ANALYSIS: Rate slump no help for online properties - Plunging net ad rates may not be enough of a boost, reports Atifa Hargrave-Silk

Global internet ad rates have plunged in the past six months, with web ads in Asia now selling up to 30 per cent cheaper than last year. But the drop is unlikely to provide online advertising with the boost it desperately needs. A lot of banners and button ads are largely unpaid barter deals, and traditional advertisers remain cautious, sticking to a trial approach. On a recent visit to Asia, DoubleClick chairman, Kevin O'Connor, warned that more challenging times lie ahead. "I think the reality is that with declining CPMs and an overall slowdown in advertising, it's not going to be the growth that we all thought of six months ago." According to a report by Jupiter, 25 per cent of traditional advertisers still find the online medium too expensive and are demanding more value. A buyers' market, it explains, allows them to change pricing dynamics as they increasingly expect prices based on performance. Where they traditionally would pay for number of impressions, they now insist on paying for business results - either measured in clicks, leads, members or purchases. But with the price of online ads falling, many are hopeful potential advertisers will be lured by cheaper rates and additional services. The internet accounts for 0.6 per cent of adspend in Asia, compared with two per cent in the US. And O'Connor doubts that slumping rates will be enough to lure traditional advertisers, who may not be that concerned with prices. However, ACNielsen eRatings.com managing director, Hugh Bloch, argues that although it is difficult to ascertain the exact drop in the cost of online advertising, as figures vary "depending on whom you talk to", the lower cost has already attracted new advertisers. "The trouble here is that the majority of online banners and buttons are still not paid banners. Rather, they are barter deals or companies advertising on their own or sister sites. My impression is that the drop has varied between 10 to 30 per cent, overall; in some cases more. "I have no doubt that the drop has already lured some to trial online advertising, who may not have done so otherwise. The benefit is that it will stimulate trial. "However, no matter what the price, there won't be sufficient volume or repeat business until we have enough objective data to show how online advertising works: whether it is best in combination with other media as part of an integrated advertising campaign, to build or maintain awareness created by traditional media, to build brands, as part of direct marketing or CRM and so on. "Secondly, we need to be able to show that good campaigns do work if they're creative, and they're properly targeted. This is the challenge." Hong Kong Internet Advertising Bureau chairperson, Vivian Lau, believes that as a growing number of companies tighten budgets to curb costs, many are likely to head to the internet as a low-cost media alternative. "Companies looking at cost cutting will certainly look at their marketing and advertising budgets. In cases where they can no longer afford mainstream media, they may opt for other alternative channels that are cheaper, such as online advertising," she explains. According to figures released by Nielsen NetRatings, traditional offline companies constituted more than half of Asian online advertising in March, and spent more than any other group of advertisers. Bloch notes: "We may see some further drop-off (in price), but more as a result of agencies, media buyers, sites and ad networks fighting for market share than as a way of growing the market significantly. "However, this is likely to be temporary, as the growth in volume will not lead to greatly increased revenue. Rather, there are likely to be some more casualties or mergers as a result. Once the scepticism about the effectiveness of online advertising diminishes, prices will increase again. In addition, new forms of online advertising, including rich media formats, will help drive this."

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