Last week Chinwag held an interesting session
(see their summary here) on the future of online advertising in a recessionary world.
The panel consisted of Wayne Brown (Client Services Director, glue London), Catherine Demajo (Head of Marketing, Time Out Group), Damon Reeve (CEO / Co-founder, Unanimis), David McMurtrie (Head of Product Specialists, Doubleclick), Guy Phillipson (CEO, Internet Advertising Bureau UK) with Philip Buxton (Digital Strategy Consultant) taking the helm.
The IAB has a summary of some of the discussion
over here, the following are the key points from it:
“Online disciplines are well placed in a recession,” said Phillipson. “Accountability is key. If the axe comes down and you’re thinking ‘Where can I spend money in an accountable way?’ search and online direct response is going to hoover up a lot of that”.
Wayne Brown, head of account management at glue London was in bullish mood, arguing that recession had opened up opportunities for his agency. “The early stages of recession have been very positive for us,” said Brown. “Big advertisers like Toyota for example have been forced to spend more money in digital.”
For Brown, measurability is the key to the future survival of the medium. “We’ll come out of this recession much stronger if we can match the high standards of creativity with targeting and tracking,” he argued.
David McMurtrie, head of product specialists at Doubleclick agreed that measurability would be a crucial factor in the months ahead as clients will inevitably look to focus on “tracking value”. As a result, argued McMurtie, “people are looking at optimisation, targeting and the like. These tools have been available for a long time but have not been so widely used until now.”
McMurtrie warned clients against short term budget slashing, arguing: “There are two types of business. One that will say ‘my business is screwed’ and slash budgets. The other will accept that they have slightly less to spend but will be more innovative. Who do you think will come out of this the strongest?”
From a client-side perspective, exploiting new found opportunities was a key theme of the discussion. Catherine Demajo, head of marketing at Time Out London, pointed out that recession had led to an increase in the financial importance of Time Out’s online brand in comparison with the offline title. “While online is not compensating for what’s lost offline, it’s growing,” said Demajo. “As a result we’re looking more and more at integrating our media.” The net result of this according to Demajo is that Time Out has been forced to “become more flexible, open and creative.”
For more flexible, read "pricing". The key take the ISB had was that measurability was the key differentiator for online Ad media.
Conference chair Philip Buxton wrote that in his view there would be
two types of plays:
Digital – as the accountable ‘channel’ - will have been up in the second half of 2008 on the year before (my guess - and it really is a guess - is by between 15 and 20%) and even up by a [perhaps significantly] smaller amount compared with the first half. Its most accountable sub-channels – search – will claim even greater share, though growth will be slower. And the accountable versions of other channels – CPA display, for example – would fare better than their less accountable brethren – like CPM banners. Experimental budgets like mobile are likely to be cut or axed completely. Brilliantly, Wayne Brown, who oversees the Toyota account at glue, was also able to confirm that no one is buying cars.
So, what lies beneath?
The upshot was that advertisers are starting to fall into two camps:
1. The back-to-basics types that will hammer the numbers (and their DR suppliers) harder to reach tougher targets in tougher times. Their bosses have said to them: “You’re in online, get me out of this mess. You won’t get any more budget, but you will get more of what you had last year than everybody else.”
2. The innovators. Usually in marketing-led businesses, there are those that see the recession – and the potential desperation of innovative suppliers – as the time to buy and try new ideas to get what money they have working harder for them.
One of the problems that many advertisers and client sites will face is the sheer surplus of inventory, one WSJ writer, martin Peers, likening its inflation
to the Zimbabwe dollar, in that:
Both are printing nearly-limitless amounts of their main currency, vastly diminishing its value and undermining their future. The currency, for Web sites, is their ad inventory. And while Zimbabwe, under different management, can change course, the same isn't true of the display-ad market. Web sites keep generating new content and extra pages on which ads can run.
That is why the sudden sharp weakness in online display advertising, which hit fourth-quarter revenue at companies ranging from Yahoo to Time Warner's AOL and New York Times Co., isn't just about a cyclical downturn caused by the recession.
What to believe, then? Julia Eilon of Chinwag
summarised the data to date:
With stats seeming to being revised downwards every few months here is a recent snapshot of what's been happening and the predictions for 2009.
From company surveys:
• Q4 2008: 20% of firms reduced online ad spending while 14% increased. (UK, IPA)
• 2008: 80% of advertisers increased online ad spend, predict will also do in 2009. (Europe, European Interactive Advertising Association)
• 2009: 42% of UK marketers forecast their digital spend to increase. (UK, Marketing Week)
General industry predictions:
• Online ad spend: 20% up in 2008, 16% up in 2009. (global, Jefferies)
• Online ad spend: 18% up in 2009 for North America, 12% up in 2009 for Western Europe. (Zenith Optimedia)
• Online ad spend: 8.9% up in 2009. (US, eMarketer)
• Online ad spend: 4% up in 2009. (UK, Group M) (was lowered from 20% estimate)
• Online ad spend: 2.7% up in 2009. (US, Jack Myers) (was lowered from 13.5% estimate)
• Online ad spend: to fall sharply in 2009. (US, Fitch Ratings)
Specific formats:
• Video ad spend: 45% up in 2009. (US, eMarketer)
• Paid search: 14.9% up in 2009. (US, eMarketer)
• Display ad spend: 14% up in 2008, 7% up in 2009. (global, Jefferies)
Putting this all together leads me to the following hypotheses:
1. Online Advertising spend will continue to grow, albeit far more slowly in 2009. Offline will still decline as it always does in recessionary times, but companies will choose to spend some of the savings online.
2. There will be a flight to quality sites that can deliver large and/or defined audiences - much of the "inventory" will not carry Ads
3. There will be both the the "pull horns in" and "innovate our way out by going digital" plays.... with many companies dabbling in the latter.
4. The ROI for the latter group (especially those using Display Ads) will be a lot easier if there is good metrics and measurability.
5. The focus on targeting and relevance will increase
6. A "good-enough" to teh above may well prove to be just to "make Ads more fun"
For what its worth, I asked the panel whether they thought Mobile advertising would take off in 2009. The general view was that apart from DMS the answer is no, it is still to fragmented and there is friction throughout the supply chain. However, one interesting point was made, ie teh iPone gives a near-web experience so Web Advertising can work on it - and as a user base, iPhone users are self selected into a useful demographic - early adoption, above average income etc.
