Saturday, May 01, 1999

Interactive Marketing: Do You Know Which Half Works?

National Association of Broadcasters Conference, Las Vegas, May 1999

By: Michael Cairns and Marisa Kabasinskas

Benny Hill, the British comic, may have been more prophetic than anyone ever gave him credit for. In one skit, Benny plays a woman who professes to have watched more TV programs continuously than anyone else in Britain. Turns out - which is supposed to be the funny bit - that Benny only watches the ads and leaves the room to make a cup of tea when the programs come on. This is funny because we consider ads to be an intrusion - we leave the room, we fast forward the VCR through the ads, we avoid them at all cost. With the advent of interactive marketing we are now being told that the end of the unwanted advertisement is at hand. Interactive and database marketing promises to finally 'close the loop' between ad delivery and performance. The answer to the famous advertising adage, 'half of advertising is wasted, but we don't know which half' may finally be possible.

Of no news to anyone in this industry is the explosive growth of interactive marketing. As access to the Internet broadens and grows, the ability for media firms to succeed - be they publishing, advertising, interactive or broadcast - will center around the development and sustainability of Web sites, deals, alliances and communities. In the near future, media firms will be more focused on and by their audience rather than their content. As a consequence, they will be able to charge premiums for delivery of that audience to advertisers.

How Will the Paradigm Change?

One might ask how the above contrasts with today's media environment when NBC delivers a specific audience on Thursday nights. We believe that the interactive (future) paradigm will exceed the passive (current) environment in its ability to accurately identify and deliver targeted advertising and create a response from the viewer. When advertising is addressed accurately, we won't want to leave the room. Database marketing will ensure that the respondent is predisposed to a particular message and, more importantly, the advertiser will have documented and detailed information on the effectiveness of the particular message they are delivering to us. Direct marketers call this a response rate.

Before the online world, there existed a fundamental distinction between advertising and direct response.
Generally speaking, advertising in its purest form is all about reach and frequency - building brand awareness. Exposure to advertising - particularly broadcast - is rarely designed to 'elicit' a response. Direct marketing, on the other hand, does precisely the opposite. We believe this will change as traditional advertisers begin to discover "e-commerce" as a critical revenue stream. To date, their interactive marketing efforts have focused on a Web presence - brand building - rather than a transaction oriented approach. While transaction oriented companies -, The Gap - generate sales through online advertising, traditional marketers are still searching for the value in a banner ad. Consumer products companies such as Procter & Gamble and Coca-Cola are working to determine how their online brand strategy fits with their overall brand management strategy when the consumer can control the purchase decision-making process while surfing the Internet. With convergence of broadcast and online a certainty, broadcasters will also be required to deliver both brand-oriented advertising and direct (transaction) marketing, increasing the overlap in these two objectives - building brands and generating transactions.

On the Internet, the consumer is exposed to directed advertising, can view the specific product, compare prices and conduct independent research, make a purchase decision and initiate the purchase.

The consumer controls all aspects of this chain of events. The marketer is able to correlate the performance of a particular promotional vehicle; i.e., an advertisement, with specific results. For the most part, goals targeted in 'conventional' media have been geared to achieving reach and frequency targets and not to quantifying the effect of the marketing effort on sales. As digital TV becomes more prevalent, the ability for broadcasters to tailor advertising messages and direct mail will increase. Moreover, we will see a fundamental change in the manner in which we view television. The digital TV screen will allow segmentation so that when we view that ad during the Super Bowl on one side of the screen, we can also experience the product and click on the order button on the other side. It will work with programming as well; team merchandise, product placement in TV shows and movies, package vacations on travel shows, etc., will all be part of the directed advertising in the interactive world. In many ways, one can assert that the networks were the original 'portals'; it is digital TV that will allow them to leverage their market size, content and audience in the interactive world. What Do You Need to Change to Stay Competitive?

The online environment has the potential to become the most accountable advertising medium available to merchants. Yet while marketers are driven towards being able to quantify their return on investment, online advertising agencies do not currently have the ability to tie the delivery of an ad message to its actual performance (at least as precisely as is envisioned). As is routinely reported in the trade press, all view this capability as a key strategic goal. In fact, for the reasons above, this ability will be a price of entry into the online advertising business within 18 months. Currently, it is commerce sites -,, and others - whom are able to deliver specific audiences based on their affiliate and affinity marketing programs, customer profiles and visiting/viewing habits. These 'communities' of like people will prove to be the 'holy grail' for marketers.

PricewaterhouseCoopers is helping our clients develop the infrastructure and technical environment to compete in this area. Currently, we are working with an interactive agency in the development of a data warehouse solution which will enable them to report to clients on the performance of a specific ad on a specific Web page. Not only will this allow optimization of both the media buy and the creative, it will also allow the agency to present clients with strategic marketing information supported by proven advertising messages - e.g., sales by Web sites and creative unit. In pitching new clients, this agency will be able show the past performance of advertising they created for similar types of clients using specific media (Web sites). Additionally, the data warehouse will allow them to catalogue all their creative with metadata (descriptors), documenting in summary form the actual performance of the creative for every occasion it was used. Armed with this type of information on media and creative performance takes marketing to a whole new level, enabling interactive agencies to partner with their clients by not only influencing purchasing behavior but driving that behavior.

We envision an environment where (online) advertising agencies will become broadcasters of advertising messages and concepts for clients. Rather than developing individual broad-based campaigns, agencies will deliver a constant stream of specific targeted advertising messages on behalf of clients. Advertising will be 'tagged' with demographic data, target market, direct sales data/response data, etc. Clients - if they choose - will be able to pick and choose the messages they want to use for particular products and services and/or messages. Ads with a 'history' of performance maintain a profile so that advertisers and clients can predict how particular ads will perform under particular circumstances. This will encourage a three-way path of communication between the advertiser, client (marketer) and customer. All of this information will be collected in a data warehouse application for analysis, and current and future marketing.

Given that we believe this type of "closed loop" application will be a requirement for entry, it will also mean that the technology driving this will eventually become a commodity. Agencies will be back to providing good and effective creative and cogent strategic advice. The difference will be that in contrast to today's environment, these activities will be backed up with actual data, and their ability to measure the return on investment (advertising) will be a transactional requirement. In direct mail, any mailing has a key code to track the performance of the mailing, but the analysis of results is delayed. Moreover, all the expense is up-front and sunk the moment the material is printed. In the interactive world, ads which don't work can be switched out as soon as the performance is apparent - sometimes within hours. There is no sunk distribution cost other than the cost of the failed ad, but even this ad could conceivably be used again on a different Web site. The ad is simply deposited into electronic storage with its metadata.

Marriage of On-Line and Database Marketing

Perhaps the best example of the change in this industry is evidenced by Peter Georgescu, Chairman of Young & Rubicam, who believes that advertising is becoming more predictable and measurable and is encouraging clients to pay not on a commission basis but a fee based on results achieved. The difficulty is to agree what defines success, especially when the advertising is brand driven and not transactional. This is where common standards need to be defined.

In the intervening time, standard audience measurement guidelines and definitions are required. Recently, the two largest online research monitors, Media Metrix and Relevant Knowledge, agreed to merge, increasing the likelihood that a standard measurement methodology will emerge in the near future. An industry association is also considering standards to cover ratings services, server logs of site traffic and third-party ad-server reports. And Nielsen, the leading provider on television ratings, has recently announced its service to supply Web-site ratings and track Internet traffic.

With the hype surrounding, it is easy to lose sight of the fact that a still relatively small amount of commerce is transacted on the Web, or that daily use of the Web is still small and not broad- based. Regardless, the interactive environment is fundamentally changing the manner in which advertisers and media companies view their relationship with customers. In these days of increasing clutter and short attention spans, we don't want to be bothered with advertising or programming that we are not interested in or predisposed to. Online marketing married to database marketing will allow marketers to effectively manage their ad spend and draw the precise relationship between an advertising event and a transaction.

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