Clients step up online spend

It's no secret that the faith of often big-spending online marketers may have waned in the past 18 months. OK it crashed, along with the dot-com economy. And the negative buzz surrounding the online advertising industry has continued, perpetuated in part by media reports of gloom and doom. But confidence levels are on the mend.

It’s no secret that the faith of often big-spending online marketers may have waned in the past 18 months. OK it crashed, along with the dot-com economy. And the negative buzz surrounding the online advertising industry has continued, perpetuated in part by media reports of gloom and doom.

But confidence levels are on the mend. Increasingly, clients are admitting what countless i-shops bet the bank on: that if done right, online advertising can indeed work. Many marketers, including MasterCard Canada, are planing to include interactive in this year’s media buy.

‘Going into 2003, we are actually – for the first time – looking at developing a media plan specific to online advertising, as opposed to adding it or tacking it on at the end,’ says Tracy Hanson, VP marketing and communications for Toronto-based MasterCard Canada, adding that it is planning to incorporate banner programs as well as partnerships and marketing alliances with online merchants. ‘Consumers are getting more and more comfortable with shopping online, for example, and we want to make sure that we’re going to be there.’

Hanson’s sentiment – a need ‘to be there’ – is widespread among Canadian marketers. And it’s the traditional companies, say pundits, that will drive much of the online spending, not just online companies. These investments, however, will be made with caution and precision, say experts, and with the guidance of expert partners – whether traditional agency or pure-play i-shop.

‘Some clients are still leary because click through rates (CTRs) have gone down. But CTRs are not the only measure of efficiency of online advertising anymore – those factors must be explained,’ says Paul Willliams, e-business director for Cossette Interactive, of Toronto, which has witnessed increased online advertising activity this year and planned activity for 2003 from clients. ‘It’s about challenging clients and showing them innovative solutions. Education is key.’

In an October study of online advertising, Cambridge, Mass.-based Forrester Research found that early online advertising didn’t work because marketers lacked the research to target effectively. Today, in comparison, they have an arsenal of studies and stats to create more educated placements and programs. The same study found that marketers still only spend 2.5% of their advertising budgets online, but that percentage is expected to grow. The study also revealed that marketers, perhaps over-optimistically, predicted online spending will triple by 2004 to 7.5% of spending.

‘It’s definitely now more mainstream,’ says Jill Schoolenberg, Director of Marketing for Toronto-based MSN.ca. ‘The clients who have typically operated in this space – the dot-coms – are very knowledgeable. But for everyone else there’s still a lot of potential for learning.’ That learning, she says, most often seems to come from a client’s traditional agency of record.

Zellers Canada, for example, works with agency Leo Burnett for all its mass and interactive work, including its latest online Interactive Change Room initiative, aimed at tweens and teens during the back-to-school season, which has already garnered a 50% lift in traffic to the Zellers site, says Alison Savage, Toronto-based senior marketing manager.

‘We’re in planning for 2003 right now – we are putting more focus on the Internet as a media vehicle – usually as part of an integrated program. Our agency is very familiar with the brand and is easily able to integrate the program and messages. That’s why the Internet has always resided with the main agency of record.’

And while agencies have long been criticized by onlookers for playing catch-up in the Internet space – relegating their tiny interactive divisions to the periphery – pure-play Web shops have had their own challenges.

‘It’s still such a small piece of the business, agencies don’t devote as much time. We never really did a good job of understanding this medium at the agency level,’ contends Toronto-based consultant, Peter Mosley. ‘But Web boutiques failed to understand the big picture, and a lot of them are in trouble today.’

I-shops have seen many of their competitors depart from the marketplace, and while it weeded out the bad seeds, it has left the industry a tad downtrodden, says Andrew Keyes, principal of Toronto-based e-marketing shop Armantus. The marketplace is leveling off however, he says, with investment picking up, and people beginning to take the business seriously.

‘There’s no denying that the Internet as a channel represents value. It’s just a matter of that value being recognized,’ he says. ‘The demand for services will still be there and will grow. And if in 2005, we are at 6% interactive budget – well that’s a healthy market to operate in. Who knows? I’ve been criticized for being conservative – but that’s also why I’m still standing.’

Dawna Henderson, VP, managing director of ninedots, of Toronto, points to the U.S. where many big brands rely on e-boutiques for their interactive work. ‘More sophisticated marketers understand the benefit of working with best of breed agencies in terms of a pure-play,’ she says, adding that ninedots recently added several new staff members in part to keep up with growth in the particular area of CRM and data analysis. ‘But that’s not to say ad agencies don’t have the expertise. It comes down to budget and how big your initiatives are. And budgets are increasing.’