Director of Content at Econsultancy
05 October 2005 17:36pm
Online advertising is worth £1bn in 2005, according to the latest ad research issued by the IAB UK
. Great news for online ad agencies, portals and publishers. Or is it?
The truth is that this is great news for search marketing agencies, though you wouldn't know that to read the IAB's press announcement, or the coverage on the likes of the BBC (nor The Register, The Guardian or Reuters for that matter). None of these news stories stated that the growth has more to do with increased spending on paid-search, and that display ad spend (by percentage share) is actually in decline.
That seems to be the real headline, yet it was totally glossed over in the press. Maybe this was a little PR spin from the IAB, for the benefit of publishers?
What of the methodology? The IAB’s umbrella term of 'online advertising' consists of paid-search, classifieds, display advertising and email ads. Around 75 companies are said to have taken part in the research.
Surely if the IAB factors in paid-search then it should also include spend on organic search? And what about affiliate marketing (affiliates display banners and receive commissions)? Or email marketing campaigns (acquisition / list buying is included in the IAB US methodology)?
The definition of what is or isn’t ‘online advertising’ has led to an outcry from radio and outdoor ad executives, who are complaining about the role of paid-search in these figures (“search isn’t really advertising”). Whether you agree or disagree, we need a bit more transparency and little less spin. Why be so coy about the role of search in driving up the numbers? Why the Alastair Campbell approach? Maybe it's just that the IAB is prioritising the interests of publishers and portals, over the search engines and agencies?
The ‘online advertising is worth £1bn’ headline suggests that banner ads and suchlike have surged in popularity, when in fact the opposite is true.
So will these fluffy headlines generate a surge in display ads?
Certainly there is a need for such a surge. Display ads are down from around 36% share of online advertising to 33%. Paid-search has gained share of spend to more than 40%; classified listings and email ads have also gained percentage share on display ads (I’m not sure whether email was mentioned in the IAB UK's 2004 research?).
Is any of this a surprise? No. After all, publishers and portals alike have been making noises in the trade press about the need for new creative formats, acknowledging that display ads are losing share to search. But search isn’t just about paid ads. If the IAB is going to factor in paid-search, then why not also include client spending on maintaining organic search visibility, and other areas?
Our own research into online spending during 2005 has revealed that investment into interactive is spread across many different areas.
For example, our Managing An E-commerce Team study surveyed and interviewed around 100 FTSE500 companies to discover attitudes to spending, outsourcing and interactive marketing in general.
We found that the average company spends 11% of marketing communications budget on interactive media. This is about twice as much as the 5.8% spent on ‘online advertising’ according to yesterday’s figures from the IAB.
Our methodology for the Managing An E-commerce Team report went way beyond media spend, to include spending on creative services such as online ad design, as well as online fundamentals such as usability and accessibility. This gives you a better idea of how much is actually being invested into the internet by marketing teams (and hey, it’s still not enough).
There is also the market research we conducted for our Buyer’s Guides to consider. We’ve published sector-specific research in the following areas: Online Ad Networks, Usability, Search, Web Analytics, Affiliate Marketing Networks, Email Marketing and Online Customer Services. Each of these areas attracts significant spending from organisations that are serious about internet marketing and e-commerce.
The IAB’s figures are great in that they prove that more money is being spent on interactive media. We simply feel that there is a bigger picture to be seen, and that the IAB’s methodology should either be broadened or narrowed, depending on its aims, and to deflect criticism from other advertising sectors.
NB – E-consultancy is an IAB member; we didn’t contribute to its adspend research.
06 October 2005 15:41pm
Completely agree about the ad spend figures - a similar opinion was voiced in the US when the IAB released the figures there in this article I read last week (see link below):
Advertising spend vs Interactive marketing spendhttp://www.clickz.com/experts/brand/buzz/article.php/3552631
I think the key is to try and understand the difference between advertising and marketing - the two areas are more black and white in an offline sense, but there is an enormous grey area between the two when you look try to adopt the same approach online. To try and understand the share of offline vs online spend, you have to try and give them the same base definitions, otherwise it is like comparing apples and pears - which could explain why they have been defined as such.
I don't think the IAB are trying to favour anyone, but at a more macro level trying to push the more cynical companies with the money (both single-channel or multi-channel) to put more of their money into the online pot rather than any other. It's not going to take a company very long to figure out the best strategy for them and whatever online mediums (banner ads, paid search etc.) that suit them and their product best - so in the end it's everyone online area that wins.
Just as an afterthought, as you said - display ads have been losing share to paid listings for a few years - it'll be interesting to see what behavioural driven banner ads, which are really still in their infancy, will do to this ailing area of advertising.
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