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."
