The online advertising edge

A great philosopher once said: I think, therefore I click. I think his name was Desmond or something, but click he did. After the click followed the advertiser’s website, which listed the product and allowed Des to buy himself a fine looking chariot and that gladiator suit he had always wanted.

You see, this is what online advertising is all about. It goes beyond the branding, allowing people to transact with the advertiser and buy the product right there and then at an online shop. The effectiveness, or lack thereof, of the advertisement can be measured immediately. We can tell how many people saw the advert (the branding bit), how many people clicked on the advert (the interacting bit), and how many people then went on to buy the advertiser’s product (the most important, transacting bit).

It’s all pretty neat and cuddly – until you see the dismal click through rates. In fact the all-conquering great advantage of the net – its measurability – has paradoxically turned out to be a great thorn in its side at times. Because with this painfully accurate measurability, online advertisers began to see that average click through rates were low in the single digit percentile category and conversion rates (the purchase) were even lower.

Now online is not alone in this. It’s just that the other mediums generally escape the rigorous checks and balances because they are not as immediately and comprehensively measurable. But even in the print world, some savvy advertisers have begun adding interactivity to their adverts by advertising a unique web address or cellphone number with a particular ad – which allows some measurability of the campaign.

Still, even though click through rates are relatively low, online advertising seems to be doing the job. A few innovative, clever companies such as the insurers, banks, car companies and online casinos have found online a happy hunting ground and continue to plow money into the sector, for no reason other than that they are getting the returns.

We are also starting to see more and more new advertisers starting to test online. It’s part of the reason why local online publishers posted strong growth figures after a tough few years. It’s also why most of the big online publishers in the US are battling with sold-out inventory. Clickz.com notes that there is such demand they just don’t have the space left on their websites any more.

It’s not rocket science really. Advertisers need to go where the consumers are in order to reach them. So as more consumers go online, the advertisers are following. In world terms, there are now more than half-a-billion people online (Nielsen//Netratings). The Interactive Advertising Bureau (IAB) reports that many target markets are spending time online that they once devoted to traditional media such as TV, radio and magazines.

Advertisers like online because they are given access to a top tier audience in the high LSMs — the big spenders. The net is also extremely efficient at gathering data about users for research and marketing purposes. There is no problem with this as long as it is done ethically, with the full knowledge of the user, who is not spammed.

Viral e-mail marketing, for those who know how to do it properly, has also found huge success with advertisers. The reason is that it’s cheap, and the user does all the work for the advertiser by distributing the advertisements.

Depending on how advanced the online publisher is, advertisers should also be able to serve adverts to highly targeted audiences. Because the New York Times insists on free registration before you read – it only asks a few seemingly innocuous demographic questions – it’s able to sell highly targeted ads based on users’ age, gender and interests.

It’s these unique features that makes online attractive to advertisers and gives the medium somewhat of an edge. The industry is still much smaller than its TV and print counterparts, but as its market share grows, so the medium is starting to grow.