Even as Web advertising is reaching new heights, we learn that it is very underweighted in ad spending. I sat in on a briefing session from the Online Publishers Association called Eyes on the Internet. The Chicago session was quite crowded, with a diverse group of advertising and publishing people anxious to hear about research on how real people use media like TV, radio, and the Web. It’s worth noting that the sponsors of this series of briefings are online publishers, who have a vested interest in making Web advertising seem like the greatest marketing opportunity ever; still, the findings were quite interesting.
BusinessWeek Online is one of the participants in the OPA, and they published a brief summary of the work in How We Use the Web. The part the OPA would really like ad agencies and big advertisers to take note of is neatly summed up in that article:
So what does all this mean for advertisers? For starters, though ad spending is shifting to the Internet, it has yet to catch up with consumers’ habits. About 17% of the time spent using consumer media is devoted to the Internet, Ball State found. But the Net accounts for only 8% of advertising spending, say the researchers…
That suggests that allowing for consumer behavior, ad spending is, perhaps, only half of what it should be. This is a gross generalization, of course, as the media are different, and the advertising technology is quite different. Perhaps ad spending on the Web is lower because it’s more effective and targeted due to use of contextual and behavioral targeting, the existence of millions of specialized “channels”, etc. Then again, if Web ads are indeed more effective, maybe it should be overweighted in ad spending dollars.
To put this in context, a couple of weeks ago we saw that ad spending on the Internet had taken a big leap upward.
U.S. Internet advertising surged 38 percent to a record $3.9 billion in the first quarter as marketers moved additional dollars to the Web… The Interactive Advertising Bureau and PricewaterhouseCoopers surveyed leading companies that sell advertising space online, including Yahoo Inc. and Google Inc. , which are benefiting as consumers spend more of their media and purchasing time on the Internet. “The momentum has continued to build in the Internet advertising space,” said David Silverman, a partner at PricewaterhouseCoopers. “More and more advertisers are seeing the effectiveness of the medium.”
That was no doubt cheery news to the OPA folks, who were probably well aware of this trend from their own results. Not everyone thinks the growth will continue its torrid pace. An article in Financial Times - Deutschland suggests that the growth in Web ad spending will slow considerably over the next few years.
Despite the occasional pessimism, I’m with the OPA on this topic - there’s still a long way to go in making the Web an efficient and desirable ad medium, and as it evolves, and as people spend even more time on the Web, ad dollars will follow. Some of the growth will come from sophisticated user targeting by big sites - the more effective the ads are, the more advertisers will be willing to spend. A good portion of the growth, I think, will come from advertising on smaller sites that in aggregate get huge amounts of traffic. If you talk to many site owners, you’ll find many still aren’t happy with their ability to monetize their traffic. Google Adsense was a huge step forward, and greatly appreciated by smaller site owners - they finally had at least some opportunity to sell targeted (and higher cost) ads because Google was able to target their pages automatically for appropriate ads. Still, many site owners still feel undercompensated compared to major sites that can earn higher per-page revenue. In the coming years, we’ll see improvements in Adsense and other systems for effective ad delivery across the entire Web, leading to higher total ad spending.
In another post, we’ll cover some of the interesting media research being done at Ball State Univerisity.
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