Three Reasons for Growth in Online Ad Spending

Image from moneyproduct.netMarketers in businesses of all sizes are increasing appropriations for online ad spending. Search engine advertising, behaviorally targeted advertising, social-media marketing, video/rich media advertising, and video game advertising are all avenues marketers are exploring to increase brand awareness and ROI.

Why is ad spending shifting to the Internet? Let’s explore 3 key factors:

1. Measurement and Accountability

Metrics allow advertisers to quantify the necessity of spending ad dollars online. Early metrics offered the ability to view page views and click through rates; today’s metrics include, but are not limited to:

  • Cost per conversion
  • Cost per click
  • Revenue per visitor
  • Revenue per purchaser
  • Average frequency of ad exposures
  • Interaction rate with media
  • Brand impact lift
  • Delayed site visits
  • Share of voice
  • Cross-media econometric modeling

Search engine advertising, with its pay-for-performance model, represents the largest chunk of online ad spending.

What is search engine advertising?

“Advertisers bid on key words. The bids ensure that the ads appear on search results pages when consumers use those key words, and the relative placement of the value of one bid versus other bids on those same key words determines the rank positions of their ads. Best of all, advertisers pay the bid amount only when someone clicks on the ad.”  – Advertising 2.0

2. Consumer Reach

As consumers are spending greater amounts of time online, advertisers are as well.  However, before spending their money on this gigantic medium called the Internet, advertisers must have a demographic understanding of who can be reached with online advertising.

The Pew Internet & American Life Project Tracking Survey (percentage results reflected in Table 1.2 on page 12 of Advertising 2.0) sought to define the characteristics of Internet users. Results supported Internet penetration to be strong in the most pursued target markets, including all but the most elderly populations, middle-income and affluent customers, and those with moderate to high levels of education.

According to the survey, activities that consumers engage in while online include sending or reading email (91%), researching a product before purchase (71%), and many more. It is not a wonder that Geoff Ramsey, CEO of eMarketer,  noted that the Internet is becoming the central hub of most marketing campaigns.

3. Technology-Driven Engagement Opportunities

Online advertising has fostered the need for more than just art direction and copywriting. Brandweek predicts that agencies will employ “engagement planners” in creative and strategy departments in the very near future.

Engagement Planning: Includes the creative the strategic development of advertising, contests for and distribution of consumer-generated advertising,  and the execution of brand personalities in social networking.

Google has had great success connecting individuals with niche sites with the help of its AdSense program and its AdWords search program. As a result, the directive issued in Chris Anderson’s book,The Long Tail, is met because advertisers now have the ability to reach beyond the most visited sites to the millions of small niche sites that embody the Internet.

Opportunities for consumer interaction and engagement have blossomed amongst the many forms of social-media advertising including : consumer-generated advertising; opinion-giving through message boards, review sites, and blogs; social-networking; socialnews, virtual worlds, ARGs, and video games.

Consumers now have the ability to:

  • Ingest aspects of a brand’s persona
  • Assess what the brand means to them
  • Interact with that brand
  • Co-create the brand’s meaning
  • Distribute the brand to other consumers online.

Social-media advertising is empowering consumers to let their voices be heard. Advertisers, who are aware of the power these consumers have, are recognizing this shift and moving their ad dollars to the Internet.

For more information on “Growth in Online Ad Spending”, please check out pages 10-14 in Advertising 2.0: Social Media Marketing in a Web 2.0 World.

What do you think is the most compelling argument for why advertisers are spending more money on online advertising? Please share your comments below.

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