As discussed in Part 1 of the post, the online advertising industry, driven by search marketing, has grown from $100 million to $20 billon in less than 10 years. Even though Internet users have reached a critical mass and they are spending a lion’s share of their leisure time on the Internet, what is preventing the industry from going from the current $20 billion to $200 billion?
In order to analyse this too, we need to go back to the days to the initial days of search advertising and its attempt to remove the flaws of conventional advertising. I believe that Google successfully removed the flaws of conventional advertising by introducing Dynamic Pricing, Measurement and Intent driven advertising into their platform. However, enough time was not spent to analyse the benefits of conventional advertising and introducing the same into the Adwords or other online advertising platforms. I think effort now has been made and already a few solutions have started delivering the benefits earlier associated with conventional media.
Broadly, there are four factors that are set to tip the online advertising space:
1. Introduction of new technologies and new advertising formats being adopted by the online advertising industry that mirror the benefits of conventional media. Let’s look at how this happens:
a) Frequency: Conventional media has the capability of displaying the same advertisement multiple times. As a result of this, the audience is able to recall the ad with ease, thus remembering the product/ service. (Fondly called Frequency)
Although the Google network had acquired reach, it still did not allow delivery of frequency, as users search for specific keywords only once. Now, the concept of remarketing allows the Google network to deliver frequency too. According to Jared Sandberg, “One of the Internet’s strengths is its ability to help consumers find the right needle in a digital haystack of data”. Now, we can follow the users and keep showing ads that say “we have the right needle for you”. Re-marketing allows you to show ads repeatedly to users who have previously visited your website. It’s all about the right people at the right time. Earlier, there were hardly any sites where users frequented every day. Thus, again, delivering frequency was a challenge. Now, sites such as Facebook can also deliver frequency quite effectively.
b) Duration of Ad Exposure: “National borders aren’t even speed bumps on the information superhighway” – Tim May. With more than 400 million active users on Facebook and nearly 75,000,000 users on Twitter, social media is changing the way conventional media works. Social media delivers advertisements similar to TRP measurement of TV – not only does it deliver reach and frequency, but also duration of advertising exposure.
c) Engagement Through Multimedia Ad Exposure: With YouTube becoming the second largest search engine in the world, videos are the next big thing that is going to hit the Internet advertising industry. On YouTube, 24 hours of video is uploaded every minute, with more than 2 billion views per day. This is the biggest form of multimedia engagement ever. With YouTube’s promoted videos, advertisers can now promote ads based on the intent of the user. This can deliver the benefits of search marketing and still engage users through multimedia videos. I believe that a Brand Channel on YouTube is a must for all brands.
d) Evolution in Measurement Techniques: “A journey of a thousand sites begins with a single click”. Earlier, measurement on the online platform was click or lead based. But now, marketers have realised the benefits of video views, average time spent on the pages, engagement in terms of posts, repeated visits, etc. Thus, marketers now have actively begun using Internet advertising to complement their brand building initiatives.
2. The Internet Population Reaching Critical Mass and Changes in their Media Consumption Habits: Internet now has the critical mass in terms of reach. SEC C, D and E account for 35 per cent of Internet usage. Internet users spend an average of 15.7 hours is spent on the Internet per week. Internet usage for music/ videos has gone up to 45 per cent in the year 2009 as opposed to 32 per cent in the year 2008. Neil Edwards has rightly said that “More people have access to an Internet-ready phone than to a PC with Internet access”. According to the Gartner Report, mobile phones will overtake PCs as the most common web-access devices worldwide by 2013. It is estimated that the combined installed base of smart phones and browser-equipped enhanced phones will surpass 1.82 billion units by 2013, eclipsing the total of 1.78 billion PCs by then. E-commerce has already become a Rs 10,000-crore industry in India. With IRCTC selling 7,000 crore railway tickets through the Internet, it is proof enough that Internet has reached critical mass in India.
3. Convergence of Mediums and Platforms: At the end of it all, what works best is the confluence of all platforms. With Google TV combining the high quality viewing experience of television and the web capabilities of the Internet, the room for innovation is only getting bigger. 35 per cent of all books sold on Amazon are for the Kindle, E-ink allows one to deliver dynamic content on outdoor advertisements and newsprint (kindle DX), it is a matter of time when Kindle would have dynamic ads, reducing the cost of books by half.
4. Evolution in the Thinking of Marketers: The CMOs are now increasingly becoming aware of the Internet as not only as an e-commerce platform, but also as an effective advertising medium. 95 per cent of product sales for Microsoft take place offline. However, they have allocated 50 per cent of their total advertising budgets to online advertising. 97 per cent of cars are bought offline, however decisions of which car to buy is made online. The smart marketers have now understood the advertising and influencer value of the Internet and are using it to build their brands and engage with prospective customers.
In a nutshell, all the above factors have made Internet advertising reach a tipping point; we are going to see exponential growth in it over the next five years. Will it become 50 per cent of all advertising, I want to believe!
Guest Article: Will online advertising become 50 pc of all advertising? - Part 1
(Vivek Bhargava is the Founder and Managing Director of Communicate2, which has evolved into one of the largest search and social media specialist organisations in India.)