Copyright 2002 by Scott Hays
Magazine: Advertising Age, 2002
Topic: Traditional Marketers Go Online
Byline: Scott Hays

HAS ONLINE ADVERTISING FINALLY GROWN UP?
Amidst the smoke and carnage of the online media recession, the industry has quietly moved forward with the help of traditional marketers like American Express, Pepsi, Delta Airlines, VISA, Kraft Foods and others.

Forget about the reported death of online advertising and the downward spiral of electronic revenues. Amidst the smoke and carnage of the online media recession, the industry has quietly moved forward with the help of traditional companies like American Express, Pepsi, Delta Airlines, VISA, Kraft Foods, and others. But more than merely establishing a Web presence, these companies have reinvented online advertising, created relationships that blur the lines between online and offline marketing, and leveraged the intimate, interactive nature of the Internet to forge customer loyalty.

Understanding why so many traditional companies have succeeded online is critical to anyone who expects to do business in the next decade. Indeed, even as the dust settles, the marketplace is poised for a new phase of development, a fact confirmed in several recent well-published reports.

For example, the rate of growth of Internet use in the United States is currently two million new Internet users per month, according to a survey published by the National Telecommunications and Information Administration (NTIA) and the Economics and Statistics Administration. More than half of the nation is now online. A 2001 Internet Report by UCLA, titled “Surveying the Digital Future,” found that Americans with Internet access spend an average of 9.8 hours per week online, second only to television.

And according to a new study by the Online Publishers Association, in conjunction with marketing research company Millward Brown IntelliQuest, media consumption by time of day revealed that no medium other than TV at night “commands as large a share of the available audience.”

Yet according to a recent Morgan Stanley Dean Witter media survey, most of the top 50 U.S. advertisers spend less than one percent of their advertising and marketing budgets online, which means in order for these companies to keep up with the increase in consumer media consumption, doubtless they will need to increase the amount of money they spend online. In fact, by 2005 online advertising will be an $18.8 billion market in the United States, up from $7.9 billion in 2001, according to GartnerG2, a research service from Gartner, Inc.

“Businesses that fail to leverage the power of the Internet will miss out on one of the most-compelling means yet devised to reach their target audience,” says Rick Parkhill, president of iMedia Communications, Inc., sponsor of the iMedia Brand Summit held last week at Amelia Island Plantation in Florida, where roughly 50 traditional advertisers who collectively represent billions of dollars in annual marketing and advertising budgets gathered to discuss the future of online marketing and advertising.

And the future appears to be played out in the online advertising campaigns currently hitting the Internet. Up until a year ago, adidas America looked at online advertising as nothing more than a 468x60-pixel banner to showcase its logo. But then brand recognition was not the shoe company’s top priority. After all, adidas is a world-recognized sports footwear, apparel and accessories manufacturer with an estimated 15 percent share of the world’s sporting goods market and worldwide net sales in the $5 billion range. A small online ad unit couldn’t possibly communicate effectively the larger-than-life personality of its brand.

As a result, the company reportedly spent last year less than two (2) percent of its total marketing budget online. Only recently, however, has the company committed to a “noticeable shift” in its online advertising strategy—namely to build a portfolio of new marketing tools to grow its customer base and drive sales, says Adam Milne, the company’s business development manager of digital marketing.

Reebok, on the other hand, will spend roughly 10-15 percent more this year on online advertising and marketing. “Last year, we didn’t spend a lot of money on online advertising because we positioned everything as a test for Reebok,” says Marc Fireman, the company’s director of interactive marketing. “We did a lot of different things, but not on a large scale. It allowed us to prove certain things about the Internet to the entire company. Based on that proof, we’ve got more money to spend this year on those things that were successful for us.”

AT&T’s online evolution went from a testing period two years ago to a comfort level where online advertising spending is roughly 8-10 percent of the company’s total advertising budget. “We’ve learned how to better use the medium,” says Jeff Bauer, the company’s media director for AT&T Business. “We’re moving beyond the banner and placing a greater emphasis on interactivity with the creative message.”

Even business-to-business marketers are optimistic about the opportunities and capabilities of interactive marketing, says Eric Siebert, director of worldwide interactive integrated marketing communications for IBM. Last year, IBM used combinations of Internet advertising, banners and pop-ups, online sponsorships, website communications and email marketing. “We know our target audience is online. It’s part of their everyday media consumption,” says Siebert. “Naturally, if they’re online, we’re going to be online. It’s that simple.”

Most people forget that television was a viable technology by the late 1930s, but went nowhere because advertisers weren’t willing to gamble on those strange boxes with their grainy black and white pictures. It wasn’t until the technology improved and the cost for a home television became affordable to many Americans that advertisers realized the corny jingles and sponsorships that worked on radio needed to be adapted to a population with increasingly disposable cash and anxious to buy into the American dream.

Likewise, it took a while for advertisers to realize that those same corny jingles and sponsorships that worked for television needed only to be adapted to a population now online.

Between 1994-1997, the online advertising industry was poised to find its place in the media landscape, but then “everybody got stupid,” says Doug Weaver, president of Upstream Group, Inc., a consulting company that service online media companies. “Everybody got excited about all the venture capital money funding dot.com companies, and they forgot about the basic tenets of advertising.”

It wasn’t until the VC river ran dry that the industry got serious about getting the model right.

“Now we’ve got a base of traditional advertisers who are willing to spend more time and money on online media, because the critical mass is there,” says Weaver. “This industry is ripe for standards and models that follow traditional advertising principles, and its poised to see double-digit growth over the next several years.
“It’s starting to rain, but not everyone is going to get wet at the same time. It’s no longer about revolution, but evolution.”

An evolution where the very companies who are now quietly colonizing and conquering the online world include many of those established brands who have been successful in print and broadcast media for decades.
What does online marketing need to do to mature as a medium?

“It needs to stop thinking of itself as just online marketing,” says Mike Welling, vice president brand development, foods/Unilever Canada. “The notion that it’s going to completely replace traditional marketing makes no sense. We need to understand how it fits in the lives of different consumer segments. We need to understand how it’s relevant to different brand owners. And then we need to make a determination as to whether it’s appropriate as a primary communication vehicle or as a secondary communication vehicle.”

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Significant Opportunity for Sustained Growth
50 major traditional marketers who, collectively, represent billions of dollars in annual marketing and advertising budgets,attend iMedia Brand Summit.

Roughly 50 major traditional marketers who, collectively, represent billions of dollars in annual marketing and advertising budgets attended the iMedia Brand Summit at Amelia Island Plantation in Florida. Also present were significant online publishers who represent the majority of daily online visits by consumers, students and businesses; top research companies; third-party ad serving tool providers; and advertising agencies and other interactive marketing service specialists.

And everyone, repeat everyone, was engaged in some sort of frenzied conversation about the state of the online advertising industry.

The Summit was organized to provide the industry with unique opportunities to approach, discuss, and move issues that will ultimately allow greater marketing investment online. And yet, not one speaker or panelist or Summit participant was naïve enough to suggest there aren’t barriers such as language and metrics and internet advertising planning tools that still need to be ironed-out. Yet according to several reports that surfaced during online advertising continues to grow, and steadily.

Here are several snapshots of just some of the panel discussions held during the three-day event.

Surviving Online Advertising in a Traditional Marketing Environment
The issues and obstacles marketers face in championing the online medium within mainstream marketing companies was the focus of the first panel discussion, moderated by Doug Weaver, president of Upstream Group, Inc., a consulting company that service online media companies.

“How do we grow the interactive budget, when it’s vulnerable?” he asked the panel, which included Jon Raj, director of advertising for Visa; Nick Riso, vice president of eBusiness for Nestle USA; and John Lane, vice president of online acquisition for Charles Schwab & Co.

“For Visa, building the brand is about building our business,” said Raj with Visa. “We’ve seen the results by working a brand online. It then becomes my job to educate the people within my own company.”

Lane with Charles Schwab & Co. emphasized that his company made the mistake of putting “too much emphasis” on the media side and not enough on what his company does once a prospect comes to its site. “We asked and expected our relationships with big media companies to zoom prospects to our site, and it never really happened,” he said.
And what’s the one point about online advertising that every champion of online advertising needs to share with his or her CEO?

Said Raj with Visa: “That there are peaks and valleys, so invest for the long term.”

Added Riso with Nestle USA: “Value the relationship between how traditional media spends its money and how the online world spends its money.”

Executing the Multimedia Deal
Five or so years ago, the initial takeoff off Internet advertising was fueled by some big multi-year Internet marketing alliances, said Tony Romeo, CEO of Strategic Dynamics, who led a panel discussion on how to make the multimedia deal a reality. Advertisers jumped in with AOL, MSN and Yahoo! and made commitments, media buys that put the Internet firmly and unavoidably on the map. But now, while such deals have slipped somewhat from favor, a new breed of deal is emerging, the cross-media deal. By definition, these deals are not just about the Internet. Indeed, some would argue that they are hardly at all about the Internet. But traditional advertisers and multi-media conglomerates seem focused on contracts that link the media buy across multiple channels.

“Interactive marketing is regaining its momentum,” said Romeo, founder and former leader of Unilever’s push into interactive marketing. “Evidence of a strong ROI for Internet advertising is building, case-by-case and study-by-study, and that in turn is generating a renewed level of enthusiasm for the medium.”

But are the benefits of cross-media deals truly significant, or are they just a myth? And if we choose to engage in the cross-media deal, how do make it work?

Kraft Foods signed two cross-platform deals last year to build a “strategic advantage,” said Kathleen Olvany Riordan, the company’s vice president of Internet and emarketing. “We asked ourselves, how do we . . . evolve to the point where our world-class brands fit into the lives of consumers?” Riordan said. “By going deeper, instead of just broader. That’s the advantage of being able to work with one or two strategic partners.”

And what can a traditional marketer accomplish with a cross-media deal?

“A competitive advantage that ties all these different platforms together,” said Chris Marentis, senior vice president of interactive marketing for American Online, Inc.

Added Romeo: “Marketers still have much to do to move interactive into the mainstream. Clearly, we need to build evidence, and that’s happening. But we need to put that evidence into metrics and into a language that mainstream marketers can understand.”

One Unified View of Reach, Frequency and Performance
For years, interactive advertising has lived in a measurement vacuum, said Doug Weaver, president of Upstream Group, Inc., moderator of Friday’s early morning panel discussion. Online measurement and metrics just haven’t looked, sounded or even felt like what advertisers are used to in the traditional world. “We haven’t given the marketer the online equivalents of reach/frequency curves, gross rating point or share. Instead, we’ve asked that a whole new language and set of measurement protocols be adopted.”

But now that traditional marketers are looking to spend more dollars online, it’s a much more troubling equation. What is the ultimate commonality of reporting across media, and what standards should be applied?

“Online is held to a much higher standard than traditional media,” said Kelly Reed, director of brands and marketing communications for British Airways. “Sure, reach and frequency are simple units of currency, but that’s only one part of the equation.”

So where does one begin to reconcile the terminology and practices of online and offline advertising measurements? Where is the one unified view of reach, frequency and performance?

Most of the panelists had more questions than answers.

From the Department of 'For What It’s Worth’
According to results from a IAB/ARF/MSN study, presented by Rex Briggs, principal with Marketing Evolution:

• In order to compete with content on a web page, all you really need to do is “get some of the people to pay attention some of the time.”
  
  
• More important than consumers looking at ads is whether the ads moves sales.
  
  
• While we debate whether online budgets should be one or two or three percent, consumers have already made it 10-15 percent of their media time. “This shift leaves a chasm between where our budgets are more efficient and where we’re spending today.”
  
  
• What can advertisers do? (1) Form a working group that includes key brands, agency and measurement team members; (2) Examine your target audience share of time with ach media; (3) Make your measurements relative to effectiveness a priority; (4) review and update your marketing mix annually.

During the panel discussion on how to find the proper role and level for online marketing in the media mix, Tribal DDB Chief Media Officer Tim McHale offered the following “rough guide” budget allocation parameters:

• 0-5% if client has not advertised online and does not sell online
  
  
• 5-10% if client is already advertising online, but does not sell online
  
  
• 10-20% if client already advertises online and sells online
• 20% plus for sophisticated web-based clients

The Top 5 Issues Facing the Online Advertising Industry

According to results of an iMedia Connection online poll, designed to prioritize the top issues impending the advancement of interactive advertising, the top five issues are Reach, Frequency and GRP; Analytic Tools; Sales Training and Terminology; and Creative.

The poll was the second step of a five-step process outlined by a formulation committee (created after the iMedia Summit, held November 14 through 17 in Park City, Utah), to keep the dialogue going between industry events and develop action plans for moving the industry forward.

• Branding - What is the best way of delivering proof of online branding’s effectiveness to marketers? How do online marketing opportunities contribute to branding efforts? What can be done to prove the efficacy of interactive in regard to branding?
  
  
• Reach & Frequency & GRP - How can the traditionally-rooted concepts of reach and frequency be integrated into the interactive lexicon? How can the concept of gross ratings points be integrated into interactive marketing? What form should the gross ratings points take?
  
  
• Analytic Tools - What are the most relevant media analytic tools? How can these information sources best be used to entice traditional marketers?
  
  
• Sales Training & Terminology - What base elements and terminology need to be understood across all media and between traditional and Interactive marketers/buyers /sellers in order to be able to properly interact and create cross-platform programs?
  
  
• Creative - What can be done to push ad agencies to develop better online creative? Are ad agencies putting their top creative talent on “high profile” mediums like television and print?

Case Study #1 – Pepsi-Cola North America
Artwork: Captured on PowerPoint

In the land of firsts in the online world, you can only do so many things, says John Vail, director of digital media and marketing for Pepsi-Cola North America.

For this year’s Super Bowl, Pepsi compiled behind-the-scenes streaming video footage of classic generations of Pepsi advertising, featuring pop-sensation Britney Spears. The company develop a five-day public relations and Yahoo! ad blitz asking consumers to vote for their favorite Pepsi/Britney Generation.

Six classic generations of Pepsi advertising were pieced together for one 90-second commercial that aired during the first quarter of the Super Bowl. As voted by consumers online, the winning 30-second spot aired during the second quarter.

Goals for the campaign beyond getting consumers involved by asking them to vote, included driving database acquisition via sweepstakes, building a charity auction, and showcasing the new 90-second Super Bowl spot exclusively online, synced with an on-air debut.

The campaign drove 417,000 consumer votes in just five days, delivered more than 1 million 90-second streams in 24 hours via page-altering rich media advertising event on Yahoo!, received nearly 70,000 sweepstakes entries, and engaged 135,000 unique visitors in one day to vote on the Pepsi.yahoo.com Website, according to Jupiter Media Metrix.

“The Internet was the only way to pull off the long-form streams we developed, and to get consumers to vote in a timely manner,” says Vail. “And, most importantly, a way to showcase our full 90-second because there are no bandwidth restrictions.”

Planning started in June 2001. All behind-scene footage was captured within a six-month period prior to Super Bowl 2002.

And what does Pepsi see as the incredible capabilities of online marketing?

Instant results, says Vail. “In just five days, we had 415,000 consumers voting for their favorite thirty-second Britney Pepsi Generation, which then aired in the second quarter of the Big Game. We also raised more than $78,000 by auctioning off signed costumes and props from Pepsi commercial shoots to support the Britney Spears Foundation. We feel we scored a touchdown with this campaign.”

Case Study #2 – AT&T Wireless
Artwork: Captured on PowerPoint

The online evolution for AT&T Wireless went from a testing period two years ago to a comfort level where the online channel is now the company’s most efficient acquisition channel. “By focusing on the return-on-investment of each placement we bought on the web, we were able to aggressively bring the online channel to the forefront of our marketing goals,” says Bryan Trullinger, the company’s director of Internet marketing.

Earlier this year, the company took advantage of an opportunity to integrate online and offline advertising by extending the company’s new branding platform (mLife message) with key target audiences and by promoting interaction with the brand through mLife.com.

Phase One included mostly email and banner ads. But Phase Two included prominent rich media ads—on complimentary sites such as Ask Jeeves, CBS Sportsline, ESPN, Weather.com—to reach a broad base of unduplicated Internet users, in addition to more email sign-ups and various links to attwireless.com.

Campaign results?

• The Super Bowl mLife ads caused an 853% increase in website traffic (Sunday vs. Saturday)
  
  
• Online advertising drove 33% of mLife.com traffic (41% during the homepage take-over campaign) with 10% of the overall budget
  
  
• 6% of mLife.com visitors signed up to receive more information via email
  
  
• Daily traffic to mLife.com increased another 42% with the launch of online advertising on the Monday following the Super Bowl.

And what did AT&T Wireless learn from the campaign?

“When done correctly, integrated offline and online marketing increased the effectiveness of each,” says Trullinger. “Also, we realized online effectiveness depends on high–impact advertising and a well-designed website. And it can be an effective sales channel and a powerful advertising medium.”

Case Study #3 – Compaq
Artwork: Capture on PowerPoint

Compaq considers online a key component of its marketing mix. Last year alone the company increased its budget three fold over the previous year to a reported $16 million. Compaq participated in several major strategic relationships with top online properties, utilized new ad models, and even joined the wireless revolution--mostly for lead captures. The company’s diverse corporate goals and objectives required marketing programs to change brand perceptions while simultaneously driving demand for individual products, says Mary Bermel, the company's director of interactive communications.

To that end, company officials decided to position Compaq as a leader by using cutting-edge technology to showcase its capabilities, create a presence for Compaq that would cut through the “clutter” and generate buzz, capitalize on the broad interest of Compaq’s iPAQ Pocket PC, and leverage the capabilities of a key marketing partner, Yahoo!, and then expand to other partnerships. So the company executed a comprehensive campaign on Yahoo!, which included a Home Page takeover. Yahoo!, in effect, allowed Compaq to white-out its home page.

Campaign results?

• 61 percent of the broadband users actually click through to the purchase page
  
  
• On average, nearly 170 qualified users interacted with the front page iPAQ creative every minute over a 24-hour period
  
  
• 15% increase in awareness of Compaq iPAQ pocket PCs as a mobility solution among IS/IT professionals
  
  
• Marketplace “buzz” with extensive coverage in various trade magazines , USA Today, CNN and local market news affiliates

What did Compaq learn from the campaign?

“We know traffic numbers, we know immediate response from click-through data, we know the results of our e-mail campaigns,” say Bermel. “And overall the aggregate of all of these activities resulted in direct online sales. Add to that qualitative research and we have a very good sense of the impact online has on awareness, image and purchase consideration.”

Case Study #4 – Delta Air Lines
Artwork: Capture on PowerPoint

Delta Air Lines has put a lot of effort in creating service and functionality at www.delta.com. Launched in 1995, the company’s Web site offers comprehensive travel information and services to assist customers in researching and purchasing air travel. The company communicates these efforts to its customers via e-mail campaigns, creative placements, sponsorships and partnerships. Last year, more than 4.2 million Delta tickets were purchased at www.delta.com, representing a 60% growth in ticket sales over the previous year, 10% of Delta's total tickets sales or $1.1 billion in revenue.

But Delta still wasn’t satisfied, says Rob Sherrell, the company’s manager of interactive marketing. So the company designed an online marketing strategy to make sure its frequent travellers felt valued and loyal to the Delta brand. The company effectively positioned delta.com against the explosion of “new travel competition.” A multi-dimensional Customer Profiling Research project was designed to combine and report on five important data sources: site behavior, on-site attitudinal survey, online profiles, database analysis, and third-party demographics data.

To drive traffic to its Website, Delta used a combination of probably every aspect of interactive marketing: e-mail marketing to its existing customers, creative placements-banner ads, rich media, sponsorships, and strategic partnerships with some of the media properties.

Campaign results?

• Delta.com now sells a ticket every 10 seconds
  
  
• Forrester Research recognizes delta.com as one of the top four consumer travel sites
  
  
• Delta.com was ranked among the Top 5 travel sties in winning online travel buyers between January and July 2001, according to Nielsen/NetRatings and Harris Interactive eCommercePulse.

And what did Delta Air Lines learn from the campaign?

“Interactive marketing is about doing things that haven't been done before, and sometimes that's met with fear. But the best marketers embrace these challenges.”