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  • Ian Ritchie : Business AM

Advertisers are focusing on intelligent eyeballs

When it comes to getting a message across, television's loss is new media's gain

PEOPLE have always been sceptical about the value of advertising, but perhaps never more so than today. Despite low inflation, healthy retail sales, and a growing GNP, advertising volumes are well down this year.

John Wanamaker, the 19th century department store pioneer famously once said “Half the money I spend on advertising is wasted; the trouble is… I don't know which half”.

Now, for the first time, it might be getting easier to answer this question; and that, in itself, might be the reason for the current slump in overall advertising volumes.

Helping companies to communicate with their potential customers has always had value. Newspapers discovered early on that the cover price could be lowered by including advertising messages. They have been particularly important in broadsheet papers, often paying for most of the costs of the newspaper.

In most of the world, TV and radio broadcasts are entirely funded by advertising, so when ‘new media’ was being invented it went down the same path.

As with everything else on “planet internet”, expectations for circulations and ad revenue were first unrealistically high and have been subject to extreme correction. Lots of ad-supported internet publishing businesses were started up, many of them attracting large investment, and many have since closed. Even major publishing companies such as News Corp have written off massive investments in new media.

So as everybody knows, internet advertising has failed hasn’t it?

Well actually no it hasn’t. Quite the reverse in fact.

This year total internet advertising rose 53% to an estimated $2.9Bn, stronger growth than any other sector of the advertising marketplace, and is predicted to grow to $4.8Bn next year. AOL has announced that the drop in advertising revenues has bottomed out and that they now see renewed growth. DoubleClick, the leading internet advertising service, has stabilised.

One key player, Microsoft, is getting ready to spend around $1.5Bn later this year on the launch of Windows XP, and their games console, Xbox, and a sizable proportion of that will be online.

The big change in internet advertising is not that rates are down, although they are. It is that advertisers are getting more discriminating.

Advertisers are less keen to buy “eyeballs” by the million, even on TV. With the arrival of digital, satellite and cable television, families no longer gather around the big comedy or light entertainment programmes as they used to do. Now they watch different channels: sport, soaps, news, cartoons, in different rooms of the home. Or, an increasing number of them, surf the internet.

The result is that the big collapse has been in general advertising, particularly in newspapers and television. The biggest single general advertising market in the UK, the ITV network, is hurting vary badly, some analysts think that ITV advertising revenue might be £250m down on last year. Granada has already announced losses and major cutbacks are now likely. Many newspaper groups have announced cost cutting measures or hiring freezes.

Roy Thomson once described owning STV as “a license to print money”. Well, it certainly isn’t any more.

The TV channels which have a clear focus have done best. E4, the 6 month old entertainment channel, has overtaken both UK Gold and Paramount in audience share, and has specialised in appealing to young, intelligent viewers. Exactly the kind of “eyeballs” that advertisers want.

In the US, as the audiences for the big TV networks shrink, the online ones grow. AOL Time Warner had over 72 million unique visitors in June, MSN had 61.5m and Yahoo 59.9m. And unlike the TV networks, each one of these visitors was selecting content specific to their own personal interests, a factor that makes them much more interesting to the advertiser who wants to make an impact.

Now the experts are rethinking online advertising. Forrester Research has published a survey of advertising effectiveness which shows that internet ads are often much better value than other traditional media. New innovations, such as “pop-up” windows, and “roll-over” panels are increasing the impact of the ads.

And a wider range of media are being brought into action. DoubleClick have just bought two companies which specialise in email advertising and the Wireless Advertising Association has devised agreed formats for the delivery of SMS text adverts. Companies such as L90 have devised technology which more accurately tracks the effectiveness of campaigns. It has over 1500 customers including General Motors, Visa, and Proctor and Gamble.

Increasingly, it is becoming more and more possible to answer John Wanamaker’s question, and to switch off the half that is being wasted.

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