September 27th, 2006
As advertising dollars continue their inexorable march from offline to online, the battle for control of those dollars will be fought over the fuzzy middle ground between branding and direct response. I can’t count how many times at the OMMA conference I heard someone say it “depends on the advertiser’s objectives.” The problem with allocating online ad dollars to branding vs. direct response is that many advertisers, especially those with the big bucks, want to have it both ways.
eMarketer predicts that this year the growth in online branding ads will equal the growth in online direct response ads, and that branding ad growth will exceed that of DR across the next few years.
Thanks to the explosive growth of direct response over the past few years, driven by search, absolute spending on direct response ads has already eclipsed spending on branding ads.
I think the BIG question here is how companies vying for these dollars and the companies spending them will parse the definitions of branding and direct response:
Note: branding includes display ads/banners, rich media/video, sponsorships, slotting fees; direct response includes paid search, classifieds, e-mail advertising, referrals
For the purpose of forecasting, which requires clear bucketing, these definitions are perfectly reasonable. But the reality is that “brand” advertisers using banners and rich media are still obsessively tracking clickthrough rates, while many “direct response” advertisers want to find ways to build their brands (which was evident in the OMMA session “Beyond Response: How Search Builds Brands“). Many ad categories (e.g. auto, financial services, consumer electronics) consistently wear both brandng and DR hats.
On the media side, you have branded content sites like The New York Times, Yahoo, and AOL receiving the lion’s share of the branding ad dollars, while search engines receive the lion’s share of direct response ad dollars. But each camp wants to control more of the pie, with Google’s ambitions looming largest.
Then you have social media, i.e. blogs, MySpace, YouTube, etc., whose control over online attention is growing at a torrid pace, wondering what their share will be.
Then you have the X factor of online video, with TV advertisers turning to online, and a growing frenzy over the video ad space. Beyond 800 numbers, most TV ads were never intended to be direct response. Will that change as video ad dollars move online? Will a new science of DR video ads arise following the path of DR text ads?
Right now the fuzzy middle between pure branding and pure direct response is still up for grabs (thanks to Marissa Gluck for getting me thinking about the middle).
If you feel the urge to quibble with my graphic, then you understand the problem with the fuzzy middle — even the ends of the funnel are not that easy to define — assuming you even believe in the funnel.
Traditional approaches to advertising, rooted in TV and print, still hold sway over branding. And search clear dominates direct response. Whoever can figure out a new value proposition for the fuzzy middle will be able to take a big slice of the pie — and possibly even growth the pie, as search did.