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Online Advertisers Spent 23% More in First Half 2011, But They Continue to Want Ads Targeted to Lower-Income Click-Happy Types

According to the latest from the IAB and PricewaterhouseCoopers,

Display-related advertising — which includes banner ads, rich media, digital video and sponsorships — totaled more than $5.5 billion in the first six months of 2011. Display increased 27.1 percent over the same period in 2010, substantially exceeding the previous year’s growth rate of 16 percent. Digital video once again commanded double-digit growth — up 42.1 percent over a year ago, and moved close to the $1 billion mark with $891 million in half year 2011 revenue.

Good news, right? The numbers do paint a rosy picture for “display advertising,” which is often considered the “brand advertising” side of digital. Just because the ad unit is graphical, though, doesn’t mean its intent is brand building. (More of my thoughts on the difference between “graphical ads” and “display advertising” here). When you break down the IAB / PwC data based on the contract structure — whether the advertiser is buying impressions (on a CPM basis) in order to affect brand metrics, or it’s buying clicks (on a CPC basis) to drive transactional or direct-response metrics — you get a different picture. David Kaplan at PaidContent explains it this way:

The latest figures for online ad spending looked pretty good for the first half of the year, but as the Interactive Advertising Bureau’s report shows, even though display is rising, the “premium” impression-based ads still have a long way to go to catch up to performance-based ads, which tend to be of the cheaper, “click here” variety.

This is troubling, and not just for publishers who prefer to get paid for every impression they give away to an advertiser. It’s also bad news for the advertisers. If, through the structure of the contracts they sign, they motivate publishers and ad networks to push ads to people more likely to click on them, they are incentivizing their partners to deliver their ads to end users who are less likely to have disposable income to buy their wares. Those click-happy types (Natural Born Clickers, as they are called in a series of Comscore / Starcom studies) — the 8% of internet users that are responsible for 85% of the clicks on display ads — aren’t the audience that most brands want to reach. They are more likely than the average internet user to make less than $40,000 and to visit gambling and get-a-job sites.

A bad, self-reinforcing cycle appears to be underway. Advertisers demand that publishers and ad nets sell them inventory on a per-click basis — because advertising on the internet doesn’t impact brand metrics among the upscale audience they’re targeting. Meanwhile, to make the economics of those CPC contracts work out, publishers and ad nets are forced to target the lower-income (perhaps unemployed) audience that is more likely to click on banners.

Online Display Ad Spending to Pass Paid Search by 2015

eMarketer predicts US marketers will spend $12.33 billion in online display advertising (including online video, banner ads, rich media and sponsorships) versus the $14.38 billion they’ll spend on search advertising. By 2015, display spending will surpass search.

eMarketer display v search spending thru 2015

“The rise of display advertising, in particular online video, goes hand in hand with a rise in usage of digital advertising for branding. Online advertising, long considered primarily for direct response, still leans in that direction. But branding is increasing in importance as better ad vehicles develop for this purpose and market dollars flow.”

More at eMarketer.

The Vacuum Cleaner Engineer Who's a Marketing Magician

Dyson and His Vacuum

From the New Yorker profile of James Dyson, the British engineer and unlikely pitchman behind the vacuum cleaner that sells at four times the price of its competitors yet snatched up 23% of the US market.

“In the most perverse design decision of all, Dyson let you see the dirt as you collected it, in a clear plastic bin in the machine’s midsection. One day in 1978, Dyson was cleaning his house when he became frustrated with the way his vacuum cleaner quickly lost suction. It was a design flaw, and yet vacuum cleaners had been made that way for a hundred years. As the brand story goes, Dyson thought about the problem, built thousands of prototypes, and finally came up with a vacuum cleaner that used centrifugal force, rather than a bag, to separate the dirt from the air…. Sir James Dyson is now known to millions as the man who made vacuum cleaners sexy again.

“Dyson had grasped what the companies trying to make hundred-dollar vacuum cleaners had forgotten: that a lot of people get their kicks from buying appliances, and are willing to pay a premium for a machine that will deliver an emotional experience.”

It’s a story that reminds you: Building a brand is more art than science. It’s a discipline where irrational humanness (“the solid yellow used for the body of the machine was a shade familiar in power tools but not in household appliances… gave the Dyson a gravitas that the lime greens and mulberries of the other brands did not possess”) trumps rational thinking. And if you can pull it off, wow, double-digit market share at a 300% premium over your rivals?! That’s nice.

To Experience Your Brand, Eat Your Own Dog Food — and Buy It at Retail Too

Purina Puppy Chow

Rohit Bhargava at Influential Marketing points out that brands aren’t just shaped by the experience a customer has with the product itself, they are formed (for better or worse) at every stage of the product’s journey from the manufacturing plant to the recycling heap.

“while a GM exec . . . may drive the same car as his or her customer, they have had a far different experience in getting it. They didn’t research the car online. They didn’t shop around and talk to several dealers about it. They didn’t have to trade off something else in their budget to afford the car and figure out how to finance it. And now that they have it, they don’t have to worry about things like maintenance or even filling gas into the car. All of that was taken care of.

“Eating your own dog food (ie — experiencing your own product) isn’t enough. You need to experience the entire process around buying it to really understand your customers.”

Makes me think that obnoxious (but effective) DR campaigns and offensive (but highly viewed) viral video campaigns are counter productive in the long run.

Best Buy CMO Barry Judge: The Digital Future for Brands

Godin: Facebook, Twitter, Telephone Are for Talking, Not Marketing

I agree with Godin that traditional advertising doesn’t and won’t work in Facebook or Twitter. Operative word: traditional. But I don’t agree that Twitter and Facebook — just because they’re designed for connecting communities rather than distributing traditional media content — won’t devise native experiences that will work well for their communities and for brand marketers at the same time.

Brand marketing doesn’t need to operate like “traditional advertising.” For example, with its OPEN Forum blog, American Express is using marketing dollars to create a credible small business publication, replete with editorial contributions from the leading names in business advice. Based on repeat visitor rates and links from other sites that recommend it to their readers, the SMB community is finding value in the OPEN Forum blog even though its content is funded by ad dollars. And because the contributors to the site, such as Guy Kawasaki and Anita Campbell, are given license to create real, editorial content (they wouldn’t participate otherwise), they’re alerting their Twitter followers each time they post something new. They are not paid to post these stories to Twitter; they’re doing it because they always Twitter new stuff they publish, whether the content appears on their own sites or at someone else’s publication.

Guy K Tweets His Lastest OPEN Forum Post

I’d argue that American Express is using Twitter for brand marketing right now, and it’s working as well for Guy’s and Anita’s followers as it is for American Express.

Certain applications within Facebook, like Graffiti, have done the same: Developing ad-supported experiences that allow brands to enter the conversation without spoiling the conversation. Here are some exmples.

(Disclosure of sorts: Seth Godin is not officially affiliated with FM, unless you count our informal Seth Godin Fan Club. He is, however, a sometime contributor to the OPEN Forum site, the content of which FM manages.)

Joe Marchese: Google Making Marketers Stupid

From Joe’s column in MediaPost:

“If I click on a paid link or banner for Nike shoes and make a purchase profiting Nike by $10, to say that the click on that link is worth up to $10 is stupid. Before I ever clicked on that link I have had so many brand interactions and product perceptions, from peer suggestions to celebrity endorsements, I couldn’t count them all even if I wanted to. It could even have been those interactions that caused the click.

“….it’s the product of a broken system and an addiction to Google’s amazingly efficient direct response model. But too many dollars fighting for clicks at the bottom of the funnel is causing artificially inflated pricing for those clicks. Thus, there is a real opportunity to move up the funnel online and achieve spectacular results for marketers (especially in social media).”

Right on, Joe.

Online Display Ads Are Old Media

Great article about the evolution of digital brand marketing at Ad Age:

“The inconvenient truth is that for all its new-media spin, display advertising is ‘old’ media — a commercial message to be placed next to editorial or entertainment content. And we know by now that measured-media growth has pretty much ground to a halt as marketers continue to increase their dollars in unmeasured disciplines such as web development, public relations and database marketing at the expense of paid advertising. Ad spending among the top 100 U.S. advertisers last year grew a paltry 1.7%, with measured media only up 0.3%. Measured-media spending is in decline in Japan, and it’s not much better in the U.K.”

Content Still More Important Than Demographics

No news here for folks who have participated in the television or print publishing businesses anytime in the past 50 years, but it may be revolutionary news in certain online marketing circles, especially circles in, say, Mountain View. From Ad Age:

“Now, new findings from the Online Publishers Association suggest that content is king: Ads on branded-content websites are more effective than non-branded sites and outpace industry norms in nearly every category.

“[The study] determined that ads on content sites have greater impact on the overall purchase process, including customer awareness, brand awareness, brand consideration, brand preference and purchase intent, especially among the consumer package goods, financial services, technology, telecommunications and travel sectors, giving credence to the idea that audiences are attracted to websites.”

William Morris Execs Create 'Agency 3.0'

From Ad Age.

“Hollywood’s oldest talent shop, the 110-year-old William Morris Agency, is partnering with a triumvirate of digital media, wireless and advertising executives to create a joint venture called Agency 3.0, a digital-marketing-services company seeking to marry digital technology to strategically developed content….

“In an interview with Ad Age, Mr. Johnson said TV advertising ‘is becoming less effective,’ in part because ‘it’s highly disconnected from the creative process.

“His partners’ new venture aims to ‘bring the ad dollars that much closer to the creative process,’ Mr. Johnson said.

Smart idea and an impressive team. I bet, though, they will come to regret that name.