A “brand” new day for online ads
Deloitte predicts that in 2012 global spending on brand advertising online will likely grow faster than either traditional advertising or direct-response online advertising. This is not a zero sum game: all advertising will likely grow five percent in 2012129 and all Internet advertising is likely to grow 11 percent130. However, total advertising and overall Web advertising will likely grow slower than online branding, which we expect to rise 50 percent year-over-year to $20 billion as marketers realize and invest in online advertising’s ability to build long-term value for brands.
Direct-response online advertising is defined as embedded email ads, lead generation and paid search. Online branding is defined as banner ads, rich media, sponsorships, social media and video. A shift toward online brand spending would be a new trend: online advertising has historically been dominated by direct response ads. Of the $26 billion of online advertising in the US in 2010, about $20 billion was for direct response campaigns131. Brand spending was only 23 percent of all online dollars132.
This contrasts sharply with the traditional media world, where branding accounts for 61 percent of all spending: $91 billion out of $149 billion133. Some products are only advertised through direct response and some are only advertised through branding techniques; however, most are marketed using a combination of the two. Direct is good for stimulating short-term results and is more easily measured. Brand spending is more powerful over the long term, but is harder to measure. Based on a couple of centuries of advertising experience, the optimal mix appears to be about 3:2 brand:direct for the global industry, with variation by product and by region.
The pronounced difference in the branding/direct spending mix between the online and traditional media worlds has prompted some to speculate that brand might not be well suited to online: one critic labeled online “the greatest branding disappointment ever.134” Online, it was argued, is not effective at building up the emotional connection that makes for effective brand advertising; advertisers have no control over where their ads appeared, leading to possible brand dilution. And as with branding in the traditional world, success is much harder to measure than for online directresponse.
Direct-response online ads gave advertisers a new and much valued tool: the ability to precisely measure cost per thousand views (cost per mille, or CPM), click through rates (CTR) and return on investment (ROI). This precision was often the first thing that lured some portion of ad budgets online, and direct-response spending benefited disproportionately from 2000-2010. Meanwhile, the metrics that worked so well for direct online seemed to suggest that online brand advertising was not performing well: fewer than one in a thousand display ads were clicked on135.
During 2011, the ad industry began to question whether CPMs and CTRs were the only metrics that mattered – or even if they were useful at all for determining the success of online branding. After all, in the traditional advertising world, no one ever clicksthrough on a billboard or TV ad. But those two media account for a combined 50 percent of global ad dollars. Further, consumers were spending more and more time online: almost 2.8 hours per day, second only to time spent watching TV136. Given all those hours, it seemed as if there ought to be some way to make online brand spending work better.
Data from 2011 shows that advertising buyers were starting to accelerate online branding spend. In the third quarter, online display spending grew 21 percent while search was up seven percent. That was off a low base – by our estimates online display grew from $3.3 billion to $4 billion, while search grew from $10.2 billion to $11 billion, so absolute search dollars grew more than online. Although brand advertising was gaining market share, so was online advertising as a whole: up 10 percent versus five percent for traditional ad spending137.
What is causing the online pie to be carved up differently?
The most important factor is the development of new tools that allow ad buyers to have control over placement. In the past, major consumer brands worried that a traditional display ad buy might end up advertising their product or brand on an unsavory Website or adjacent to other ads or content that were not suitable for their brand image. Real Time Bidding (RTB) technology changes that by allowing brands to specify exactly where and in what contexts their ads will appear138. RTB enables a buyer to see every other ad that will appear on the Web page, as well as to be “above or below the fold” (in traditional ad parlance), while automating what had previously been a laborintensive process139.
In addition, the options available for online branding have broadened. In the early days of online advertising, the only option was the standard banner ad, albeit in different sizes. But in 2011, advertisers also spent money on brand ads in videos and social networks. Successes included video ads for soap and scent that increased sales and attracted hundreds of millions of views140, and social pages that allowed packaged goods makers to reduce ad spending while growing both reach and engagement, and boosting sales141. One large advertiser has stated that 20 percent of its total ad spend is now on social media142, suggesting that online brand is already larger than online direct – at least for that particular company.
Finally, online branding has been climbing a learning curve. In the past, many display ads were simply traditional brand ads resized for a smaller screen, or used techniques that were technologically easy to implement but offensive to consumers. Today, flashing text and pop-ups that won’t go away are in retreat. Advertisers are increasingly producing special content for the online world, rather than just re-purposing print ads. Further, targeting technology and geo-location are making even traditional banner ads more relevant and effective.
Although online branding is growing from a low base, if advertisers can make it deliver ROI similar to traditional branding, at some point it will likely match the market share for online direct-response advertising – perhaps as early as 2015.
When thinking about brand advertising online, it may be necessary to unlearn some old habits. Most traditional media is consumed passively, and the most successful ads (such as TV ads) seem to be best delivered in a passive way. Traditional online advertising tricks such as pop-ups might not work for online brand building, as they may conflict with consumer preferences for passive consumption.
Talent may need to change as well. Ad buyers, media companies, and ad agencies all will likely need to increase, acquire or develop new skills. In the future, online advertising will go far beyond display ads and search: new talent will be needed for social, video, and real-time bidding – and these competencies are likely to be in high demand for the immediate future.
Moreover, talent may need to be organized differently. When online branding accounted for less than a quarter of all online ad spending (and therefore less than 5 percent of total ad spending) it made sense to run it from a company’s online department, usually overseen by a search expert. But in the future, if online brand advertising reaches parity with online direct, it might be better to structure companies along the lines of brand and direct divisions, rather than splitting them into traditional and online departments.
Finally, it is still unclear how online branding can best tap into the human emotions that make traditional branding so effective. Although some online video campaigns have been very successful and had an emotional impact similar to the best TV commercials143, further work can be done using neuromarketing tools such as functional Magnetic Resonance Imaging to increase the overall impact of online brand campaigns.
Deloitte Canada, as referenced in videos, podcasts, or online materials related to TMT Predictions 2012, refers to Deloitte & Touche LLP, the Canadian member firm of Deloitte Touche Tohmatsu Limited.
129MagnaGlobal Cuts Global Ad Forecasts for 2011, 2012, The Hollywood Reporter, 5 December 2011: http://www.hollywoodreporter.com/news/magnaglobalcuts-global-ad-forecasts-269544 and U.S., Global Ad Growth to Accelerate in 2012 Driven by Special Events, The Hollywood Reporter, 4 December 2011: http://www.hollywoodreporter.com/news/us-global-ad-growth-accelerate-2012-269442
130Magnaglobal downgrades 2011, 2012 ad growth estimates, Radio & Television Business Report, 5 December 2011: http://www.rbr.com/media-news/advertising/magnaglobal-downgrades-2011-2012-ad-growth-estimates.html
131Campaign Optimization in Real-Time, Slide 2, SlideShare, October 2011: http://www.slideshare.net/CMSummit/950-com-score
132Campaign Optimization in Real-Time, Slide 2, SlideShare, October 2011: http://www.slideshare.net/CMSummit/950-com-score
133Campaign Optimization in Real-Time, Slide 2, SlideShare, October 2011: http://www.slideshare.net/CMSummit/950-com-score
134When Will Brand Dollars Move Online? Maybe Never, Advertising Age, 25 October 2011: http://adage.com/digitalnext/brand-dollars-moveonline/230622/
135Click This: Why Banner Ads Are Having a Banner Year, Mashable, 23 June 2011: http://mashable.com/2011/06/22/banner-ads-success/
136TV, Mobile See Gains in Viewing Time, eMarketer, 12 December 2011: http://www.emarketer.com/Article.aspx?R=1008728
137Q3 Online Advertising Growth Gives Rise to Cautious Optimism for Q4, IgnitionOne, 5 December 2011: http://www.ignitionone.com/press/q3-onlineadvertising-growth-gives-rise-cautious-optimism
138Casale Media Offers Real-Time Bidding on Premium Media, Casale Media News Release, 10 August 2011: http://www.casalemedia.com/newsroom/08.10.11/
139The Advertising Industry’s Balance Of Power Is Changing Big Time, Business Insider, 13 December 2011: http://articles.businessinsider.com/2011-12-13/news/30510864_1_digital-advertising-digital-media-ad-network
140The Benefits of a Successful Viral Campaign and How to Achieve One, TechnoStreak, 18 July 2011: http://technostreak.com/uncategorized/the-benefits-ofa-successful-viral-campaign-and-how-to-achieve-one/ and Axe vs. Old Spice: Whose Media Plan Came Up Smelling Best?, 31 March 2010: http://adage.com/mediaworks/axe-spice-media-plan-worked/143066/
141Food Brands Get Sociable on Facebook and Twitter, The New York Times, 30 June 2010: http://mediadecoder.blogs.nytimes.com/tag/oreo/
142Shaking Things Up at Coca-Cola, Harvard Business Review, 1 October 2011: http://hbr.org/product/shaking-things-up-at-coca-cola/an/R1110F-PDF-ENG
143CHIPOTLE – Back to the Start video advertisement had 3.3 million views on YouTube as of December 2011, and was one of the 10 best commercials of 2011 according to Ad Week, 28 November 2011: http://www.adweek.com/news/advertising-branding/10-best-commercials-2011-136663?page=9