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I'm surprised this is news, but it is after a long weekend....


On the front page of the Wall Street Journal there is a featured article called Once-Wary Industry Giants Embrace Internet Advertising, where it describes how package goods advertisers are racing to the internet to reach their audience. The embrace they are describing reminds me of the one I received from my Senior Prom date after I ditched her about halfway through the dance.
The article uses terms like "winning converts," "cranking up online spending," "the shift in spending," and "boosting online sales." However, the one sobering chart found on the front pretty much kills the premise and shows that package goods companies, for the most part, are just playing around.
You know what the chart shows - almost 6% of US advertising spending was spent online and -- now hold your breath for the big news -- package goods advertisers spent a WHOPPING 1.6% of their advertising online. And, if I get out my magnifying glass it looks like it jumped from 1.25% in 2004, which was a giant leap from 1.1% in 2003.
For now, let's put aside the 6% numbers because that's not the point of the WSJ article. But they did correctly outline that the number is mostly driven by personal computer and financial services companies -- one of which I used to work for (Harrisdirect).
Do you know what 1.6% looks like on a modest $10 million advertising budget? Let me do the math for you - that's $160,000 or $13,333 per month. On a $100 million advertising budget true believers, that's $1.6 million. For an annual spend of $160,000 you maybe get a decent search campaign and one modest online advertising program that your traditional agency probably threw the creatives in for free. WAHOO.
You want more reasons from the same article why these numbers are nothing to celebrate? Just look to page 2 of the article for the next. It shows that the internet has the third largest amount of time spent in use at 15%, which is behind radio at 23% and TV at 51% for people aged 12-64 for use between 6am and midnight. That means that 15% of consumer's time is spent on the internet while the package goods companies are spending 1.6% of their budget on reaching them. That's some big effort in reaching their audience.
There are a few CPG companies that are true pioneers in this space. One of them is Pepsi that is prominently featured in the article. I think the internet marketing at Pepsi is far ahead of the average online advertisers. In fact, I've been invited to Yahoo! Creativity Summits every year for the last 5 years and you know who is always there either on a panel or giving a presentation - Dave Burwick, former SVP and CMO Pepsi North America. Pepsi was also smart enough to test a Yahoo service called Consumer Direct which allows them to correlate internet spending with actual consumer purchase at the store. Pepsi is far ahead of their competitors.
Do you know what the conversation is like in a marketing organization when the online spend is less than 5%? It goes like this. First, you talk about the overall strategy for the campaign. Second, you review the media spend. Third, the team examines key messages and the offline campaign. This is where the meeting peeks because it is always a lot of fun to review creative.
Next, you look at budget and tracking requirements including criteria for success. And, if there is still time left in the meeting, you take a look at that online thing. The CMO probably says something like, "Oh Eric, what is the online spend and do me a favor, speak quickly because I have to run to another meeting in 5 minutes."
Until the internet reaches a true tipping point of around 10%, let's not celebrate how well the medium is doing by shifting dollars around. 15% of time is spent online but advertisers only spend about 6% demonstrates a very, very light embrace.
PardonMyFrench,
Eric

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ABOUT THE AUTHOR

Eric Frenchman is an online marketing and advertising consultant located in the Great State of New Jersey and Chief Internet Strategist for the online political agency Connell Donatelli Inc. Since 1998, Eric has managed multi-million dollar online advertising and CRM campaigns for AT&T, DLJdirect, Harrisdirect, and BMO Investorline and is a recognized expert in online marketing and advertising techniques. In 2005, Harrisdirect was ranked as the 17th largest online advertiser in the US and in 2003 was recognized as Best Financial Advertiser. Eric Frenchman's marketing blog is located here: https://www.ericfrenchman.com