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
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 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 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, 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.
This was first published in May 2001