being replaced by the spending of traditional advertisers," he said. "This means that when all is said and done, the online-advertising industry will weather the market correction.
"The fact that the number of companies advertising online in the last year has more than doubled is encouraging."
Staff writer Ariel Tam reported from Singapore.