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

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