The value of online media

Last year the online advertising industry was valued at R116 million. Despite South African consumers spending 10 to 15% of their media time on the internet, the industry is still running a hard race against traditional channels of marketing and advertising. Online advertising accounts for only 1% of the market share and companies spend only 2% of their marketing budget on this medium.

Experts agree, however, that it won't be long before more advertisers see the value of this tool.

Mail & Guardian Online publisher Matthew Buckland attributes the inconsistency in adspend and consumer demand to the novelty and size of the industry: "Online advertising in SA is still the smallest part of the advertising pie for various reasons. It's the youngest of all the major mediums, just over 10 years old; it still has some way to grow and establish itself. If you take an historical view, online is just a baby compared with say the print medium, which is hundreds of years old."

Statistics released by the South African Online Publishers Association (OPA) and Nielsen Media Research/AIS AdEx this year show the internet to be the fastest growing advertising medium in SA - in 2004 the SA industry grew by 136.7%.

Managing Director of Saatchi & Saatchi's AtPlay, Uwe Gutschow says: "In the last year, the industry has seen renewed interest in online ad spending. This will continue, but can be jumpstarted by understanding the medium, knowing what works and in the end sharing this understanding in a simple and jargon-free manner."

Gutschow points out that insufficient understanding of the medium makes advertisers apprehensive: "A large part of the problem is in the fact that this medium is so complex. Very few clients or agencies understand all the jargon or what works in this medium. Because of this, most clients are afraid of the internet or they've had bad experiences in the past. Also, the average response (click through) rate is fairly low (about 0.6%), which is a further deterrent."

A viable alternative

But there is good news. The European Interactive Advertising Association (EIAA), for example, conducted a study to quantify the effectiveness of online advertising, consolidating the medium as a viable alternative to traditional advertising vehicles.

It found that FMCG brand building through online advertising campaigns has achieved greater success across all branding measurements compared with other branding categories.

What is important to remember here, however, is who the target market is. As FCB Channel Plan Director at Headspace Joanne Scholtz points out, online ads are talking specifically to the top end of the market: "For the broader market, there are 44 million people we're not reaching. Online ads just don't factor that much for the bottom end of the market."

Acceleration media director Andrea Mitchell says this can be a good thing for the medium: "The reason why the internet is starting to attract more revenue in SA is because of the changing demographics of the user. Older people and people outside of the IT industry have come on board and more people are using the internet to shop."

Looking more closely at the demographics of internet browsers Buckland points out that, small as it is, "online advertising appeals to the top LSMs - the big earners and highly educated - an attractive demographic for an advertiser".

An estimated 2.5 million South Africans surf the web (AMPS 2005) and 25.5% of web surfers possess post-graduate qualifications, with 25.2% holding professional titles. Approximately 54% own their own homes and 18.2% earn a minimum of R400 000 per annum.

Campaign measurement

One of the more compelling arguments for online advertising is how amenable it is to the measurement of a campaign's success.

According to Ananzi MD and OPA vice chairperson, Mark Budwala, campaigns can be tracked from impressions, through to reach and frequency, giving advertisers precise measurements for return on investment: "Readership is measured using page impressions and the number of unique users. Page impressions refer to the number of times an agent's web page is called up on the screen. Unique users are first-time visitors to a site during a specific time frame."

Scholtz says it's the companies who have been able to cut out the middleman who are really reaping the benefits of the web: "Companies like Outsurance and Budget can measure the exact return on investment and know whether a visitor bought anything and how much they purchased for."

Gutschow agrees that some brand categories are more suitable for the web: "The automobile category for example, is a perfect fit for the web. In South Africa, a large percentage of people who can afford a new vehicle are already using the internet.

"International research done by Jupiter Research, shows that almost 70% of people visit a car manufacturer's website before purchasing. If you are a car manufacturer and you are not actively attracting people to your website, you are most definitely losing out."

He explains how in the US Chrysler is allocating 20% of its nearly US$2 billion adspend towards its online efforts (Fortune, Aug 8th 2005). It is hoped that this optimism will soon translate to the South African industry.

Buckland outlines the unique features of online advertising that make it a competitive medium: "It offers branding for advertisers, but also goes beyond branding allowing consumers to purchase an advertiser's product or service. Online publications also offer easy access to an international audience, should this fit an advertiser's business model."

What is also key, according to Scholtz, is the search engine that browsers are using: "People use the web to find out more. What you want is to be the answer they are looking for. Do they need insurance, finance? Do they need a new car license? If I was a runner I'd be advertising on the vehicle sites, alongside banks. Trailers should be advertising on biker's sites.

"And the search engine drives this process, so ad space that is linked to key words is the solution."

Budwala agrees: "An example can be taken from my family who never use the Yellow Pages any longer. They go online to search for information. If you can't find the Yellow Pages it's probably because it's being used under your computer."

Cost effective

Cost being an all-important consideration in all facets of business it is interesting to note that the internet is more cost-effective than some traditional mediums when comparing audience size and cost.

Target audiences can be streamlined through a listing on search engines and advertising on contextually similar web pages, an element less controllable in other marketing mediums. These advertising methods also level the playing fields as all businesses receive greater exposure at a relatively low cost. Smaller, new or lesser-known companies can compete with more established businesses in the industry.

Scholtz agrees that much can be achieved with limited budgets online, but believes that these campaigns should be more interactive: "When you see an ad online it is only the beginning of a journey. You want to take people from there to an environment where you can expand on the brand and close the loop with a future opportunity; a competition or SMS. We don't see enough of this happening - people are not making adequate use of the medium."

Communication between prospective clients and the business is immediate. Once the basic content of the ad has been loaded new information can be conveniently added at a marginal cost. The business saves time and money.

Buckland predicts that a number of developments in the internet industry will see the blossoming of the internet as a sought-after advertising tool: "If the US example is followed, a greater take-up in broadband will not only increase the online audience, but users will spend more time online.

"SA's online audience is set to grow as more affordable broadband services become available; as 3G takes off on both cellphones and computers; as the net is increasingly being accessed from a range of mobile/handheld devices; and lastly, as a result of the arrival of the second national operator which will hopefully ramp up pressure for lowering fixed-line call costs.

"The recent boost in online advertising revenues indicates the medium is working for advertisers and gaining in popularity. For me, it's pretty simple: advertisers will go where the audience goes."

About Cheryl Hunter

Cheryl Hunter is a senior freelance journalist for Bizcommunity.com.
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