Advertisers taking the Internet seriously
Competitively-priced Internet advertising is being seen as an alternative to increasingly expensive options such as TV. Simon van Wyk writes.
Major advertisers are not happy with what they’re seeing on TV the numbers, that is, not the shows. In spite of steady decreases of audiences by 1% a year this decade, the Australian TV networks have increased rates by up to 10% for 2005.
As a result, many large companies are threatening to reduce or even eliminate their spend on TV. B&T reported that Unilever asked its agencies to draw up two media schedules for 2005 one with TV and one without. Though the company later denied it was considering removing the medium from its schedule, it confirmed it was scaling back its use of TV by 23% in 2005, while Holden is cutting back by 25% and Telstra 17 percent.
A recent report from Initiative Media showed all leading advertising media in Australia cost at least twice the global average with the exception of radio and the Internet. Some of that reduction in TV spend is being channelled to the Internet, because people are finally taking it seriously. This is due to three main reasons:
1. More people are using the Internet. A survey of European Internet users conducted recently by Millward Brown reported that an increasing number of people are using the Web to perform daily tasks, such as booking tickets (45%), reading newspapers (37%), chatting to friends (35%) and shopping (31%). In addition, one in four now listen to music online. And 40% of Internet users research travel tickets and holidays online, and then buy through traditional means.
Christmas gift buying continues to be a huge market for the Internet. Depending on which report you believe, online holiday sales in the US were either a record US$9 billion (VeriSign), or US$23.2 billion (eSpending). Regardless of which figure you believe, both companies agree the amount is 25% ahead of last year.
According to VeriSign, the average price of online purchases was US$178. The fastest growing shopping categories vs. 2003 were classifieds, grocery & alcohol, automotive, sport & fitness and auctions, according to Hitwise.
Internet and email use on Christmas Day and Boxing Day was more than double the amount for the same two days in 2003 - itself a record year - according to figures from the London Internet Exchange (LINX).
The flow of Internet traffic through LINX facilities peaked at around 50 Gbit/second on Boxing Day and 45 Gbit/second on Christmas Day itself. This is more than double last year, according to LINX, when the peaks were 25 Gbit/second and 22 Gbit/second, respectively. The strong Internet traffic on Boxing Day would suggest that online news sites were being scoured for the latest information on the Tsunami. Over the three December weekends prior to Christmas the peak traffic flows at LINX were around 62 Gbit/second.
2. More women are using the Internet. BusinessWeek labelled 2004 holiday e-tailing’s year of the woman. Despite early forecasts that consumer electronics (well-established as boys toys) would again dominate online sales, the single biggest growth category in online sales in 2004 was jewellery, with a 113% increase in spending over 2003.
Women shoppers also helped make apparel the no. 1 category overall, with 16% growth and $3.8 billion in sales in the US, according the eSpending Report released in early January. Shoppers spent $1.4 billion more on clothes in 2004 than on consumer electronics.
BusinessWeek analyst Sarah Lacy wrote that, “The timing makes sense. It typically takes a consumer three years to get comfortable enough online to start doing lots of Web shopping. Three years ago, the total number of women using the Internet passed the total for men, according to several Internet studies. When you put those facts together, this may have been the first Christmas that women really felt at ease coming to the Internet for a significant chunk of their holiday buying.”
Online consumer goods seller PriceGrabber, meanwhile, reported spikes of 149% in jewellery, 239% in apparel, 153% in home and garden and 313% in flowers, compared to electronics gains of only 121 percent.
3. People are moving away from other media towards the Internet.
A recent survey by Stanford’s Institute for the Quantitative Study of Society has revealed that the average Internet user in the US is now spending three hours a day online, and the use of Internet has displaced television watching and a range of other activities.
Institute director Norman Nie said it was inevitable that increased use of new media would mean a decrease in other activities.
According to the Stanford survey, an hour of time spent using the Internet reduces face-to-face contact with friends, co-workers and family by 23.5 minutes, lowers the amount of time spent watching TV by 10 minutes and shortens sleep by 8.5 minutes.
Another survey, conducted by Harris Interactive, has found that along with expected increases in using the Internet for email, research, news & weather and hobby information, there have also been big increases in the past couple of years in those making travel plans or reservations (26%), or seeking information on health and diseases (21%). Harris reported that as well as the proportion of the population who are online is growing, those who use the Internet use it for more purposes than they did in the past.
Europeans are now spending 20% of their media consumption time on the Internet, according to the aforementioned Millward Brown research. eMarketer reports that this news adds fuel to the argument that many companies are yet to devote enough of their advertising spend to the Web.
The study placed the Internet well above both magazines (8%) and newspapers (11%) in terms of media consumption and catching up with radio (30%). While TV still took the largest share of people’s media time (33%), 35% of those online said they watched less TV as a result of using the Internet.
More than 42% of respondents with Internet access said they are online every day and 10% claim to spend at least 25 hours a week surfing the Web.
The eMarketer marketing website suggests the results show the Internet has a far greater potential for advertising than TV. While 83% felt that TV has too much advertising, less than half felt the same about the Internet. Interestingly, 33% stated that online advertising was relevant to them and 53% believed that Internet advertising was from ‘forward-thinking brands’.
The Internet Advertising Bureau (IAB) reports that in the UK, online advertising now represents 3.4% of total advertising spend, worth more than £500 million in 2004. The IAB predicted that this was set to surpass the amount spent on radio advertising by Christmas.
A JupiterResearch study of adults who consume household information online has found that 44% prefer the Internet as their leading information channel, compared to 20% who prefer magazines and television. According to eMarketer, “Following that migration online are a growing number of consumer goods advertisers, who are avoiding traditional offline media and aggressively turning to online channels especially search engine marketing and optimisation of their own websites.
According to David Card, senior analyst at JupiterResearch, “The Internet being a clear favourite should send a warning sign to traditional media: serious cannibalisation potential ahead.”
EMarketer predicts that the offline media imperilled by what Card calls this disintermediating effect include women’s magazines, newspaper home sections and TV programs with a specific consumer goods focus.
A survey of more than 12,000 consumers by US company BIGresearch indicates simultaneous consumption of media is continuing and TV appears to be the medium most consumed along with other media, as well as experiencing the biggest drop in use, 2.5 percent. The survey found that multi-tasking TV watchers also regularly or occasionally read their mail (66.3%), go online (60.1%), read the newspaper (55%), and/or read magazines (51.8%) at the same time.
The bottom line
The bottom line is that Internet use is now affecting the bottom line of competing media. The Internet has become a key channel for reaching and connecting with consumers and is an increasingly key element in communications and media planning.