Whether it’s fear left over from the dot-com bust or confusion over how to use the Web effectively, traditional marketers and media buyers have been reluctant to jump on the digital bandwagon.

It’s not surprising, then, that ad rates on the Internet are lower than those of any other media, reflecting what has been a relatively low demand for the medium by marketers.

But all that is about to change, say digital planners and media forecasters alike. Thanks to a new appreciation for actual ad exposure, online reach and time spent by consumers using the Internet, 2004 promises to be the tipping point for online marketing.

‘It’s the necessary tipping point if you haven’t already jumped in – this is the dip-your-toe time for marketers who haven’t adopted the Internet into their mix because the ones that have are already knee deep,’ says Michael DiGiovanni, manager of Toronto-based Starcom IP. ‘It’s also the time for us to start speaking correctly about the medium and key to that is looking at measures like time spent.’

According to a new Canadian study, Keeping Up with the Consumer, released exclusively to Strategy MEDIA by the Interactive Advertising Bureau of Canada, the Internet ranks number three, just behind television and radio, in terms of time spent. And in some of the younger demographics, the Internet is almost on par with radio in terms of reach (See charts on p.6 and sidebar on p.7).

‘This is big news. Most marketers don’t know this,’ confirms DiGiovanni. ‘But I predict we’re going to see a lot more change on this front, that the Internet will surpass radio in the next year or two and not just among kids.’

Time spent, as opposed to reach/frequency, allows marketers to compare apples to apples when looking at media. It is also a necessary variable in measuring consumer usage of the Internet, specifically. ‘You can’t think of the Internet in broadcast terms,’ says DiGiovanni. ‘Reach/frequency doesn’t take into account differences between light, medium or heavy users. In television you don’t know how many people are in a room at a given time or whether someone has fallen asleep. It gets rich when you says to your client, ‘Teens are spending upwards of 15 hours a week online,’ or even more granular, time spent by actual Web site.’

Keeping Up with the Consumer, which is the first tier of a three-part study, ‘was designed to provide advertising and media people in Canada with their first quantitative understanding of the extent to which the Internet is penetrating the consumer headspace,’ says Rob Young, SVP planning and research, PHD Canada, who conducted the research and analysis for the study.

A scarcity of indigenous studies that show the size and prove the effectiveness of the online medium is one of the many reasons Canadian marketers have been slow to adopt the Internet, adds Young. While comScore Media Metrix Canada collects data on how much time adults spend with the Internet through a group of people who have tracking devices attached to their computers, Young says the research is difficult to aggregate.

The numbers speak volumes

The IAB estimates the Canadian online spend for 2004 will be $200 million, representing more than a 30% increase from $150 million in 2003 and more than a 100% increase over the $97 million 2001 spend.

According to PriceWaterhouseCoopers’ Entertainment and Media Outlook: 2003-2007, released last summer, the online spend is projected to rise 7.1% yearly until 2007.

Pivotal to this growth, however, is how quickly and efficiently online publishers change their tack. It’s not enough for risk-averse marketers to accept the medium and learn how to exploit it when online publishers in Canada offer few to no standards and often lackluster advertising environments.

Meantime, Canada is among the three countries with the highest proportion of Internet users, along with the U.S. and South Korea. It is also among the forerunners in broadband use with almost three out of four Internet users hooked up to high speed, according to The Face of the Web, the annual (U.S.) study of Internet trends by Ipsos-Insight.

‘When you consider that more than half of Canadian Internet users are on high speed,’ says Cossette Media’s interactive media specialist Nick Barbuto, ‘and that they’re paying between $40 and $50 a month for the service, the entrenchment is phenomenal.’

That, adds Barbuto, coupled with the capacity to control frequency on an individual basis, to target by connection speed and offer opportunities for sequential messaging are among the exclusive attributes of the Internet.

However, whether the Internet is a deal at this juncture is still a question, he says. ‘A deal implies efficiency and while the audience and technology are here, the communication value of the Web is still a major question.’

Generally buyers agree that in order for the Net to graduate from an extra to a respected marketing channel, three things must happen. First marketers and their agencies must develop online strategies and gain more expertise with what is still a profoundly misunderstood medium. Next, more research needs to be done on how to use the Net as a branding tool. And finally, the sellers, especially online publishers, need to stop cluttering up their sites with pop-ups and amateurish ads, and adopt universal formats, rates and measurements.

More strategy and expertise needed

‘Fewer people have expertise in this area than any other medium, so what they do is dumb it down and resort to just driving clicks to Web sites,’ says Barbuto. ‘In many cases, the end measure of success is the click-through rate and when it declines, people turn to that as a rationale for not including Web in the buy.’

In it’s purest form, the Internet is and has been used to track sales. Dell, for example, puts a dollar value on every click, equating it back to cost-per-acquisition, which in a nutshell, means that every dollar it spends on media must equate back to a sale. While this can be done with direct-response TV and print ads, it’s most effective online, says Huw Cawthorn, manager of digital strategy, OMD Canada.

Ad effectiveness can be better measured online than in any other medium, he adds. Unlike other media, the Web allows marketers to target by registration profile (a buy that in theory is 100% composition, since we know exactly who the audience is), and measure through sales, as well as test and control group surveys. ‘And we’re not just talking about impressions or a chance to see an ad based on audits that happen a few times a year. It’s actual exposure that we’re measuring,’ says Barbuto.

Branding through the Internet

As a branding tool, the medium offers everything from sponsorship opportunities, home page events, rich media, big box and skyscraper units, and endless synergies through ad placement.

‘We’re seeing a lot more unique sponsorship initiatives, from owning your own vertical and wrapping your ad around it, to building a whole new channel on somebody else’s Web site,’ says Michelle Bailey, online account supervisor, at Toronto’s ZenithOptimedia.

A good example of the latter is the health and beauty channel Vichy built on Chatelaine.com or the RSP hub that RBC has cornered on Sympatico.ca. ‘You don’t have to spend big bucks in these content deals,’ says Bailey. ‘You piggy-back on someone else who has spent years building their property to hit your target.’

RBC’s online advertising investment has increased exponentially over the past two years, now accounting for a substantial 10% of the media spend, reports Sarah Jue, manager, advertising and interactive properties, RBC Financial Group.

In an effort to drive traffic, the company is involved in cost-per-acquisition deals with other financial sites and portals, like Google, which house finance areas.

But despite the small handful of clients realizing both the response and branding opportunities of the Internet, ‘most buyers need to have a better understanding of how it should be used and how much money should be directed to it,’ says Cawthorn. ‘Clients have no problem dropping $50,000 on a one-page ad in a magazine, but spending $50,000 online is perceived as a lot of money.’

The onus, however, doesn’t lie on buyers and marketers alone. If online publishers were to make the buy more appealing, he says, the dollars would likely follow.

Planners blame publishers

‘[Online publishers] are not leveraging their properties,’ Cawthorn says. ‘They’ll run five ads on a page with pop-ups everywhere, which makes the ads seem to have less impact and [in turn] makes it hard for media planners to recommend the Internet to clients.’

The National Post, Globe and Mail and Chatelaine, which limits the number of ad units allowed on one Web page, are three notable exceptions, he adds. ‘Through strong ad placement and Web design, they’ve all done a good job at making their online offering as appealing as their offline properties.’

The majority of others still, however, need to step up to the plate.

‘Online publishers undervalue the medium when they simply offer cost-per-click or cost-per-acquisition,’ says Bailey.

But online publishers are also stuck between a rock and a hard place.

‘Agencies are always trying to push the envelope in an effort to break through, so they put pressure on the publishers to accept and come up with new formats. At the same time they want us to provide standards. Because there’s more opportunity to do interesting things online, this standardization issue is problematic,’ says Gary Fearnall, Web general manager, Rogers News and Business Group.

In the beginning, explains Fearnall, everyone was doing banner ads, but they were said not to work anymore because the click-through rates were falling. Marketers then started demanding more creativity online, which gave birth to a flurry of different kinds of ad units that were not universally accepted.

‘The good news now,’ Fearnall adds, ‘is that as the market matures, there’s increasing acceptance of big boxes and skyscrapers. It’s not 100% that all sites are on the same page, but standards are fast emerging.’

The IAB even recently endorsed a standard set of ads.

Low prices may not last

As it stands, online rates range between 25 cents/CPM to $100/CPM, but once the medium hits a critical mass and sites begin to sell out of inventory, those numbers are bound to change, says Cossette’s Barbuto. ‘Although, so far I’ve yet to hear of one Web site in Canada that has ever run out of inventory.’

Part of the problem is that as long as the rates remain low, most online publishers can’t afford to reduce the clutter.

‘At this point, if a site can generate incremental dollars by adding more units, most would. Once rates become reflective of the offering, then we’ll reduce the clutter,’ says Fearnall, who was recently hired by Rogers Media to revamp canadianbusiness.com, macleans.ca, moneysense.ca and profitguide.com in an effort to better represent their core brands and increase their traffic, revenue and profitability.

Meantime, the window of opportunity remains open for marketers to seize an opportunity at an undervalued rate.

IAB study positions net as number-three medium

The impetus for Keeping Up with the Consumer, initiated by the Interactive Advertising Bureau of Canada, was the question of where the Internet stands against other media in terms of time spent and reach, and how that positioning has changed since 2000.

In order to find the answers, the IAB, with the help of Rob Young, SVP planning and research for PHD Canada, looked to aggregate the four existing syndicated studies that measure Internet amongst the mix: comScore, BBM Radio, PMB and NADbank.

Through a cross comparison of how each of them measured daily and weekly reach, as well as daily and weekly time spent, it turns out that the Internet ranks number three in terms of time spent.

What’s particularly interesting is that wherever the Internet is positioned, it is consistently on the rise, while the other media tend to remain flat.

As for demographics, it’s interesting to note that the lines representing the Internet tend to be the mirror image of those representing television (see charts on p.6). For example, where there is the biggest drop in time spent on the Internet across the board (i.e. for those aged 55+), there is the biggest rise in television.

In the 18-to-24 demo, the Internet is at or near its high, meeting or almost meeting up with radio (see PMB ’03 and NADbank ’02 on ‘Time spent by demographic’ chart).
The study doesn’t look at outdoor, which is only measured by miles driven and whose consumers don’t voluntarily spend time with it.

The next phase of the study, A Day in the Life, looks at how different demographic groups interact with media. The concept is to follow a woman, 18 to 34 with a child, through the course of a day, then perhaps a man 55+, etc. These individuals would then record their interaction with media.

The third and final phase of the study, which started last summer and is expected to be released in the coming months, is the Canadian Media Optimization Study, which is a Canadian version of the groundbreaking Cross Media Optimization Study conducted by IAB in the U.S. The study uses fieldwork to measure specific campaign effectiveness and brand favourability through its use of each medium.

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syaffe@brunico.com