September 19th, 2007

Who’s Afraid of Online Advertising?


A new McKinsey & Co. report called “ How Companies Are Marketing Online” draws the astonishing conclusion that many advertisers are reluctant to shift dollars online — despite the massive shift of consumer attention online — because of the “absence of meaningful metrics and adequate capabilities.”

McKinsey polled 410 marketing executives in five sectors, and among those already advertising online, 52 percent said “insufficient metrics to measure impact” was the biggest barrier, followed by insufficient in-house capabilities (41 percent), the difficulty of convincing management (33 percent), limited reach of digital tools (24 percent) and insufficient capabilities at agency (18 percent).

Does that mean advertisers really believe metrics like cost per lead, cost per sale, or even cost per visit are inferior to traditional “bottom line” metrics like reach and frequency, gross rating points, and rate base? Does that mean advertisers believe mass media have better “capabilities” than online advertising platforms like keyword-targeted search advertising, behavioral targeting — or Google’s new Gadget Ads, announced today:

According to Christian Oestlien, Google business product manager, Gadget Ads are also backed by actionable metrics. “In addition to the combination of precision and scale, advertisers get a whole system for tracking interactions. They can specify particular behaviors like mouse-overs or clicking-throughs, and get an interaction report in the AdWords Report Center.”

Tracking the Gadget Ads ROI wasn’t difficult, according to Bladimiar Norman, head of interactive advertising for Paramount Vantage.

The division of Paramount Pictures was part of the search giant’s first gadget trial, promoting “A Mighty Heart” (a thriller based on journalist Daniel Pearl’s kidnapping and murder in Pakistan) through a widget that featured the movie trailer and a news ticker, as well as a clickable timeline that enabled users to relive the 16 months surrounding Pearl’s kidnapping.

“Of course, selling tickets is the bottom line,” said Norman, “but we were able to track which articles users clicked on, how long they watched the video and whether they shared it with others.”

Well, no. Suggesting that a platform like Google’s Gadget Ads lacks the “metrics” and “capabilities” of traditional media would be silly.

The reality is that the attitudes expressed in the McKinsey report are all a smoke screen, intended to protect vested interests and organizations adapted to static media models, which went unchanged for decades, and not the dynamic innovation of the web. But they can’t deny that the future of advertising and marketing is online.

Regardless of the mode, clients and agencies are all scrambling to keep pace with consumers whose desire to live and shop online is growing. By 2010, McKinsey’s survey respondents expect a majority of their customers to discover new products or services online and a third to purchase goods there.

What this report demonstrates is that the barriers to accelerating the growth of online advertising have nothing to do with questioning the web’s increasing dominance of media consumption or the huge innovations of online advertising — including those still to come.

No, billions of dollars still remain in traditional media because the advertising industry has to go through its own transition page views are a terrible currency for media buying — this buying model, a holdover from Web 1.0, mirrors the familiar traditional media modes of buying that have been used for decades.

Online media and advertising companies share some of the blame — there’s a lot of innovation, but not a lot of standardization. Traditional media adverting — like traditional media consumption — isn’t about to go away, so the inability of many online advertising platforms to map easily to traditional media remains a huge barrier.

Indeed, although a majority of the respondents to McKinsey’s survey find online vehicles to be more efficient than traditional advertising, the relative newness of the medium and its still developing benchmark data make it a hard sell internally to bosses who demand accountability, said client consultants. What’s more, the multiplicity of online channels can make it difficult to isolate what’s working and what’s not, digital agency chiefs said.

It’s not that traditional advertising is more “accountable,” but rather it’s more “comfortable,” more “familiar.” Just ask media companies how uncomfortable the transition to digital can be.

But as the media industry has painfully discovered, the advertising industry is now discovering that making the case NOT to change is no longer viable.

Comments (13 Responses so far)

  1. [...] Scott Karp does a fine job ripping apart these arguments. In typical fashion, he provides this succinct summary: [...]

  2. [...] Who’s Afraid of Online Advertising? – Publishing 2.0 “A new McKinsey & Co. report called ‘How Companies Are Marketing Online’ draws the astonishing conclusion that many advertisers are reluctant to shift dollars online — despite the massive shift of consumer attention online..” (tags: internet advertising audience measurement trends) [...]

  3. [...] our blog reading this week, I found the posting by Scott Karp that discusses a new report about the reluctance to spend money on online advertising completely on [...]

  4. [...] more about this is here [...]

  5. [...] 20th, 2007 · No Comments Scott Karp wrote a nice article called “who is a afraid of on-line advertising“. According to a survey done by McKinsey many advertisers are afraid to spend their dollars [...]

  6. The McKinsey report actually confirms what can be witnessed in the market everyday: advertisers and especially media buyers are extremely conservative . I fully agree with your conclusion that they have to go through their own transition as well in trying to understand the possibilities of online advertising and the metrics that are already out there.

    On the other hand I also agree to the statement made by Chris Albrecht at “Even with all the fetishization of the long tail these days, it’s important to remember that entertainment (and therefore online video entertainment) is a hit-driven business. People flock to hits, advertisers flock to people”
    In other words: reach remains important as well, even online.

  7. [...] Karp fra Publishing 2.0 mener, at synspunktet snarere er en dårlig undskyldning, der dækker over, at rigtig mange marketingchefer faktisk føler sig så godt tilpas med vanerne i [...]

  8. Scott,
    I agree with most of all you say — very good analysis. However, one of your assertions is worth dissecting further: “many advertisers are reluctant to shift dollars online — despite the massive shift of consumer attention online.” That massive shift of attention is important — extremely significant — though that attention is splintered among many different activities, and some of them are media, some communication/interactivity and some other. While attention is important, it’s important to drill down on quality of attention for the media/advertising opportunities, and even more important to probe performance from a holistic, multichannel level. The tension between “online” and “print” and “broadcast” and “out-of-home” are arguments marketers really don’t care about. They just want to promote and protect their brands, while selling more stuff.

  9. [...] online advertisers look to get the most out of their budgets, publishers and brokers will need new methods of attracting them. Maybe Cost Per Second is the [...]

  10. Point 1: people, alone and in groups, make decisions based on faith, not reason. No surprise that they stick with what they know, what has succeeded for them in the past, what presents no risk to them losing their job for advocating something new. The person who stands up and wants to do things differently gets the target on their back.

    Point 2: marketers want mass audiences but mass audiences are fast becoming as rare as hens teeth. Why mass audiences? Because then marketing is a system. Design the system and then adjust it as needed. We already have the mass system — get a bunch of people and pound them as hard as you can with the same message.

    But the web doesn’t conform. Given choices, people gather in smaller groups. They form social bonds or reinforce existing ones. They recommend things to each other, reflecting and tailoring to that individuality they always had. Mass media has lost its ability to focus those individuals into mass audiences at the same time as people have discovered they can do media for themselves.

    So a new advertising system is needed to fit a web architecture, and that new system is emeging slowly in small pieces, loosely joined (Weinberger). Which makes a lot of people uncomfortable, even afraid.

    So who’s afraid of online advertising? Everyone already in advertising, and all the companies making their living off those people.

  11. [...] was a recent article on Publishing 2.0 that suggested advertisers might be wary to spend online due to a lack of metrics [...]

  12. [...] Online advertising is the only truly measurable and accountable advertising vehicle. [...]

  13. Sekhar Ravinutala

    Fine analysis Scott, thanks. I’ve worked in Oracle Marketing and can say your analysis is on the money. However, even large corps (certainly Oracle) will be open to innovative approaches – e.g., before I left last year Oracle had created some online dramatic short films (that led to a landing page) featuring Oracle products – a first of sorts for an enterprise software company.

    The trick to get the execs on the online road I think is to introduce the 2.0 elements as part of traditional campaigns. E.g., have a viral element in the regular Economist print ad or airport banner ad. Since we can track its effect separately, it becomes easier to sell more 2.0 elements in the future.

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