Online Newspapers Grab Ad Spending

SEPTEMBER 21, 2007

An old media dog learns some new tricks.

The Newspaper Association of America has reported double-digit growth for the last 13 consecutive quarters of online newspaper advertising spending, which reached $795.7 million in the second quarter of 2007.

Randy Bennett is vice president of audience and new business development at the NAA. eMarketer spoke with him about what factors are driving this growth, key issues of the day and how newspapers are adapting to online publishing.

eMarketer: Online ads seem to be a bright spot for newspapers these days. Why?

Mr. Bennett: Part of it has to do with online ad growth overall. But newspapers are also making aggressive efforts to make their sites more compelling.

Online newspaper site content is more than just news. It includes community sites and content created around them, including user-generated content and video. This changes the value proposition. If you want to buy local ads, newspapers are a hub with a connection to the community. Advertisers can trust that ads will appear next to respectable content. Having varied content also draws a wider audience.

You can geotarget through a portal site, but news sites are where people are talking about things that affect their lives.

eMarketer: Some observers have said that only the largest newspapers are profitable these days. At the same time, local news site ads are picking up. What's the relationship between a paper's size, site and profitability?

Mr. Bennett: That's not true. Profitable newspaper sites come in all sizes. It's not so much a question of size as the amount of effort put into a site. Success is related not to cost-cutting, but to making the content better. Expanding content and the types of media available on news sites helps bring in more readers and helps with ad sales.

eMarketer: Small papers do seem at a disadvantage for offering robust content on their sites. Is there a trade association that helps them with the scale of what they carry?

Mr. Bennett: Newspapers handle content creation and packaging well, and their connection to the community is a core competency. Building platforms is not, so some newspapers are partnered with Yahoo! [in] the Newspaper Consortium. This includes smaller sites, since there's a desire to bring the local newspaper experience to a national audience, especially for marketers.

eMarketer: What types of local ads work best?

Mr. Bennett: There's nothing unique. Search is successful both locally and nationally. The thing is, newspapers are both online and offline. Bundling ads which use both media tends to be a good way to lift brands and spread messages.

eMarketer: What's the role of online video on news sites?

Mr. Bennett: We're still trying to figure that out. Newspapers with a local broadcast presence are trying newscasts. Some are using video for entertainment value. It just makes for more compelling content overall. Newspaper sites are still experimenting and there are lots of different approaches.

Some of it is definitely working. Newspapers capture half of online video dollars, according to Borrell Associates.

eMarketer: How do forums and the community portions of news sites fit into the news site mix?

Mr. Bennett: Consumers are looking for a one-stop shop for their community. Newspaper sites can be that. They don't just focus on breaking news, but also on what's going on in the community. Site users in forums are asking things like "How can I live my life better?"

eMarketer: Is there anything that online advertisers or marketers want from news sites that they're not getting, such as support for various ad types, campaign types or metrics?

Mr. Bennett: Metrics are a key issue. How do you tell the story that despite declines in traditional products, there is a growth story to tell?

[Ed. �" Mr. Bennett is referring to the drop in print newspaper ad revenues. The drop has overall news ad revenue growth trending negative, despite online newspaper ad growth.]

The Audit Bureau of Circulations used to just report circulation, but now they're reporting who's reading, how often print copies are passed along, total readership and online readership. Scarborough Research has also started reporting total readership, online audience and reach.

The issue is that it's not your father's newspaper. Newspaper sites are not just the newspaper online. As a result, they can deliver segmented audiences.

Big media hunts for Web cred, again

By Caroline McCarthy for News.com

This summer has been an unusual hunting season for the start-up world, with nascent Internet companies firmly in the crosshairs of major media conglomerates.

This month alone, Hearst Publications purchased social-shopping site Kaboodle, The New York Times "absorbed" the Freakonomics blog, and bookmarking start-up Clipmarks was rumored to be in the midst of a deal with Forbes.

In July, cable conglomerate Discovery Communications snapped up eco-blog TreeHugger. And this spring, CBS Interactive acquired both music community Last.fm and finance video blog Wallstrip.

"Surprisingly, we were in discussions with multiple media companies and not really that much with tech companies for some reason," said Manish Chandra, the founder of Kaboodle.

Sometimes, the motives behind the purchases are ambiguous, but one thing's clear—media companies are forking over amounts of cash in the tens of millions to hundreds of millions of dollars for Web start-ups that would seem more appropriate targets for a Yahoo or Google.

The big media rush to buy into the Web brings a remarkable sense of deja vu—and skepticism. The common wisdom (based on more than a little evidence, like Time Warner's hugely disappointing acquisition of AOL), ever since the first wave of tech acquisitions in the dot-com boom of the late 1990s, has been that big media doesn't know what to do with its pricey Web acquisitions.

"They have the money available to them today to get deeply involved in the dynamics of this, but they don't for the most part natively understand. They don't understand how Web publishing works," said Alan Mutter, a former newspaper editor and current partner in the Tapit Partners venture capital firm who blogs about the evolution (and often, devolution) of the news media at Reflections of a Newsosaur.

More than a few of the recent acquisitions have so far been letdowns. Conde Nast purchased Reddit last year, only to see the social news site increasingly eclipsed by competitor Digg, which remains independent. According to figures from Internet traffic firm ComScore, Digg pulled in 4,611,000 unique visitors in July while Reddit racked up only 311,000. Both sites are growing rapidly—Digg's unique visitors rose 118% from January to July of this year, and Reddit's rose 127 percent—but it's clear that when it comes to size, the two are in different leagues.

Likewise, NBC Universal's purchase of online women's community iVillage, also in 2006, has been rockier than either company would have liked—as was documented by The New York Times in August. The site lost a lucrative contract with Hearst, tie-in television efforts proved fruitless, and in June, fast-growing rival Glam Media surpassed it as the top online women's property for the first time. iVillage has shown signs of progress, as advertising revenues are rising, but it'll be an uphill climb.

Even Fox Interactive Media's $580 million buy of MySpace, which looked like a rock-solid move back in 2005, is showing signs of uncertainty. As rival Facebook continues its meteoric rise, some critics are wondering whether MySpace will turn out to be such a wise investment for News Corp. after all. "I figured the minute Rupert Murdoch bought it it was over, and now all eyes are on, guess what, Facebook," Mutter observed.

But digital media czars like Hearst Interactive Media Group President Kenneth Bronfin argue they know what they're doing this time around. "Within Hearst Interactive Media Group, we have spent the last 10-years-plus investing in venture-backed companies," Bronfin said. "We've invested in over 50 venture-backed companies from way back when, like Netscape, to companies today from Sling Media to Brightcove, so we have a long list of successful businesses that we've invested in where we've been on the board of directors and we've done a lot."

Fee content vs. free content

The Wall Street Journal and The New York Times may drop pay-to-read content. But online ad revenue alone won't cut it.

By Dante Chinni

Washington

Many in the newspaper business have embraced the Internet warily. For all the promise the Web platform has, it also holds some big pitfalls.

Yes, the online world offers potentially broader audiences and the promise of cutting costs by slicing into publishing and circulation expenses.

But the free content model on the Web is particularly scary for newspapers.

If the content online is free, why would people bother to subscribe to the paper? And once enough readers flee, circulation falls and advertisers find less reason to buy ad space. Perhaps even more alarming, the numbers increasingly suggest that online ads may never match the revenue base that print ads do.

This is precisely the situation many newspaper publishers find themselves in today. They can't ignore the Web. They understand they have to find a way to move online. But they aren't exactly happy about it and they are unsure how the economics are going to play out.

The last two weeks have only added to the sense of uncertainty.

The American newspaper industry's two giants – The New York Times and The Wall Street Journal – which have both made users pay for some content, are reportedly looking at giving in and joining the free-content crowd.

For the Journal, the speculation has come with the purchase of the paper by Rupert Murdoch. Some believe that Mr. Murdoch's goal is to make the Journal much more than a required read by the nation's MBA class. Many analysts believe he wants to make the paper a national, politically conservative alternative to the Times.

That goal, plus the desire to increase online audience and ad revenue reportedly has Murdoch thinking about removing the Journal's pay-to-read firewall – or at least parts of it. There are roughly 1 million online Journal subscribers each paying $79 a year. It has been a remarkably successful exception to the mostly free-content world.

For the Times, the question is about the fate of TimesSelect, the enhanced online subscription that the paper launched two years ago. The Times made some Web content – namely the paper's prominent columnists and some online bonuses – available only to those who paid $50 a year or subscribed to the print paper. It was aimed at the I-need-my-Tom-Freidman-now set.

How big is that crowd? There were about 225,000 of them as of June.

But critics of TimesSelect, and there have been many, have long held that it lessens the impact of the columnists by allowing fewer people to read them. One of those critics is Times columnist Maureen Dowd.

A report last week in, of all places, the Murdoch-owned New York Post, said the paper was considering junking TimesSelect. The response from the website's general manager was less-than-Shermanesque: "We're still looking at the situation."

What does all this mean? If both the Times and Journal abandon the idea of pay-to-read content, it is essentially dead for the time being on the Web.

That may not sound like such a big deal. After all, as anyone who Googles enough knows, fee content doesn't necessarily stay that way for long. Any blogger who understands basic "cut" and "paste" commands can turn "fee content" into "free content" with a few clicks of a mouse.

In addition, there is a social networking news culture developing on the Web that thrives on sharing news accounts. The more news that's free, the more that can be shared. These sites, like digg.com, are particularly popular with younger news consumers, which newspapers are desperate to reach.

And, from a purely selfish standpoint, who is against getting anything for free?

But the demise of pay-for-news on the Web would also mean we are still a long way from figuring out how news organizations will function in the new news world.

Online ad revenues may be growing like weeds, but the growth rate has begun to slow sooner than expected. Even the most optimistic projections suggest if they keep growing at their current rate it will take more than a decade for them to equal the money that comes in from print newspaper ads. But no one expects them to keep growing at the current rate. Somehow, newsrooms need to find new revenue sources, or they won't be able to cover as much news.

Online fee content probably isn't going to be the answer for newspapers, but some thought it might be part of an answer. Now it seems that, for the time being at least, it probably won't be, at least not with the current approaches.

What these changes would really mean is that the fast and furiously evolving world of news gathering is a little cloudier this week than it was last month.

Web to Pass Papers As Key Ad Segment

AUGUST 9, 2007

US online ad spending is still growing.

US Internet advertising spending will reach $61.98 billion in 2011, according to Veronis Suhler Stevenson's "VSS Forecast" report published in August 2007.

The media investment bank estimated that alternative advertising spending, including Internet, mobile, video game and digital out-of-home ads, grew 36.6%, to $26.53 billion, in 2006.

Alternative media spending is expected to rise at a compound annual growth rate (CAGR) of 17.4% through 2011, to $197.11 billion. Traditional advertising and marketing will see an aggregate CAGR of 3.2%, to $438.99 billion in 2011.

"Leading national advertisers have accelerated their diversion of dollars from traditional print and broadcast media to alternative digital platforms to combat media and audience fragmentation, increased consumer control and multitasking, and the growing impact of advanced technology on conventional media models," James Rutherford, executive vice president and managing director at VSS, said in a statement.

Spending on alternative marketing, including branded entertainment, interactive marketing and e-custom publishing, increased 17.3%, to $61.67 billion, in 2006.

By contrast, 2006 spending on traditional marketing such as direct mail and promotions grew a mere 5%, to $192.34 billion, albeit on a much larger base.

VSS's projections are more aggressive than those made by eMarketer in June 2007. The firm's $62 billion estimate for 2011 online ad spending also includes RSS, blogs and podcasts, which likely accounts for some of the difference.

"For Internet ad spending to surpass newspapers is a sign as big as any," David Hallerman, eMarketer Senior Analyst, said. "The shift in ad budgets has not yet caught up to the shift in media usage, but as the VSS data indicate, it will, at least eventually."

Zenith Reaffirms Its 3.7% Ad-Growth Prediction

Firm More Optimistic Than TNS, Other Forecasters

By Nat Ives

Published: July 02, 2007

NEW YORK (AdAge.com) -- ZenithOptimedia has reaffirmed its prediction of 3.7% growth in the U.S. this year, providing the brightest take among a recent spate of cloudy forecasts -- even for certain traditional media. TNS Media Intelligence, by comparison, said last month that ad sales would eke out a gain as small as 1.7% in 2007.

ZenithOptimedia says ad spending is likely to slip 1.7% for network TV and 1% for spot TV this year, while internet spending is expected to grow by 29%.

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Bright though it is, the Zenith view isn't exactly rosy. "It's slower growth than we've seen in the past," said Bruce Goerlich, exec VP-strategic resources at Zenith. Part of the problem is the cyclical absence of the Olympics or big elections this year, but the business is also being affected by deceleration in the U.S. economy and marketers' increasing reliance on cheaper digital media as well as nontraditional marketing.

Predicts TV to slip
To be precise, ad spending is likely to slip 1.7% for network TV and 1% for spot TV, according to the latest from Zenith. Newspapers and syndication can expect zero growth in 2007. And radio will only expand 1% this year.

The biggest gain in store belongs, unsurprisingly, to the internet, which Zenith expects to top 2006 by 29%. But cable TV and traditional outdoor, each on a bit of a tear, are poised to collect 6% more revenue this year. And consumer magazines are in line for a 4.6% boost.

"Clearly we're living in a digital age," Mr. Goerlich said. "There is a shift to digital going on, but certain media are showing continuing resilience, those that are providing unique strategic value." Out-of-home, for example, is echoing the old, innate power of network TV to push broad awareness quickly, he said.

Looking further out to 2008, with its elections and Olympics, Zenith forecast gains of 19% for the web, 6% for cable and outdoor, 5% for consumer magazines, 3% for spot TV, 2% for network TV, 1.6% for radio and 1% for syndicated TV. Newspapers are expected to turn in a second flat year in 2008.

Britain Says 'Cheers' for Online Adverts

JULY 3, 2007

The old guard is changing, and fast.

If your impression of Britain is a bloke in a bowler hat, think again. Far from being set in its ways, the UK is becoming a model for the future of advertising around the world.

In fact, Britain is set to account for over half of all online ad spending in Western Europe this year. That share will rise to 52.6% of regional online spending by 2011 — amounting to nearly £4.5 billion ($8.2 billion).

"Several recent developments, including Google's planned acquisition of the ad-serving company DoubleClick and Microsoft's announcement that it hopes to buy aQuantive, another player in the advertising sector, signal a radical transformation of online advertising," says Karin von Abrams, eMarketer Senior Analyst and the author of the new report, UK Online Advertising. "The UK will be in the vanguard of this change."

The health of the UK economy will continue to provide a firm underpinning for online advertising in Britain. Today, few advertisers remain unfamiliar with digital media, and both new and established brands increasingly have the funds, the will and the agency partners to invest confidently in online campaigns.

"Several sectors will drive the UK online advertising market between now and 2011," says Ms. von Abrams, "such as paid search, social networks, mobile platforms, rich media and personalization."

The importance of the rise of Internet spending is difficult to overemphasize.

With the rate of advertising growth declining, and Britain's share of world spending also diminishing, the growth of the online marketplace has made a remarkable contribution to the UK's advertising landscape, and given an enormous boost to spending overall.

Data from the Advertising Association and GroupM illustrate the impact of online spending dramatically — and projections for 2007 show the trend continuing.

The rate at which online spending is growing against spending in all other media is easing somewhat, however.

Recent projections by ZenithOptimedia anticipate that online advertising will account for 16.6% of the total in 2007 — a less optimistic estimate than the 18% calculated by GroupM — and will forge ahead to claim just under 23% in 2009.

"A world transformed by the convergence of browsing, searching and ad-serving technologies isn't here yet," says Ms. von Abrams. "In the meantime, in Britain traditional display formats remain central to the online marketplace, even as more complex types of messaging and interaction emerge."

To get more of a peek into the future, read the new eMarketer report, UK Online Advertising.

Internet Advertising Revenues Set a New Quarterly Record at Nearly $5 Billion

The growth of interactive advertising continues at a torrid pace. After a record year in 2006, Internet advertising revenue rose again with a quarterly record of $4.9 billion for the first quarter of 2007. This represents a 26 percent increase over Q1 2006 and a two percent increase over Q4 2006.

These record numbers are a solid indication that marketers are becoming increasingly comfortable with the strength, accountability and effectiveness of the interactive medium. With its unique ability to affect consumer behavior from product awareness, to purchase intent, to actual purchase and then brand loyalty, revenue should continue to grow as marketers allocate more marketing dollars towards the effective and innovative platforms that only interactive can deliver.

For more information, click here to read the IAB/PwC press release on first quarter interactive advertising revenue.

Global Media Outlook: $2 Tril. by 2011

June 21, 2007
By Georg Szalai/The Hollywood Reporter

NEW YORK The global entertainment and media industry will expand at a 6.4 percent compound annual growth rate over five years to hit $2 trillion in 2011, according to PricewaterhouseCoopers' "Global Entertainment and Media Outlook: 2007-2011."

One estimate likely to cause a stir includes the prediction that U.S. spending on Internet advertising and access will surpass spending on newspaper publishing in 2009.

Globally, PwC expects Internet advertising and access spending to grow from an estimated $177 billion in 2006 to $332 billion in 2011, making for a 13.5 percent compound annual growth rate.

The U.S. remains the largest but also the slowest-growing media market in the world, expanding at an estimated 5.3 percent compound annual growth rate to hit $754 billion in 2011.

Asia Pacific will be the fastest-growing region at an estimated CAGR of 13.5 percent.

Digital media, particularly online and wireless, are pegged to be the key growth engines around the world, with nearly half of total industry growth expected to come from these two areas over the five-year period, according to the global consultancy.

PwC released its eighth annual Outlook forecast with these and other projections today.

Global advertising will increase at a 5.4 percent compound annual growth rate to expand from an estimated $407 billion in 2006 to $530 billion in 2011, the Outlook predicts.

According to PwC, the Internet will remain the fastest-growing ad medium, with a projected 18.5 percent CAGR to $73 billion, or 14 percent of total ad spend, by the end of the five-year period.

PwC projects double-digit growth in the online/digital and mobile fields in all territories around the world over the next five years to $153 billion, with TV distribution and video games also figuring as key growth engines.

Broadband households will grow by 300 million to 540 million, and wireless subscribers will increase by 1.1 billion to 3.4 billion worldwide, PwC also predicts.

"Content, distribution and technology companies need to aggressively seek out new relationships to accommodate the shift towards convergence," said Jim O'Shaughnessy, global chairman of PwC's entertainment and media practice.

In terms of regions, economic and media/entertainment growth will continue to boost the importance of Brazil, Russia, India and China (BRIC), according to PwC.

One particularly eye-catching projection by PwC calls for Asia-Pacific spending on the distribution of TV programming on mobile phones to jump from only $26 million in 2006 to $6.5 billion in 2011.

This 14.7 percent compound annual growth will be nearly three times the projected 5.5 percent increase for the rest of the world.

"Digital download-to-own streaming services will generate incremental revenue in the United States and EMEA," PwC predicts. "Box office will be enhanced by digital cinemas in the United States, Europe/the Middle East/Africa and Asia Pacific and by modern theaters and more screens in Central and Eastern Europe, Asia Pacific and Latin America."

The 6.4 percent global entertainment spending increase projected in PwC's Outlook compares with the compound annual growth rate of 6.6 percent that last year's report predicted for the 2006-10 time frame.

Marketers Get More Efficient With Ad Spending, Leading to Less of It

ROI Allows Cuts to Media Spending Without Losing Effectiveness

By Nat Ives

Published: June 12, 2007

NEW YORK (AdAge.com) -- If you're looking for expansion in U.S. measured media this year, dig out a magnifying glass. Ad spending will total just $152.3 billion in 2007, for an anemic 1.7% rate of growth and the smallest gain since the 2001 advertising recession, according to a forecast from TNS Media Intelligence. As recently as January, TNS had forecast a 2.6% growth rate -- and it called that increase "tepid."

.

'Weak year'
"By historical standards over the past decade, 2007 is shaping up as a weak year," said Jon Swallen, senior VP-director of research at TNS. In addition to general economic conditions that are making marketers a little leery of huge outlays, the continued fragmentation of media options is depressing growth, he said.

And digital media's relatively higher level of accountability and tracking also has given advertisers a better basis on which to calculate returns on investments.

"This has allowed advertisers, particularly the larger advertisers with a bigger impact on the overall market, to improve the overall effectiveness of their marketing efforts," Mr. Swallen said, "which in turn gives them the flexibility to scale back their advertising and marketing budgets and take those savings to the bottom line without feeling that they're losing anything in the marketplace."

Shift to unmeasured services
Even in recent years when overall measured-media spending was expanding at rates closer to 3% or 4%, the top 50 advertisers have cut back on their media outlays. Some of that money, moreover, is going into unmeasured marketing services such as digital, direct and customer-relationship management.

So what's the good news? Don't worry, we've got some.

Online display advertising will grow 16%, the TNS forecast predicts. The other anticipated gainers: cable TV, with an expected expansion of 5.9%; outdoor, set to climb 4.6%; consumer and Sunday magazines, up 4.5%; Spanish-language media, up 3.7%; network TV, up 1.3% and syndicated TV, up 1.2%. The losers are fewer in number: Business-to-business magazines are expected to lose 1.5% of their ad revenue, newspapers could fall 2.9% and spot TV is in line for a 5.5% drop.

Ad spending in the first quarter of 2007 slipped 0.3%, TNS said last week. Rival ad-research firm Nielsen Monitor-Plus weighed in today, reporting a 0.6% decline in the first quarter.

European Online Ad Spending

JUNE 12, 2007

Display ads are popular on the Continent.

Online advertising spending within the 13 countries of the IAB Europe network was Eur8.003 billion ($10.08 billion) in 2006, according to the Interactive Advertising Bureau (IAB) Europe's "Pan-European Online Advertising Spend" study, analyzed by PricewaterhouseCoopers

The UK accounted for the largest share of European online ad spending, at 39% of the total. Germany accounted for 22%, France for 15% and the Netherlands for 7%.

Alain Heureux of IAB Europe said, "These figures demonstrate without any doubt the significance of the European online advertising industry."

Nearly a third of online advertising spend in 2006 was on all forms of display advertising, 45% on search advertising, 22% on classifieds and directories and 1.6% on e-mail marketing.

In 2007, eMarketer estimates advertisers will spend $7.5 billion to reach all Western Europeans, up 25% from $6.0 billion in 2006.

Online advertising in the UK will account for as much as 18% of all media spending this year, according to GroupM. It is also the most expensive country in the world for online advertisers. By 2010, eMarketer estimates advertisers will spend $217 per Internet user in the UK, compared with $136 per French user and only $10 per Italian Internet user.

The US audience is something of a bargain by comparison: Advertisers spent $86 per American user in 2006, and they are projected to spend $130 per user in 2010.

Behavioral Advertising on Target... to Explode Online

JUNE 11, 2007


Brand advertising is moving onto the Internet.

After years of deriding the Internet as "only" a direct advertising vehicle, major brand marketers are discovering powerful new ways to target their users online, and major online players are clearly noticing.

"Nearly $10.5 billion sends a very clear message about future strategies," says David Hallerman, eMarketer Senior Analyst and the author of the new eMarketer report, Behavioral Targeting: Advertising Gets Personal." "Four deals in 35 days — Google-DoubleClick, Yahoo!-Right Media, WPP Group-24/7 Real Media and Microsoft-aQuantive — are a clear indication of the onrush of brand-focused advertisers onto the Web."

Internet advertising is no longer all about paid search. Targeted online display advertising is exploding.

Spending for Internet advertising with a behavioral targeting component will soar from $575 million this year to $1 billion in 2008, and that still represents only 11% of the US display, rich media and video market.

"With the greater attention paid to overall ad targeting, and the rising focus on brand messages online," says Mr. Hallerman, "this market will nearly quadruple by the end of 2011, growing to $3.8 billion."

There are three key reasons for the large spending gains:

1. Behavioral targeting helps marketers reach a more engaged audience with fewer ad impressions
2. Behavioral targeting helps publishers monetize their "long tail" pages — the non-premium or remnant inventory that either is sold for less money or remains unsold
3. Even though individuals are often not aware of the process, many tend to find ads targeted by their actions to be more relevant to their needs, and therefore more palatable or even welcomed

"The eMarketer outlook for behavioral targeting is optimistic," says Mr. Hallerman, "but not overly so, since the scalability required for substantially larger spending is simply not there yet."

Scalability involves several factors, including the broad reach among Web sites — both through portals and ad networks — needed to allow fine-tuned segmenting and yet maintain a reasonable size for each slice of the audience.

"Another element holding back behavioral targeting's growth is the technology itself, which despite its benefits still seems counterintuitive to many advertisers," says Mr. Hallerman. "That they need to pay nearly the same rate for a remnant page as they would for a contextually targeted page placement goes against the grain."

Nevertheless, behavioral targeting spending will continue to grow at a significant rate, peaking at nearly 74% next year due to a combination of greater advertiser acceptance, greater publisher support (only about one-third of Web sites can do behavioral targeting, according to Advertising.com) and greater overall online ad spending with the national elections and Summer Olympic Games.

By 2011, "very large publishers will be selling 30% to 50% of their ad inventory using this [behavior targeting] technique," predicts Bill Gossman, CEO of Revenue Science.

See what lies ahead for advertisers and publishers alike — read the new eMarketer Behavioral Targeting: Advertising Gets Personal report today.

Advertising's death is greatly exaggerated

Commentary: But marketers are losing touch with customers

By Jeffrey F. Rayport

Last Update: 12:10 AM ET Jun 8, 2007

Jeffrey F. Rayport is founder and chairman of Marketspace LLC, a strategic advisory business.

BOSTON (MarketWatch) -- No one could have missed the mad rush in recent weeks among advertising and technology players in their high-stakes game of musical chairs over online advertising assets.

Google snapped up DoubleClick. Publicis bought Digitas. Yahoo nabbed Right Media. WPP gobbled up 24/7 Real Media. And Microsoft paid $6 billion for aQuantive.

To judge from ad-industry publications, advertising is in crisis. Nothing could be further from the truth.

Whether all of these deals is consummated (the FTC, for example, has already raised antitrust concerns about Google's deal), and whether there are more such transactions to come (it's likely that consolidation will continue), there's a crucially important storyline underlying all the sound and fury.

An overwhelming question faces every marketer worth his or her salt. Indeed, you might say it's the ultimate conundrum: Who will determine (or control) how major brands connect with their consumers and markets in the future?

To judge from ad-industry publications, advertising is in crisis. The stories of upheaval in how agencies serve clients, create value and get paid might readily suggest that advertising as a profession and business is dead, or dying. Nothing could be further from the truth.

Corporations spent roughly $600 billion globally in 2006 on advertising, marketing and promotion. The market is growing year over year, and the big publicly traded agency holding companies -- Omnicom (OMC, IPG11.59, +0.03, +0.3% ) -- touch about a third of those revenues. The holding companies are making plenty of money, and most of their share prices are at long-term highs, so what's the problem?

Three sets of numbers pretty much tell the whole story.

First, follow the money.

There is a growing divergence between how consumers spend their time and how advertisers allocate their marketing budgets. Last year, U.S. consumers spent nearly a third of their total media-consumption time engaged with online or interactive media, a dramatic increase from just two or three years ago. At the same time, Fortune 500 companies allocated only 6 percent of their marketing budgets to online media in 2006, up from 5 percent in 2005. Marketing bellwethers like Procter & Gamble and Nissan make headlines when they talk (incessantly, it seems) about moving in new directions, but, in most cases, their budgets simply have not budged. That's a problem; they're spending ever more money where, increasingly, consumers aren't.

Second, follow the growth.

The inevitable correction is upon us. That's why online adverting in the U.S. market is growing seven times faster than other advertising media: Online was up 35% year over year, while the overall ad market grew only 4 percent. Whether dollar allocation percentages ever match consumer usage numbers is academic; it's clear that the gap between consumer behavior and corporate marketing budgets must close. Of course, the penetration of online media among consumers continues to grow, so there's no static target. Instead, there's a new dynamic equilibrium that the marketing world is currently seeking and cannot (yet) find.

Third, follow the power.

As ad dollars shift online, something remarkable is happening. Despite the promise of democratization of the Web, with nearly 120 million active sites last month, there is nothing that favors the little guy (or even most of the big guys) when it comes to online ad dollars. In the United States, at least, an oligopoly has emerged. Call a Big Four: Google (GOOG :

google inc cl a

MSFT30.05, +0.43, +1.5% ) . In 2006, the four companies captured 85% of the U.S. online-ad market as measured in gross ad dollars, down slightly from 88% in 2005.

If that sounds mildly encouraging, it shouldn't: The top 10 online sites on the Web, including the Big Four, captured 99% of gross ad dollars in 2006, up from 95% in 2005.

Of course, on a net basis, the figures are less dramatic: The Big Four claimed 57% in 2006, and the Top 10 took 70%. And in the global market, where the Big Four are less entrenched, the power is more balanced.

Still, it's worth bearing in mind what you might call Golden Rule 2.0 -- to wit, he who holds the gold makes the rules.

Which brings us back to the recent flurry of acquisitions: What's happening is a battle among online titans for control of how brands interact with consumers in the digital world. For instance, Google has proved to be dominant in search advertising but not a player in display; by acquiring DoubleClick, it will overnight become the world's largest ad-serving network.

It's also a battle for how brands interact with consumers not just online, but across all media.

While e-commerce in the United States has not become the game changer that technology pundits prophesied in the late 1990s (online-commerce revenues have hit a plateau at about 10% of total retail activity, roughly the equivalent of where catalog direct marketing peaked two decades ago), the Web not only enables consumers to buy online but influences what and how they buy offline. Today's automobile consumer, for example, spends an average of five hours online in the two weeks prior to purchasing a car. No one can actually acquire a car online, but online experience dominates what cars a consumer will consider and actually buy via bricks-and-mortar retail.

In this sense, gaining control of online advertising is not just about capturing online dollars, growth and power. It may be the whole game when it comes to consumer marketing and sales promotion for a majority of high-consideration products and brands, and many others.

With four companies emerging as the world's online-ad gatekeepers -- and getting more powerful through acquisitions every day -- we are heading toward a new reality in consumer marketing. Soon, the Big Four will tell the Fortune 500 and Madison Avenue alike how to play their game.

In that sense, the rumors of advertising's demise have been both greatly exaggerated, to paraphrase Mark Twain, and dramatically understated. Advertising is dead. Long live advertising.

Papers Still Dominate Local Online Ad Spending -- But Are Losing Share

By Jennifer Saba

Published: June 06, 2007 11:30 AM ET
NEW YORK Newspaper Web sites might reap the most from local advertisers spending online but a new study reveals online newspapers are losing share. According to Borrell Associates, newspapers controlled more than 35% of all locally spent online advertising in 2006 but that dominance is declining: Online newspaper share decreased 8.2 points over a two year-period.

"It's likely to slip more this year," the report warned, "as the industry grapples with the Web's transformation from a banner-advertising and pay-for-listings medium -- familiar formats for newspapers and their existing advertisers -- to one that is dominated by video advertising and paid search."

The study found there is no slowdown of advertising dollars flowing to the Internet either, rather more competition is honing in on newspapers' turf. This year, analysts with Borrell forecast that local online advertising is projected to increase 31.6% to $7.5 billion and Internet giants like Yahoo, Google, and others are scrambling for those dollars. Borrell found that pure-play sites represent 33.2% of local online ad spend.

"The local marketplace is shifting," analysts observed in the study. "The come-from-behind sites operated by radio and TV stations are gaining small bits of share ... The Internet 'pure-play' sties -- those not affiliated with traditional media -- are gaining local market share."

Newspaper companies teaming up with Google, Yahoo, Monster and others, stand to gain suggested analysts. For example, Yahoo's domestic advertising growth slowed from 36% in 2005 to 19% in 2006 and in the Q1 this year, Yahoo's growth is almost flat, up 0.4%.

The alliance with Internet companies will allow newspapers to tap into national ad revenue or as Borrell calls it "found money." Analysts wrote that those newspapers that participated in the survey and are involved in national advertising networks still received on average 93% of their revenue from local advertisers in 2006.

The study said that those newspaper sites that are succeeding do so because of a combination of factors including staffing online-only sales people that target non-traditional advertisers and by instituting higher online ad rates.

Furthermore the study revealed that the average newspaper Web site's revenue equated to about 15% of all locally spent online advertising in 2006. However, there were papers that reported much larger percentages, in a few cases, 50%. Not only did these sites maintain a separate online sales staff, the sites depended less on classifieds. The top performers received 62% of its online revenue from classifieds as opposed to 71% for the average newspaper Web site, according to the report.

Web's Q1 Ad Rev Up Again; Hits Record $4.9 Bil.

Mike Shields

JUNE 06, 2007 -

Online advertising’s hot streak continues to roll on, as the industry started off this year with yet another record ad revenue quarter.

During the first quarter of 2007, Internet advertising revenues hit $4.9 billion, up slightly from the previous record set just in the fourth quarter of last year ($4.8 billion) while representing a healthy 26 percent increase versus the same quarter last year, according to the latest figures released by the Interactive Advertising Bureau and PricewaterhouseCooper. Just a few weeks ago, the two partner organizations announced final revenue figures for 2006 that highlighted the growing strength of the online ad market, as revenues surged 35 percent for the year, totaling at $16.9 billion.

Officials at both firms predict that these spending trends should continue, particularly as broadband connections become more pervasive and advertisers continue to gravitate to more dynamic Web ad formats. “The recent results are particularly impressive when the size of the advertising revenue base is taken into account,” said Peter Petrusky, director, PricewaterhouseCoopers. “Given these results, we may expect continued strong revenue growth buoyed by an expanding broadband subscriber base, which could translate into more users spending more time online and offers a platform for rich media and video ads that dial-up connections can’t render.”

Auto Dealers Are Getting the Biz Online

MAY 31, 2007

Lisa Phillips, Senior Analyst

The local Internet scene is heating up for automotive dealers and sellers, according to a recent report from Borrell Associates. Local online advertising by automakers, dealers and individual sellers will escalate to $4.2 billion in 2011, up from $2.3 billion in 2006.

Data from the National Automotive Dealers Association (NADA) indicate that of the $7.8 billion spent on advertising by auto dealers in 2006, the Internet's share was 11.5%.

Common features on dealer sites in 2006 were price and inventory information, financial forms and information, and the ability for customers to schedule sales and service appointments. Yet although visits by car shoppers are on the rise, conversion rates are not. The NADA's "2006 Dealership Internet Survey" shows a monthly average of 319.9 unsolicited prospects visited dealer sites in 2006, compared with just 227.9 per month in 2005.

But of the qualified leads these dealerships received — 52.9 in 2006, up from 29.5 in 2005 — the conversion rate to sales dropped, from 26.4% in 2005 to 19.2% in 2006. Conversion rates among customers who arrived through third-party buying sites were far better — 29.6% in 2006.

What are they missing? Prompt follow-up with prospects does not appear to be the issue. Although Capgemini, in its 2006 "Cars Online 06/07" survey, demonstrated that 84% of US respondents expect their e-mail inquiry to a dealer or manufacturer to be answered in less than 24 hours, Chinese car shoppers were the most impatient, with 43% expecting an immediate response, while 91% of British respondents expect an answer within the same day.

Dealer responses to the NADA for its Internet survey indicate that 98.3% are responding to customer inquiries within 24 hours, with 82% boasting they are getting back to prospects in seven hours or less. Perhaps the responses themselves are turning away prospects. While the Internet has speeded up response time, that greater speed can reduce, rather than improve, the quality of communication.

Online Ad Spending Up in UK

Brits believe in online.

Internet display ad spending, excluding search and classified, grew 9% in the 12 months ending March 31, 2007, according to Thomson Intermedia. The Internet was one of the strongest sectors driving overall UK media spending, which increased 5% during the same period.

Sarah Jane Thomson of Thomson said, "One fear we should see assuaged with time is of audiences fragmenting endlessly, eroding forever the critical mass traditional media once offered."

eMarketer Senior Analyst Karin von Abrams said UK market changes prompted media variety.

"Uncertainty about the evolution of channels and audiences has encouraged some brands to reconsider the potential of 'old' media, such as press and door drops, for making an initial approach to consumers."

GroupM data, which included all forms of digital advertising (and are based on calendar years), revealed even greater online growth compared to the overall market. The firm put 2006 digital advertising growth at 39.1%, and estimated 36.2% growth for 2007.

Ms. von Abrams says Internet advertising usage and spending will continue to affect the market as a whole.

"We're not surprised to see spending on Internet display ads continue to outstrip the modest overall rise in UK media spend. Search-related advertising is growing even more quickly.

"At the same time, advertisers and marketers are still struggling to exploit the full power of the Internet, and the relation of online to other media. Real progress may come incrementally."

2006 Canadian Online Advertising Tops $1 Billion

Online Ad Revenue Surges Forward As Variety Of Factors
Combine for Growth

TORONTO, April 30, 2007 - The Interactive Advertising Bureau of Canada (IAB) today announced that 2006 Canadian Online Advertising Revenues surged to an unprecedented $1.01 billion dollars for the year. The 2006 actuals represent a 26% increase over the $801 million originally estimated by the IAB for 2006; and an 80% increase over the 2005 actuals of $562 million.

Of the $1.01 billion, approximately $208 million or 21% of ad dollars were allocated to the French Canadian Online market, representing growth of 68% over the 2005 actuals of $124 million.

2006 Canadian Online Ad Revenue by Advertising Vehicle, was as follows:







Display advertising (including banner CPM and direct response advertising, plus contests, sponsorship and microsites) - 36%;
Search advertising - 35%;
Classifieds/Directories - 27%; and,
Email - 2%
In actual millions of dollars, 2006 vs. 2005 Canadian Online Ad Revenue by Advertising Vehicle, was as follows:


2006 Canadian Online Ad Revenue by Advertiser Category was also tabulated, and was as follows:

Automotive - 16%;
Consumer Packaged Goods - 14%;
Entertainment (Music, Film, TV) - 9%;
Financial - 16%;
Leisure (Travel, Hotel, Hospitality) - 14%;
Retail - 16%; and,
Other - 15%
What accounts for the 80% jump in 2006 vs. 2005 revenue figures? IAB Canada and Ernst & Young LLP (who tabulated results from the double-blind survey), cite a number of critical factors leading to the increase, including:
· Substantial Revenue Growth Across All Publishers:

Small and Medium publishers (who typically net between $500k to $5M/yr.) showed an average revenue growth of 85% vs. 2005;
Large publishers (who typically net between $5M to $30M/yr.) showed an average revenue growth of 155% vs. 2005; and,
Very Large publishers (who typically net between $30M to $100M/yr.) showed an average revenue growth of 62% vs. 2005.
· Revenue Growth Within Online Ad Networks:
2006 saw substantial growth in revenue for both US and Canadian networks selling "Canadian eyeballs" aggregated across U.S. and Canadian sites.

· More Integration, New Advertisers, New Advertising Choices and New Ad Formats:
More integrated campaigns; more new, blue-chip advertisers entering the market for the first time; more advertising choices for Search; uptake of rich media; and, the addition of video pre-roll advertising to the selection of Online advertising tools, all helped drive the industry forward.
"Add to all of this, results from the 7 CMOST (cross-media optimization) research studies that the IAB has undertaken over the past 4 years, plus the fact that in the past two years alone, over 1,000 senior-level advertiser, agency and publisher representatives have taken the IAB's Intensive One-Day Course in Interactive Marketing and Online Advertising -- and you get a sort of 'perfect storm' that was able to move the Canadian Online advertising dial forward to such an extent," says Paula Gignac, President of IAB Canada.

And there's still more growth to come. IAB Canada's projected total for 2007 Online advertising in Canada, is estimated to be $1.337 billion -- a full 32% more than the 2006 actual of $1.01 billion. "It's interesting," says Gignac. "While it took us 13 years from when the first banner was served on the Internet, until now, to reach the billion dollar mark in Canada, it may only take us another two to three years to reach the second billion. Fascinating times indeed."

About the IAB Canada 2006-07 Canadian Internet Advertising Revenue Report
The 2006 actual revenues and the 2007 estimated revenues were reached after a comprehensive survey of all major Online publishers in Canada. Revenue data was compiled and analyzed by Ernst & Young LLP.

Ad Spending

Ad tracking firm TNS Media Intelligence reported that the nation’s 50 largest advertisers cut their spending on “measured” media such as TV, print, and internet display ads by 1.5% in 2006 (even though US ad spending grew 4.1% overall). This likely signals that big companies like PG are reallocating some of their ad budgets to new internet venues that aren’t measure (eg – paid-search, social networking, online video). Most stunning was the performance of Spanish-language media: television, newspapers and magazines showed sharply higher growth rates, the latest confirmation that advertisers are recognizing the value of Spanish-language consumers. [Wall Street Journal]

How HP Manages Global Search Campaigns

Daina Middleton's Imaging and Printing Group (IPG) is only one part of the overall picture at HP.com, but she still has countless consumer segments to think about and just as many or more SMB verticals. While her job of organizing global search is naturally complicated, those concerns were truly scratching the surface when she took over the division's search strategy 16 months ago.

"There are roughly 750,000 pages on HP.com that relate to products in IPG," she says. "I'd say around 95%-99% of the product pages were built a long time ago -- without search in mind. So, we cannot rely on organic results."

In other words, paid search is even more integral to extending the brand online than for firms with decent-to-good SEO. Add in the fact that the division she inherited had at least 16 staffers based around the country (as well as a few worldwide) who were budgeted for online campaigns, but who never spoke with one another. Plus, their own people were unknowingly competing against one another for the same search terms. Other problems:

- Lack of top five placements
- Campaigns weren't tied to overall business objectives
- Corporate couldn't monitor their activity
- Not integrated with print, TV/radio, Web or email
Here are five strategies they implemented to overcome the obstacles:

> Strategy #1. Distinguish global buys

Once Middleton let her team know that their days of doing solo search campaigns without corporate synch-up were over, she began organizing keyword buys into three tiers: global, regional and country.

After looking at Web analytics for online stores in each of their 11 countries, they decided that general terms, such as "color printer," were to be purchased across all three levels in English, due to the widespread use of the language. They are high-cost, widely searched buys that higher-ups consider must-have because of branding and conversion reasons. Higher ROI purchases such as "HP photo printer" are also often purchased across the three tiers.

> Strategy #2. Take regional aspects into consideration

Not surprisingly, search buys get more specific at the regional level. For instance, "digital camera" performs well in the US and Canada, while "digicam" or "snappy" are the regional terms HP uses in the United Kingdom and other parts of Europe.

"You have to consider, `How do people use language,' " Middleton says. "There will be some examples where you need to make significant changes from one market to the next."

>Strategy #3. SEM by country

The keywords become language-specific and sometimes dialect-specific for campaigns in countries such as France, Japan, China, India, Hong Kong, South Korea, Taiwan, Singapore and Malaysia. Middleton and her team employ search partners (see hotlinks below) to hone in on their international target markets, but she advises to do as much of the work in-house as possible.

"You can't rely on your search partner to automatically optimize this area," she says. "You have to keep your team attentive to linguistic issues."

>Strategy #4. Organize special offers

One of the later pieces Middleton added to the puzzle was the ability to coordinate search buys with campaigns going on in other media. In a general example, they employed the keyword buy "school printer" for back-to-school campaigns.

"We have been able to try more promotions at the local level like, `HP Photosmart 230, $100 off.' Before, these efforts were very disjointed and that hurt our ROI."

>Strategy #5. Regular correspondence

Middleton holds weekly teleconferences with her team, using the meetings to alter campaigns mid-stream when necessary. She also set up formal quarterly reports that show campaign performance on the three tiers of global, regional and country.

"We are making sure that things like special promotions are moving as they should be and we work on improving seasonality."

Middleton offered five search tips for huge organizations:

Tip #1. Cover all of your bases and do not solely focus on purchase components. All of our data shows that if you do that, you will sell yourself short. You will have a better ROI if you look at all layers.

Tip #2. Don't forget that your search customers are seeking knowledge. What we need to remember is that people are not just find out there to find a bargain.

Tip #3. Take what you know about merchandising at your Web site and integrate it into your search campaigns.

Tip #4. Don't forget metrics. Look how things perform last quarter versus this one and last year versus the current. There are important seasonality differences. You start to see trends that prove themselves out from a seasonality standpoint.

Tip #5. Follow customers through the funnel and their buying cycles for accessory products.

During the last year, Middleton has been able to reign in her division's sprawled-out search initiative, giving it not only uniformity. They have implemented profitable, time-specific campaigns in 11 countries because of the strategies put in place.

"We have seen our online revenue go up because of our improved search," she says. "The sum total effect of implementing those three layers has enabled our ROI needle to noticeably move in the right direction continuously. In addition, we've absolutely increased keyword coverage on position. Mainly, I think we've improved the customer experience."

However, Middleton warns marketers taking over far-reaching search initiatives against hoping for a quick fix. "One of the things I always tell my peers is to not give up hope. The longer you do this, the more information you get and the more you can adjust your campaigns, programs or model. You can turn that data into insight that actually affects marketing and ROI."

Note: This article references several speakers from ad:tech conferences. For information about future shows, visit http://www.ad-tech.com.

Measuring the Invisible

FEBRUARY 28, 2007

Q: What is the ROI of advertising?
A: Stop advertising and find out.

Marketers know that they have to advertise, but many are dissatisfied with advertising's return on investment (ROI) — even though most of them do not measure it anyway, according to a new study by Forrester Research.

Marketers were asked how likely they were to recommend a particular product or service. The aggregate rating for ad agencies was 21%, meaning that very few clients would recommend their agencies' services to others.

The flip side is that 76% of marketers had no way to determine their ROI from their lead agencies, and 69% said ROI is too difficult to measure.

"There's always an undercurrent of discontent with agencies," said Peter Kim of Forrester. "They're dissatisfied, yet on what basis? It's not because the agency didn't help them drive sales or meet some other business outcome. It's a vague disenchantment, or disappointment; it's a feeling that there isn't data to back up."

Marketers aren't the only ones pining for more data. A new joint survey by NSON Opinion Research and the Audit Bureau of Circulations of online ad planners and buyers revealed a strong desire for independent verification of new media ad metrics.

Three-fourths of North American ad professionals said that they would be more likely to advertise on Web sites if the results were independently verified by a third party.

Less than half of advertisers and agency professionals said that they trusted online publisher metrics.

And more than two-thirds of respondents said that they preferred advertising on audited Web sites when possible.

There is good news for agencies. For one, they are still responsible for nearly 60% of ad spending. Plus, firms are always creating more data to meet demand. In traditional media, Nielsen//NetRatings recently started tracking TV viewing by college students. On the new media side, Podtrac just released a media planner for would-be podcast advertisers.