An oft-cited notion is that time spent on a medium should equate to ad spending on that medium. The reality is often something different. That very concept was first espoused by the Cable Advertising Bureau as a way to focus attention on cable at a time when broadcast TV, followed by print, still took in a majority of ad dollars. But indeed, the comparison keeps getting made, and from this perspective, online is not doing too badly.
Mary Meeker, at venture capital firm Kleiner Perkins, analyzed the time spent percentage for each media and compared it to ad spending at the All Things D/Wall Street Journal conference in May 2012. She found consumers spend 26% of their media consumption time online, and marketers spend 22 % of their ad budgets. TV is also faring well, with consumers spending 43% of their media time with TV, and marketers spending 42% of their ad budgets here. Mobile is the area with the greatest growth potential, as consumers are now spending 10% of their time with mobile, but marketers are only spending 1% of their ad budgets there. Print is the most likely to lose, with consumers spending 7% of their media consumption time with print, but marketers spend 25% of their ad budgets in print.
Of course, equating time spent leaves no room for the different qualitative ways and levels of attention paid to a medium. You also have to break down the varying formats of online to really get the full picture: The bulk of online spending goes to search, while display, rich media and video, which collectively support most of the content, remained stubbornly flat over the past few years, among the top publishers who report their numbers to the Interactive Advertising Bureau (IAB). When you look at industry spending projections, they tend to still fall into the "buckets of the past," assuming radio is consumed through a radio, print through newspapers and magazines, television through a large box in your living room. The reality is that radio is thriving thanks to an increasingly mobile format and that much of print content is now consumed in interactive formats. The growth in ad spending will come from various interactive formats at the expense of all other media, and interactive spending will be within spitting distance of TV by 2016.
RELIANCE ON PERFORMANCE
Delving deeper into what is considered online spending, sources like Brand.net and Barclays Capital for the Direct Marketing Association in 2010 said that while online accounted for 34% of all direct marketing dollars, it accounted for only 6% of all branding spending. Even the IAB numbers from so-called premium publishers attest to these trends. The publishers report increasing reliance on "performance" buys over CPMs; In other words, people are paying based on the immediate action vs. a flat fee based on exposure to the advertising. A renewed focus is emerging on how we get to more branding online—even from those who have helped to fuel what Peter Minnium, a former managing director of Lowe Worldwide and now head of digital brand initiatives at the IAB, refers to as an ad-tech arms race.
Terence Kawaja, CEO of LUMA Partners, an investment bank, which has cut some of the biggest deals in media technology sees it like this: "What's far more relevant now are upper funnel solutions. There's an argument about what branding means: More and more tech companies are working to make more advertising more effective and more efficient. That's exciting. When Madison Avenue laments tech, I say, just watch. The early money went to direct response, but that was the low-hanging fruit. Branding just takes longer. It's harder to do. There are new standards and new channels. For direct response marketers, it's all about math, but very simple math. For brands. when they look at data, it's all about integral calculus. But it's still data. Measuring awareness, purchase intent, these are all shades of gray."
WHY BRANDING ONLINE?
Why push for branding to work online if advertisers just prefer to buy based on response? Interactive, by its very name, is based on actions taken, not the kind of exposure and reaction or change in perception over a longer time period that branding requires. But figuring out how branding works in an interactive world is important, especially as all media morph into interactive and on-demand formats. Media producers need to find a way to support the creation of content, and that will only happen if interactive is measured and paid for on equal footing with other media, especially TV, since video content is driving so much of the shift to on-demand formats.
If you look at the digital revenues of media companies that most would like to see survive—organizations like The New York Times, the Washington Post, the Time Warner /Turner properties, Viacom and Fox properties—they show little to no growth in digital revenues in their latest 10-K filings with the SEC. These are also companies that will likely depend on either display or video ads for their livelihoods, and while video is absolutely the premium of online advertising, its supply is limited and its display has the challenges our new 2012 trend report, Building Brands Online, focuses on.
Paying for advertising based on clicks or any other immediate action works profoundly well for search, but with rates hovering around 0.09%, according to sources like DoubleClick and MediaMind, and research from sources like comScore showing that ad clickers are a distinct demographic and a rare one, the full value of that ad exposure -- and the necessity for brands to pay based on exposure -- becomes all the more crucial.
The challenge lies in how to measure any sort of interactive media in a way that equates it fairly with all other media: Television is bought based on delivery of audiences and the opportunity to see that ad; print is based on delivery of an audience but highly influenced by contextual placements; radio is based on reach of a market and tends to be heavily local in its support; outdoor is based on estimates of the number of people exposed. None of these really accounts for precise numbers of people actually engaging with the ads (which is something that is possible to capture online) but rather with this notion of "opportunity to see."
It is this equal footing issue that is now being fully addressed and will likely lead to a much more holistic notion of interactive and its relation to all other forms of media exposure. And indeed, this shift toward a more inclusive form of measurement makes sense only in a world where people seamlessly move between modes of taking in all media and where media will become even more ingrained throughout every minute of our day. With mobile phones, ubiquitous video screens and everything from cars to major household appliances now wired, we live in one giant web of media. Now we just have to figure out how interactive ads can generate enough revenue to keep it free.
_____________________________________________________________The full report, by Kathryn Koegel and Evan Neufeld, is available for $249 for non-subscribers and $199 for subscribers at AdAge.com/trend-reports.
