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Michael is the Chief Marketing Officer for Epic Advertising.
His current responsibilities include overseeing all marketing strategy for the company, all public relations strategy and outreach, Creative Services, trade marketing, internal communications, and providing strategic input on business & corporate development initiatives.
He can be reached at michael.sprouse@epicadvertising.com.

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Where in the World is Online Advertising?

Written on
Sep 16, 2008 
Author
Mike Sprouse  |
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Where in the World is Online Advertising?

firepr_small.jpgADOTAS EXCLUSIVE — Business publications, analyst reports, and the blogosphere in recent weeks and months have cited a slight weakening trend, compared to previous forecasts, in the U.S. online advertising industry. The key word here is “slight”; compared to overall ad spending, online advertising appears quite robust and positive, and many experts believe that the migration of offline to online ad dollars will continue in earnest for a long time.

There are subsets of online advertising that are stronger right now than others, and these have been well documented here and in other news outlets. But sometimes, U.S.-based professionals don’t have a chance to truly look globally to see what’s working and what’s not in other major regions and where there might be opportunities. I think it’s a good time to stop and look at what’s going on in the U.S., as well as some other online-savvy countries, in an effort to draw parallels and build more future business abroad.

Here at home, there is strong evidence of the continuing shift (which really began in 2007) towards performance-based marketing. As a subset of performance marketing, Search is growing exponentially because of its obvious ROI effects, transparency and targeting. SEO, likewise, has been doing well on a macro level because of its efficiency and cost benefits, if done properly. Premium display advertising seems to be waning alongside declining demand.

These dynamics have indirectly resulted from the macro economy, in my opinion, and while the U.S. may or may not “officially” be in a recession, certainly there has been at least a tightening of the belt for everyone. However, these are times when the virtues of performance-based marketing, which I and others have documented in past articles, shine. This isn’t just rhetoric, as many of us actually see the shift every day, hear directly from advertisers, and believe this will continue as the line between performance and brand marketing blurs further and advertisers crave greater effectiveness.

What’s happening in major markets around the globe? By 2011, Western Europe is projected to have the highest percentage of online ad spend compared to total ad spend (18.2% for the region); higher than that of Japan, the U.S. or the rest of the world. So let’s hone in on the countries that make up a heavy bulk of spending in Western Europe and look at the macro trends there, which have also been well documented recently. The German economy is in a recession. Same thing for Spain. France and Italy seem to be not as worse off, however there are signs that those economies are at least flattening. The region most similar to the U.S. from a language perspective, the United Kingdom, is also showing signs that its economy is heading towards a recession by the end of the year.

Looking at this news from a “glass half full” perspective, what might occur is a more intense shift towards performance marketing in those regions as happened in the U.S. even before our economy began retreating. Further, the opportunity for networks and exchanges in particular to enter the mix and truly become more “global” exists. It isn’t just about targeting a few publishers or signing a handful of multi-national advertisers; a “down” economy actually offers a smoother runway for companies to establish themselves overseas, as well as having flexibility and receptiveness for new business models to be tested and adopted.

No matter what region an advertiser targets, they all want effectiveness. What better way to gauge effectiveness than through some of the performance-based methods listed above (as well as new methods not yet fully adopted but that are coming) especially in the face of a weak economy when the need to make those ad dollars work harder exists. At Epic, for instance, we have invested in, and will continue to invest in, a strong European presence because we think the same shift will occur across the pond which has been occurring in the U.S.

When there is a major decline in any economy, there are inevitably new opportunities that open up especially in the online ad sector. Sometimes, barriers to entry become less pronounced. Sometimes, new marketing techniques or pricing models rise to the forefront. Perhaps, everything is a virtuous pattern similar to what we saw in the U.S. with the rise of performance-based marketing and stronger attention to analytics. Networks and exchanges likely have inherent advantages in all of these areas because of their scale, optimization technology and targeting capabilities. They are not by any means “recession proof”, however the best networks have showed they can withstand broader economic pressure better than most companies (or even entire industries) and can even grow during tough times.

We know that while most major economies are cyclical, they also trend upwards over time. So the question is what (or who) will help maintain, and further spur, online growth in Western Europe like a handful of strong ad networks are able to do in the U.S.?

Most likely, I believe the answer will be found in those that embrace performance marketing who don’t separate, or too narrowly focus on, individual disciplines of online marketing. Many companies and networks still do this, and it’s unfortunately the one-trick pony syndrome. The fact is that online marketing – whether performance-based or brand-based, display or search – is one long, horizontal line that represents a continuum, not disparate worlds. In other words, if you can’t make a CPM display banner work you better have more tools in your toolkit when entering new global markets.

Advertisers, around the globe, want effectiveness and greater ability to measure that effectiveness accurately. They want what works. Believe me, if a new display ad unit sprouted up tomorrow that performed better than a 728×90 flat banner ad or as well as Search, demand for premium display advertising would change. This is why Search is so hot right now – because it works! It doesn’t matter where in the world it is, maximum effectiveness – and the companies that can provide it with proper insight – is the one constant that I believe will become more pronounced globally in the cyclical (yet overall growing) online advertising industry.





Reader Comments.

Complete media speak. What about building brand again with traditional media? Especially combined with the new media. Thanks.

Posted by Denise | 1:00 pm on September 16, 2008.

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