With the current precarious business climate, Jane Irwin asks if
interactive advertising will ever provide a viable revenue stream
and compete with traditional media
If e-commerce is to become an effective business model, it must be
able to generate advertising revenue. Many dotcom portal sites do
not have business-to-business revenue streams, so how will they
survive in the current precarious climate? Interactive advertising
has long been hailed as the marketer's dream, demographically
targeting consumers with quick-and-easy access to an audience
database. Not quite. Interactive advertising, as it stands, comes
in four main guises: banner ads, click-throughs, enhanced TV and
pop-ups. But can any of them compete with traditional media?
In recent months there has been a substantial slide in global
interactive advertising investment and e-commerce ventures reliant
on this revenue are feeling the pinch. According to Sandi Wassmer,
managing director of InterQuest UK, one of Europe's leading digital
market research companies, interactive advertising as a
'stand-alone' revenue model for e-commerce "just isn't going to cut
it". Running a business on the Net is expensive and "you've got to
have a lot of people on your site to make it viable", she says.
Even extensive traffic doesn't guarantee success. AskJeeves.com has
millions of hits worldwide each day, more than any other portal
site. But still, it's had to lay off staff in order to thwart its
cashflow crisis. If a company such as this can't generate enough
advertising revenue to meet running costs, it leaves little hope
for less prevalent portals. And, more importantly, calls into
question the role of interactive advertising within current
Internet frameworks.
So what exactly do dotcoms have to offer potential sponsors? The
predominant Internet advertising tool is the banner ad. But, as
Natasha Redford of Global High Technology remarks, "the banner
advertising bubble is bursting". One of the biggest problems is
that they are dull in comparison to traditional media
advertisements, with neither the broadband capability of digital
broadcast nor the graphical luxury of a glossy magazine. "A lot of
people don't even see the banner when they look on the Internet,"
says Wassmer.
Making online ads more dynamic is not that simple. Most PCs run on
a 56K modem that's incapable of hosting streaming media (broadband
video and audio stream). Although BT has started to roll out
broadband access, it's expensive and largely inaccessible. "The
technology is there," adds Wassmer, "but there just isn't the
infrastructure to deliver it". Until there is, the Internet will
never be as appealing or creative as traditional media.
It's widely acknowledged that online campaigns alone are not enough
to drive a brand. "What you're looking for [in a banner ad]" says
Thierry Laval, CEO of ad-one, "is direct marketing and one-to-one
solutions". Interactive advertising on the Internet, he adds, is "a
purely complimentary" marketing tool.
Part of the problem is that the success of the banner is gauged by
its click-through rate which, according to Wassmer, "doesn't
necessarily tell you whether the right brand association was made".
After all, not everyone is going to click on a banner, on average
only 0.3% do, but this doesn't mean they're not noticed. However,
sponsors listen to statistics rather than protracted market
research.
The banner may be dead in the water for some but, according to a
recent report by Forrester, online marketing budgets are set to
soar in the next four years, with marketers due to spend 83% of
their outlay on "more sophisticated, performance based
advertising". Internet marketers have been busy trying to make
banners and click-throughs more imaginative - adding pop-ups
between Web pages and micro search engines to entice users.
Meltingpoint Technologies, an e-business development company,
recently launched Fotino - an online advertising tool for Internet
access providers. They claim, prodigiously, to have developed a
product that "will challenge the whole Internet advertising revenue
model". It works by 'overlaying' existing homepage banners on
search engines with ones relative to your search option. It's an
innovative idea, but not revolutionary.
Companies such as InterQuest and ad-one believe the role of
interactive advertising on the Internet is to deliver niche,
demographically targeted campaigns that mainstream media is unable
to do. But niche markets do not have the appeal of conventional
media genres and must be precise if they are to be viable. The
answer, it seems, lies in cross-media promotions that use
interactivity to add something new.
While the Internet waits for cost-effective broadband and dresses
up its banners, interactive TV is already ahead of the game. Not
only does it have streaming media, by way of digital broadcast, but
it also has the powerful content drivers needed to woo substantial
advertising revenue. Sky's recent purchase of Open has married one
of the world's leading interactive TV companies with one of the
most prevalent broadcast organisations, with seven million
subscribers in the UK alone. Although the pairing is still young
the potential for interactive advertising is huge. Enhanced TV
applications mean that interactive ads will be able to run in
tandem with broadcast streams, providing extra product information
simply by pressing a button on a remote control. Additionally, the
viewer's demographic profile is contained within the TV set-top
box, enabling relatively fuss-free 'targeted' marketing.
Sky is not the only one in on the act; at this year's Enhanced TV
Conference II in February, Carlton Active (co-owner of On Digital)
demonstrated one of its recent enhanced TV advertisements. Its AA
Insurance commercial consisted of a standard broadcast stream, at
quarter-screen size, with optional information available. Perhaps
more impressively, viewers were able to get a personal quote
directly through their set-top box.
Interactive TV has a lucrative capacity to combine direct marketing
with traditional media, utilising interactive advertising within an
established and profitable business model. And it won't be too long
before mainstream commercials are demographically targeted and
played out in accordance with our purchasing patterns. Meanwhile,
the Internet continues to struggle within its current limited
framework, to find an alternative to banners and establish itself a
viable niche-marketing proposition. But without broadband
capability it could be a long and expensive haul.
Small Ads: Keywords
Banner Ads
Banners are
rectangular advertisements featured on most websites and
interactive TV scenes, although they often take the guise of search
engines. The main function is to provide a branded link from the
site you're looking at to that of the sponsor, albeit a search
engine home page or a business-to business site. Unfortunately,
banners have been heavily criticised for their lack of creativity
and minimal appeal, often being described as 'wallpaper' or
background graphics. This has caused serious sponsorship problems
for
E-commerce businesses relying on their revenue. The downturn in
confidence has meant that few sponsors are willing to shell out
cash on a tool that fails to achieve conclusive results.
Click-throughs
Click-throughs are the part of the
banner ad that takes you to the sponsor related website, or scene
on Interactive TV. This may be to obtain further information or to
make a direct purchase. Although they were meant to revolutionise
advertisements, by being able to measure the number of people
who've clicked-through, the concept has shot itself in the foot.
Sponsors are now more concerned with who has clicked, rather than
who has actually viewed the banner. Additionally the process throws
you out of the Web page or screen you're in and is not always
user-friendly.
Pop-ups
Pop-ups are intermittent scenes that appear
when you're waiting to link through to another Web page, or
interactive TV scene. Their purpose is to drive you to an
advertiser's website, or to try to tempt you with an offer you
can't refuse. Although they exist within an interactive framework,
the consumer is not able to choose when and when not to view them.
While pop-ups can be effective, they can often seem
intrusive.
Enhanced TV
Enhanced TV, via digital and cable
networks, enables interactive applications to run simultaneously
with broadcast advertisements. Once the viewer has pressed the
interactive button on their remote control, they are normally
presented with a quarter screen broadcast stream with surrounding
interactive menus, allowing them to elicit further information
about the product. Whereas click-throughs take you to another
screen, enhanced TV allows viewers to continue with what they're
watching. The main benefits are that it is user friendly and works
alongside, rather than instead of, established revenue streams.