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Online Advertising Still in a Lurch

Kim Hart

The Digital Media Conference hosted by Digital Media Wire was held yesterday in Tysons Corner and brought together a decent number of entrepreneurs, investors and executives. I try to attend as many of these events as I can, especially when they're in the DC area.

I ran into a lot of familiar faces and the panel discussions where also all too familiar. I keep expecting one of the panelists to have an epiphany of sorts at the conference, to finally have an answer about how to make money from Web 2.0 applications or how to coax big advertisers to take a chance on social networks. Just about everyone acknowledged that the same questions we were asking a year ago are still unanswered.

Lynda Clarizio, president of AOL's Platform A, laid out the current situation very succinctly. Essentially, online media consumption is growing much faster than the advertising to support it. Supply is "vastly outstripping" demand--especially when it comes to social networks. Some advertisers specifically request that their ads not appear on any social networking site, and AOL has developed an ad-filtering technology to ensure those desires are met.

Why is there such a disconnect? Clarizio said a lot of advertisers are simply overwhelmed by all the options out there. There are so many advertising networks to choose from--more than 300 by her last count. There are so many types of ads to take a chance on--mobile ads, display ads, search ads, banner ads. "We're confusing our clients," she said of the technological complexities that go into every digital ad campaign. Even the biggest advertisers like Proctor & Gamble are spending only a fraction of their ad spend online. In fact, P&G put only 2 percent of its $5 billion annual ad budget into online platforms last year, she said.

Part of the problem also lies at the advertising agency level. Ten years into the digital era, a lot of advertising agencies haven't figured out how to make creative campaigns for the Internet. Clarizio said a lot of creative teams are still trying to make a condensed version of a TV commercial and call it a video ad. "That just doesn't work," she said.

She also said a lot of ad networks are too focused on appealing to the biggest brands out there, while real success lies in the ability to attract smaller businesses that make up the "long tail." There's also an over-reliance on search advertising, she said. While it should be part of the mix, display ads and cost-per-click ads should also make up the strategy.

On a following panel talking about online advertising trends, the presenters were quick to admit they didn't have the answers either. Colin Gillis, senior technology analyst at Canaccord Adams in New York, suggested less emphasis should be placed on ads that are considered successful only if a user clicks on them. "There are so many links there that are never clicked on but the brand impression is still there," he said.

Will all these questions pan out over the next year? Not likely, said Anthony Psacharopoulos of comScore. "It's going to get even worse before it gets better," he said. The industry "still can't agree on how to define what a page view is."

By Kim Hart  |  June 27, 2008; 8:17 AM ET  | Category:  Kim Hart
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I think part of the core issue with online advertising is this is the first media advertising medium where there is measureable results, which actually causes an advertiser or company to look at what is the actual "purpose" of their ad buys.

If you think about it advertising though often linked together really serves several different purposes. They include brand awareness, product education, increasing store traffic and product purchase. Traditionally, these different purposes has typically been achieved through different types of advertising/marketing efforts. But on the Internet, much of these can be accomplished at the same time.

I think part of the solution will require agencies and companies to really look at what is the purpose of the marketing efforts, and then designing the correct type of online ads to meet those needs, instead of just looking at the different type of ads available.

Posted by: John | June 27, 2008 11:39 AM

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