One of the striking phenomena of the advertising business during the past decade has been the emergence of the internet as an advertising medium. But this has shown two puzzlingly contradictory features.
In the first place, it offers unprecedented advertising opportunities: opportunities for an advertiser to forge links with individual consumers and engage in a dialogue with those consumers. This has a unique and quite remarkable potential. But there is a second point, and this strikes a jarring note. The internet, for all its advantages as an advertising medium, has grown at an extremely disappointing rate, and it is difficult to explain why.
The reason for this slow progress is that advertisers have repeatedly tried to make internet advertising work for the wrong types of product, and with the use of the wrong type of advertising. However, after ten or more years of very slow progress, advertisers are at last beginning to get it right.
The best available information on media advertising in the United States shows that television, the largest medium, accounts for 29% of total expenditure. For many advertisers, this medium reached its peak share in the early 1980s, after which other media notably magazines grew to compensate for the inadequacies of television’s coverage.
Television is viewed by 100% of homes in the United States, as many as 40% of them view very little of it. Spending more money on advertising in the medium does not get to these light viewers, but only provides wasteful duplication of heavy viewers.
Television’s share of all advertising has now stabilised. But the internet accounts for only 4% of all advertising, and is a relatively weak No 6 medium, after television, direct mail, newspapers, radio and magazines.
The best way to analyse American media trends is by drawing a distinction between advertising for low-involvement and high-involvement goods and services. At the moment, these two types of advertising split the total expenditure about 50:50.
Low involvement means that the process of buying a brand does not involve much rational decision making. The purchase price of the goods is normally low: most low involvement product categories are fast moving consumer goods (FMCG). The majority of consumers usually buy two or three different brands in a category over the course of a year, and most buying is a repetition of previous buying.
During the few days immediately preceding a purchase in the category, advertising can influence the choice of brand. Advertising does this by operating as a nudge or reminder, and does not embrace much rational weighing of the pros and cons. Such advertising normally appears on television and radio, media that are, in turn, viewed and listened to in a low involvement way, without full attention. Note the harmony between buying of low involvement goods and services, and the advertising in low involvement media.
Low-involvement buying represents the vast majority of goods that most people buy over the course of a year: may be 95% of the total. The categories of goods and services are competitive, and the advertising tries very hard to get people’s attention.
The process can simply be described as the media advertising seeking its audience, by offering a message that reflects that audience’s lifestyle. Until now, most internet advertisers have used their advertising in a low-involvement way, and have used banner advertisements. Not surprisingly these have not been effective, because they lack production values, the messages are stereotyped and dull, and they are only too easily avoided. They are in no way as good as magazine advertisements.
Low-involvement product categories have reached maturity in the United States and other developed countries. Growth began to slow twenty years ago and has now generally ceased. This situation does not yet apply to India, but it is a trend that will, before too long, begin to show itself in the buying habits of the substantial and growing proportion of the population that has disposable income, and is in the market for branded goods.
American consumer incomes continue to grow despite intermittent interruptions. This has meant that, because there is no growth in low-involvement purchasing, a larger share of income is being devoted to infrequently purchased, high priced goods and services: household durables, cars, vacations, various luxury goods. These are all high-involvement purchases. The decision making is essentially rational, and although the number of purchases per annum is relatively small, the average price is high.
For such goods and services, the role of advertising is quite different from what it is for FMCG. High involvement advertising is intended to help the search process. The audience is seeking the media advertising, which provides the information needed to lubricate a rational decision-making process.
It is not surprising that the proportion of all advertising devoted to high involvement has grown to its present figure of 50%, and is increasing fast. Much high-involvement media advertising is directly connected to generating leads which produce inquiries and sales. It can often, therefore, provide financial accountability, the most highly-prized objective of all contemporary advertising.
Looking at the different types of internet advertising, the proportion based on Keyword Searches grew from zero in 1998 to 40% in 2006. The Classified share has grown from zero to 18% (siphoning large amount of spending from newspapers, the traditional medium for classified advertising). The proportion accounted for by Banner advertisements fell from 56% in 1998 to 22% in 2006 and is still going down.
The trends are quite clear. A straightforward extrapolation indicates that the internet’s share of total advertising in the United States will double by 2012, to reach 8% of the total, making it the No 4 medium, after television, direct mail and (greatly weakened) newspapers. At last the internet’s potential will be on its way to fulfillment.