NEW YORK-In the third annual survey of Internet advertising trends conducted by the Association of National Advertisers (ANA), a New York-headquartered trade association representing 257 companies, Internet advertising modestly declined, though the 121 firms surveyed planned a growing presence in online advertising. But reservations about how to quantify online advertising’s impact remained an obstacle to a wider investment in the medium. The findings of the survey, Web Site Management and Internet Advertising Trends (Third Edition), were initially presented during last month’s d:tech.SanFrancisco, a conference that focused on Internet marketing, advertising and commerce.
In figures reported in the first quarter of ’99, the percentage of companies that were advertising on the Internet in ’98 took a minor dip from ’97, dropping to 61% from 68% in ’97. Since the percentage of companies advertising on the Internet in ’96 was 38%, the ’97-’98 trend represented a significant upswing. Though fewer companies were currently advertising on the Internet, the percentage who said that they planned to do so in the next 12 months jumped from 18% in ’98 to 49% in ’99, indicating that the percentage of companies advertising on the Internet would probably rise in 2000.
In keeping with the decreased percentage of companies advertising on the Internet, the amount of money spent on Internet advertising also dropped, from an average of $714,000 in ’97 to $649,000 in ’98.
Based on those figures and her own informal industry discussions, Robin Webster, an ANA senior VP who wrote the survey, said that the falloffs can be chalked up to preparation. "I think [the companies] spent ’98 getting ready so they can drive traffic to their Web sites in ’99," she explained.
A majority of the respondents to the survey (42%) said that their primary objective in advertising on the Internet was just that-to drive traffic to the company’s or the brand’s Web site. Twenty percent said that their primary objective was to create awareness of the corporation or the brand; 11% of the companies surveyed related that their primary objective was to generate revenues directly from the Internet.
Two benchmarks used by companies to determine whether or not they will buy advertising on Web sites are cost per thousand (CPMs) and click rates. Click rates are a percentage representing the number of times that users click on a link to an advertiser’s Web site divided by the number of ads delivered. Thus far in ’99, CPMs and click rates were the two highest-rated criteria that companies use to buy advertising. The median CPM for the first quarter of ’99 was $25.00, compared to $28.00 in calendar year ’98. The median click rate dropped to 1.5% in ’99 from 2.0% in ’98.
The primary reason that companies said they are not currently investing more in Internet advertising was a lack of proof regarding the medium’s return on investment (ROI). Thirty-five percent of the companies said the ambiguity of Internet advertising’s ROI was the primary reason they are not investing more, followed by 22% who said that CPMs were too high. And 16% said that the lack of reliable and accurate information about online advertising was the primary reason they did not invest more; 14% of the respondents said that the primary reason they are not buying more online advertising was a lack of experience with Internet advertising.
Webster said that the ROI question could apply to any medium-television, radio, and the Internet-and this was a concern that may recede as the Internet comes to be a more widely accepted means of advertising. "How do you know if you decided to buy a music CD, was it the ad you saw last night on television or a banner ad?" she asked.
On the question of reliable information, Webster said that current statistics about online advertising are not accurate for a variety of reasons, one of which is that the number of ads delivered are not being counted precisely.
Cached ads, for instance, are ads that are shown for a limited period of time (for instance, 15 minutes) when a user downloads a particular page. If a user were to download the page again after that limited time elapses, the user would see a different advertisement. Webster explained that though the ad might have been viewed by 70 people (as an example), the cached ad is only counted as one ad delivered, instead of 70 ads delivered.
If cached ads were figured into the mix, both CPMs and click rates would go down. A lower CPM would be more palatable to companies that want to advertise on the Internet, and Webster explained that a lower click rate would be viewed as a more realistic figure since some companies perceive that current click rates are inflated.
One of the most surprising figures to Webster was the fact that only 12% of advertisers are gearing sites to an audience outside of the U.S. "I was shocked at that because [the Internet] is a global medium and yet these global advertisers aren’t focusing on it," she noted.
