Even though the economy hasn't slowed enough to meet the technical definition of a recession, advertising executives have been saying since the end of last year that their industry is in a depression. A leading forecaster, Robert Coen, recently said the ad industry had slowed to "an alarmingly low pace" and halved his projected growth for the industry to 2.5 percent over last year.
So it was no surprise that the question everyone wanted participants to answer at the Jupiter Media Metrix Online Advertising Conference, held this week in Manhattan, was when the industry would see a little relief. The answer didn't offer much hope. Aside from expectations that the holiday season would prompt the normal surge in ad spending, the outlook for the rest of the year remains gloomy.
"We don't see any uptick for the rest of the year in the overall marketing environment," said DoubleClick CEO Kevin Ryan. "But that has less to do with our results than the health of companies that have been big spenders. If you can tell me when Cisco's and Merrill Lynch's results will be better, I can tell you more about when advertising will improve."
While many analysts have been saying that the ad market should begin to improve by spring 2002, Jupiter analyst Patrick Keane said he sees no cause for optimism before the fourth quarter of next year. He also said he sees increased marketing spending on items such as coupons, sweepstakes and the like, growing on the Internet, at the expense of banner advertising. "This is not a very positive story for most publishers, because many of them don't have that kind of inventory," he said. At least, not yet.
Attendees also wanted to know who would be spending money to attract customers. The top consumer-ad spending categories are autos, beer and fast-food restaurants. While auto marketers have been spending more online, sellers of Web advertising have been increasingly frustrated at the lack of advertising dollars spent promoting other consumer categories. JMM estimates that just 4 percent of all online ad spending comes from packaged-good marketers, such as Procter & Gamble and Unilever. That has caused considerable hand-wringing over the years.
DoubleClick's Ryan says that that trend suggests that the Web isn't an appropriate medium for packaged goods, but that this is not necessarily disastrous. "Some people think that if McDonald's and Procter & Gamble aren't leading advertisers, the medium isn't successful," he said. "To me, it's no different than direct marketing, which has grown faster than advertising for the past 20 years. McDonald's and P&G are not big spenders there, either. We are just better for other types of advertisers, high-consideration, high-interest products, like financial services, cars and travel."
The value of the Internet as a direct-marketing tool has pushed more and more advertisers to consider using e-mail to get their message to consumers. As online direct marketing gets more sophisticated - animation and sound are being added to messages - e-mail has become one of the few bright spots in the industry. Why? Its efficacy is easy to prove at a time when return on investment is the mantra of every market.
Lewis Goldman, executive director of business development at Citigroup's e-consumer division, said his e-mail campaigns are 15 to 20 times more effective than direct-mail campaigns, which are generally considered successful if they generate a 1 percent return rate. DoubleClick forecasts a fourfold increase in its e-mail marketing, to about $100 million by the end of 2002. Most of that is expected to come from companies mining their customer lists. Still, naysayers wonder how much response rates will decline as e-mail marketers load their cannons with spam. Remember: Click-through rates for banner ads were once 10 times the current 0.5 percent.
Similarly, participants wondered whether instant messaging would become a legitimate advertising medium. Ads have already started cropping up in buddy lists and, in some cases, within the actual chat text of
