Online Advertising Can Click

Online advertising can deliver users at the lowest price around. But like all marketing, its cost-effectiveness depends on management.

Within six months after the April 2000 tech-wreck, Internet Backlash had well and truly arrived. Nothing proved it better than the sudden welter of sceptical articles about online advertising. An October 2000 headline in the online edition of the Washington Post screamed that "Advertising On Internet Doesn't Click", with one ad agency research head quoted as declaring flatly that online ads don't work.

Now I'm happy to declare my belief that making money out of online ads is a tough business. I thought the ad-driven Yahoo wildly overvalued at $US250, and at its current price it is probably overvalued still. I've seen the figures showing that a typical banner ad prompts less than 0.5 per cent of viewers to click on it, a rate that has been falling for several years. I'm only too happy to point out that the online advertising industry carries levels of unsold ad "inventory" that would scandalise most offline business managers. I'll willingly quote the findings of groups such as Jupiter Media Metrix that far too many companies have signed overpriced deals with Web portals on the basis of spurious claims about "reach", only to be disappointed by traffic, transactions and site loyalty. And I'll remain cautious about predictions that online ads will make up eight per cent or more of US advertising by 2005.

After all, I work for a Web business - eChoice - which carries no ads itself, but which does buy ad space in very large quantities. It's in my interests to play down the appeal of online advertising. The less appeal it holds for others, the cheaper it will be for my business to buy it.

Yet that same Web business at which I work uses online ads every day to successfully attract people keen to take out the home loans we arrange. It's hard for me to ignore such obvious daily evidence of online advertising's power to bring together buyers and sellers. eChoice marketing director, Christine Morriss - a former general manager of Internet marketing consultancy WSA Online - says simply that "online marketing has already demonstrated itself to be very successful".

Like other smart marketers, Morriss sees the Internet as a powerful tool for "acquiring customers" at a well-understood cost. If customers click on an online ad to start transacting with you, you really do have an unparalleled opportunity to understand how much you're spending to attract them.

But Morriss stresses that marketers must actively manage online ad campaigns. They must aim to control the cost of buying space, select the right space, and put the right advertising creative in it. They must test online ad campaigns before spending large amounts of money. And as they test, they must clearly understand what will constitute a marketing success or a failure. (Morriss's willingness to test and measure ads reflects her broader attitude: before becoming a marketer, she was a university engineering lecturer.)

Measuring and refining online ad efforts, of course, looked sort of dull an un-visionary back in the heady days of 1999. Back then, "new-economy" investors were sold on the idea of growth at any cost and "old-economy" investors just wanted their CEOs to deal them into all the dot-commery. So many firms spent Internet dollars while ignoring the paltry revenues their work was bringing in. "The level of scrutiny of online media that was bought and sold was not high enough," notes Morriss drily.

This 1999-style free-spending online ad campaign is now just about dead. So is the wild hype about online advertising. But online ad campaigns will survive, simply because they have shown they can work.

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