The Second Coming

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The true power of the Internet lies in its ability to allow companies to customize their strategies.

When Away.com, an adventure travel site, sought to attract new customers, it ran an ad campaign across the registration pages of targeted Web site partners offering a free subscription to its Daily Escape Newsletter. More than 71,000 people took up the offer in the first month of the campaign, adding new names and e-mail addresses to the site's database. In contrast, when Visa wanted to increase its market share and reinforce customer loyalty, the credit card company sponsored content on Music Boulevard (now CDNOW), an entertainment site. In return, Visa was featured as the default payment of choice on checkout pages. Customers who attempted to use another form of payment were offered a $2 Music Boulevard coupon to pay with a Visa card.

Headquartered in San Francisco, California, L90, the company that devised the campaigns, came up with very different solutions for the two marketers. While dot-coms continue to disappear and the media industry tightens its belt, the New Economy is merging with the old and the Internet is gaining new legitimacy as a marketing tool. Increasingly, traditional companies are realizing that the Web is an effective platform for a variety of marketing strategies. But unlike other media channels such as TV or radio, companies must tailor the Internet to their needs. In fact, the true power of Internet marketing lies in its ability to allow companies to customize their strategies. “The Internet can be [used for] both advertising and direct marketing,� says Rich LeFurgy, chairman of the Internet Advertising Bureau (IAB). “At the end of the day, we have an interactive medium, and how it's used depends on what marketers' objectives are.�

One of the early online advertising business models — direct marketing — is still very much in force. By offering discounts, free newsletters, and coupons or encouraging people to play games and enter competitions, marketers can persuade potential customers to fill in a form or opt in to e-mail marketing. “We're doing more business these days from direct marketers,� says Christine McClellan, product manager at Enliven, a Waltham, Massachusetts-based rich media ad company. “And what direct marketers want is very measurable — they want a lead; they want your e-mail address.�

For example, when Business.com, a search engine and directory, wanted to acquire new registered users, L90 created the “Search for Accuracy Challenge� — offering those who registered the chance to win a 2001 Acura MDX SUV. Participants could run searches on Business.com to help answer the game's questions, allowing them to try out the site and — more importantly — pass it on to others, earning frequent flier miles if friends also played the game. According to Business.com, the first month of the promotion generated as many new registrations per day as they'd had on a monthly basis prior to the campaign.

Similarly, in order to increase traffic to both its bricks-and-mortar locations and its Web site, Hard Rock designed a trivia quiz about rock ’n’ roll that allowed consumers to play within the banner space, where they could print a coupon redeemable for discounts on merchandise purchased on the company's Web site or a free dessert at participating Hard Rock Cafés. Traffic on Hardrock.com increased by more than 10,000 hits during the ad's four-week run.

As online advertising evolves, marketers are also becoming aware of the need to integrate different techniques. At Smarterliving.com, for example, users can fill out their requirements and enter a deal center, where five travel offers matching their request appears. They receive e-mails whenever similar deals come up and can, at any time, remove their details from the database. Because customers receive information relevant to their search, iWant, the application service provider, says its “Instant Opt-Ins� can guarantee clients a 10 percent click-through rate — a big improvement on the less than 1 percent achieved by most banners.

“E-mail is going to become a critical marketing application,� says Mike Donahue, executive vice president of the American Association of Advertising Agencies. “But for it to work, it has to be opt-in, and double opt-in works even better — you give permission for someone to send you e-mails and before they send them, they confirm that it's still OK to do so.�

However, advertisers are beginning to look beyond e-mails and clicks. Indeed, a growing chunk of online marketing is now focused on branding — about 55 percent, according to AdRelevance, the new-media measurement firm based in Seattle — for which results do not depend on how many people clicked on an ad. “If you see a billboard by the side of a road, you don't have to get out of the car and touch it for it to be effective,� says Mark Ryan, director of media research at AdRelevance.

Branding can be achieved through a variety of means. Even the much-maligned banner plays its part. People browsing the Internet often stare at a screen for several seconds while a page downloads, so a banner that appears at the top of that page — particularly if it repeats each time the page is accessed — has a significant impact on its viewer. Of 12 banner ads tested by the IAB in its Advertising Effectiveness Study, 11 showed marked improvement in advertisement awareness after a single additional exposure. And each additional exposure to an ad boosted awareness by an average of 30 percent.

Ads containing information relevant to a Web site's content can also prove an effective means of branding because of their association with the content provider. Dice.com, the high-tech job board, is sponsoring an “anti-career zone� on Dilbert.com, with a job search facility, career tools, and a salary survey. “People who care about Dilbert comics are tech savvy,� says Stacy Smollin, director of Global Studio, the creative consultancy department of DoubleClick. “And Dice.com knows it is reaching this audience because they're coming to the site regularly to check out the comic of the day.�

Broadband technology, which supports streaming ads containing audio and video, also looks set to become a powerful branding tool. This February, Evian, the natural spring water producer, linked up with New York-based iClips, which provides Internet-based streaming video messages. The purpose: to use a streaming video campaign to raise brand awareness. During the campaign, the 10-second Evian videos are included in every streaming message created by users of iClips' partners — sites such as NBCi, the Internet portal, and Homestead.com, a Web site-building company. Consumers view the ads when they access e-mail links to the video or visit other Web sites where iClips users have posted their own original videos.

Results for the Evian campaign have still to be assessed, and with broadband penetration still patchy, such campaigns are not yet widespread. But research shows that streaming media can have a substantial impact on those who view it. A recent survey conducted by Millward Brown Interactive, the Internet marketing research consultancy, found that while banner ads experienced a 5 percent average increase in ad awareness, streaming ads accounted for 24 percent increased awareness.

For many in the industry, the move away from a focus on clickthrough rates represents a shift in thinking. “The one-to-one delivery to a person you can identify has tended to lead people to see the Internet as something that can't be used as a branding vehicle,� says Tom Hyland, partner and chairman of PricewaterhouseCooper's New Media Group. “And pricing models tend to reinforce that view because they are based on a price-per-action.�

Part of the reason that marketers have been slow to grasp the power of online branding has been their inability to measure it. “Marketers talk about branding but then they complain about click-through rates,� says Jim Nail of Forrester Research, the Cambridge, Massachusetts-based Internet research firm. “If branding is what you're after, [click-throughs] are the wrong measurement tool.�

Several organizations are attempting to solve the problem by returning to standard market research techniques. By comparing the response of consumers exposed to a banner campaign with the response of those who use the same site at the same time but are not exposed to the campaign, Dynamic Logic, an online research company, is assessing such intangibles as brand awareness, message association, and purchase intent. For Molly Hislop, director of research and development at Dynamic Logic, there is no substitute for the type of information gleaned from questionnaires. “To understand people's attitudes, you have to ask them about those attitudes,� she says.

Those behind the Sponsorship Effectiveness Index would agree. Founded by Next Century Media, American Demographics, and Studio One Networks, the SEI has conducted studies for Procter & Gamble, Nestle, Honda, and Mitsubishi. According to Bill Harvey, Next Century Media's president and CEO, awareness of the sponsors increased by 10 percent to 20 percent where sponsors were identified.

While such efforts go a long way toward assessing the Internet's ability to aid in product branding, a full understanding of how the medium can be used remains some way off. Different business models are being tested constantly and the period of experimentation is far from over. But the Web's potential as a marketing tool is becoming increasingly clear, and as the technology improves, so will its ability to deliver not only direct marketing, but the kind of results once produced by television, radio, print, and billboards. “It's back to the future,� says the IAB's LeFurgy. “Everything new is old and everything old is new again. And this means that traditional marketing vehicles such as branding and relationship building have significant power when put online.�

BEYOND BANNERS

Digital marketing in the U.S. is projected to grow to $63 billion in four years, from its current $15 billion. While online consumer ads, including banners, will continue to eat up the bulk of those dollars, its share will decrease from almost half (46 percent) to less than a third (32 percent), making room for new types of digital marketing.

(IN MILLIONS)
2001 2003 2005
E-mail (retention and acquisition) $1,291 $3,758 $6,054
Online promotions $2,584 $5,738 $10,834
Interactive TV $209 $2,513 $10,582
Wireless $3 $159 $891
B-to-B/recruitment advertising $4,128 $9,562 $14,176
Consumer online advertising (banners, etc.) $6,988 $12,771 $20,120
Total $15,202 $34,500 $62,657
*Total may not equal sum of rows due to rounding.

Source: Forrester Research, Inc.
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