Shares of Yahoo (YHOO) came under pressure last week. The giant Internet portal was downgraded by analysts who believe it will lose online advertising dollars from dot.coms struggling to stay alive.
The online advertising business model is under attack again.
The question now turns towards more traditional brick and mortar companies and whether they will put their ad dollars online to make up the slack. A new report from Media Metrix (MMXI) division AdRelevance shows that online advertising is dominated by dotcoms. The report says that online advertisers outnumbered traditional advertisers 2-to-1 for online ads.
Meanwhile, predictions for ad spending abound. Jupiter Communications (JPTR), for example, predicts online ad spending to jump to $5.4B in 2000 from $3.5B last year.
But important questions about advertising effectiveness have yet to be answered satisfactorily.
For example, it isn't clear that these online ads are a good investment. Click-through rates are still hovering around .51%. Does that indicate ad effectiveness? People on the web are not necessarily in a purchasing mood, so it's no wonder these rates are low. But is that the way an ad's effectiveness should be judged?
Should online ads be judged by traditional measures, such as awareness and attitude, or just sales? In the offline world marketing people have grown accustomed to looking at offline ads using these other measures.
But the brick and mortar companies are likely to see the net as the medium of instant gratification - online ads always have a hyperlink to the advertiser's site, so the ads better be clicked - and therefore expect more from the net than from traditional media where immediate action isn't expected.
Finally, for all the talk of laser accurate ad targeting on the web, it isn't clear that's really happened much better than in traditional media. While I write this, for example, I'm checking my Yahoo News and Media page, and there is top banner ad for Bonzi.com to make my modem work faster. Trouble is, I use a DSL connection to the web.
NET REACHES HUGE AUDIENCE
Without question, however, is that the net can potentially reach a huge audience.
Neilsen/NetRatings, for example, recently showed that in July, Yahoo had a unique audience of almost 65 million surfers. This represents about 54% of all home surfers!
Large audiences aside, brick and mortar companies may want to see a clear and consistent relationship between an ad and sales before committing a significant proportion of their ad dollars to the net. Is such a demonstration possible?
That's why you can bet that when Net advertisers looks at wireless, they see nirvana.
First, the market looks huge. Ovum predicts wireless advertising will explode to $1.2B in 2003 and $16B in 2005. All the problems identified above seem to disappear in a world where marketing messages can be precisely targeted and timed to the point of purchase.
For example, Vindigo, a city search guide, explains the benefits to advertisers on its web site:
"Let's say you own a shoe store and you're having a sale this weekend. Through Vindigo, you can send a message to women aged 18-34 in New York on a Saturday afternoon, who are within three blocks of your store and shopping for clothes."
How will this happen? By law, cell phones in the near future will carry location technologies for emergencies. Global positioning technology will be available for tracking you down on your PDA. With a little knowledge about your preferences and now your location, advertisers have consumers just where they want them.
THE HYPE MACHINE BEGINS
The Internet has always brought out a hype machine for every idea that would rival political campaigns. We're seeing the same hype applied to wireless advertising.
At the Jupiter Communications Online Advertising Forum last month, Chan Suh, co-founder chief executive officer and chairman of Internet services company Agency.com (ACOM) pronounced "mAdvertising" - the so-called convergence of marketing and advertising - as the new buzzword for the wireless medium in his keynote speech.
What nonsense. Are we going to take the wireless Internet down a path of useless buzzwords that confuse the issues rather than illuminate the real problems? By the way, advertising has always converged with marketing!
And the problems of wireless advertising are potentially many. Here are just a few.
Privacy issues abound, heavy promotions will make everyone more price sensitive, and advertisers' tendencies to favor in-your-face ads is just the beginning of what might ultimately happen when this medium takes off. Cell phones and other wireless devices going off in restaurants and other public places to signal a sale down the street also seem a bit too much.
A LITTLE RESEARCH MIGHT HELP
To put a little sanity into the mix, we might look to firms like SkyGo who will conduct a major market research study in Boulder, Colo. on September 29, 2000.
The company will give away 1,000 WAP-enabled phones to qualified consumer participants to test the effectiveness of its wireless direct marketing model. According to their press release, they plan to "gather documented, quantifiable results on the efficacy of wireless advertising and share them with the industry."
Here's my guess as to the outcome of this market research. It will be found and widely reported that wireless advertising does increase sales. There will be recommendations for prudent and responsible actions, like restraining the urge to assault consumers. A slew of conferences will be scheduled and advertisers will continue to promote new buzzwords.
Then, over time, as with email marketing - remember how email marketing messages are expected to deluge your inbox within the next five years - wireless advertising will fade into the general clutter consumers have come to expect.
In the end, online advertising as a medium will turn out to be, well, just another medium in the mix of a marketing campaign - no more important than traditional advertising. That's something the click and mortar companies can understand.