Online advertising: Behind the Growth

If it’s not the traffic or the advertising model, why is online experience a massive growth in revenues? Matthew Buckland finds some answers in a Standard Bank. case study.

A greater number of companies are starting to allocate bigger portions of their advertising spend to this thing called the internet. The figures backing this fact up are relatively well known by now: according to the Online Publishers Association, the sector recorded a prolific increase of 136,7% in 2004. The year before, it showed a largely stagnant 9% increase, and before that there was the dot.bomb decline of about 16%.

So why is online a much happier hunting ground? It’s not the traffic. Online readership, although on a steady curve upwards, has not shown any staggering growth over the last few years (thanks, Telkom). It’s not from any big changes in the advertising model either – we have bigger, bolder, flashier ad formats, but fundamentally the advertising model is the same as it’s always been.

It’s just that the business landscape has been changing. The savvier businesses love their websites because they see that it’s not just another pretty marketing tool, but can be a profitable part of their operations giving them an edge over less savvy competitors.

As a business, when you start to see one quarter of all consumer transactions happening online as opposed to the real world, you know that your business model is changing.

This is just what banking group Standard Bank is experiencing. The group processes 14-million transactions via online banking and generates more than R1-billion worth of loans through their online presence. The Standard Bank site is now also one of the most visited sites in the country, racking up more than 500,000 users monthly.

So, online is a big deal to these bean counters.

Standard Bank’s Director of Technology Engineering Herman Singh says online has now become one of the fastest growing channels for the bank. He says that in some months the bank’s online “super branch” can be bigger than their biggest branch in the country.

Standard Bank began their online advertising presence in 2000, working with MSN to build its first online marketing campaign. Singh says the online opportunity was spotted early because the demographics of customers online were attractive. He means it’s where the big earners hang out.

Paradoxically, it’s the net’s great advantage and disadvantage. Advantage, because what advertiser wouldn’t want access to a top tier consumer? Disadvantage, because the reach is limited – the net is not yet a mass medium.

As far as Singh is concerned, the numbers the bank has achieved can be linked to their online advertising strategy. It’s Singh’s view that online advertising must be part of a broader campaign that is integrated with other media.

Standard Bank’s aim is to not only generate traffic to their website and build brand awareness via online, but to get conversions. It’s online’s greatest strength. Unlike non-interactive print advertising, online goes beyond the branding part, allowing the user to purchase a product.

But despite this apparent success, online is still the smallest part of Standard Bank’s advertising budget. Singh says the reason is that the company spends quite a bit on their website already. In fact, he says, if you had to add their website as a marketing cost together with online advertising, it would be the group’s second biggest marketing channel.

Nevertheless, Singh points to the fact that the online population is growing at about 10% a year, so he says he doesn’t see any need to boost his company’s online spending at the moment.

Like almost everyone, Singh is waiting for South Africa’s second “big bang”. That’s when the SNO and Telkom declare war, call costs plummet and cheap broadband is available for a song.

Matthew Buckland is publisher of the Mail & Guardian Online @ www.mg.co.za