Warning bells about the new boom

see edited version at Media Guardian, March 29, 2004

There was a time, far-far away in a distant century, although not more than a few years ago now when the advertiser-supported media, which covered the so-called new economy, bulged like telephone directories. For over five years, it felt like a golden age when new businesses and incumbents in almost every sector lined up to capture and defend market share.

What a time to be a media owner – new or old – as businesses fuelled by investors, public markets and the panic of competition felt that if they were not advertising, they would be nowhere. In fact although traditional publishers like the Electronic Telegraph and Wired were testing the water with online advertising back in October 1994, spawning some of the Internet’s first banner campaigns, it was really Netscape, Yahoo!, Amazon and AOL who were really defining the future with new fangled notions of tenancies and keyword based advertising.

What a time to be in marketing services, as businesses unable to fathom a measurable way to leverage the Internet and e-mail, created demand for a whole new industry to support the land-grab mentality. Although traditional agencies tried to cope, the best we could do at the time was either to try to work with the new media owners to understand the value of their media or more likely persuade advertisers to leverage their traditional media investments in TV and print to promote their Internet presence – that’s if they had one. Occasionally, we’d stumble on something innovative ourselves, as we did with Guinness and create what in retrospect was a viral-marketing campaign around downloading screensavers and passing them on.

This is an old story. Worth telling again only because after four years of serious famine that has ravaged the media and marketing sectors, we’re told we are about to go back into an upswing and we need to keep the warning bells front of mind to make sure we don’t make the same mistakes again.

For the media owners and marketing services firms, the good news should now come in three parts:

• Firstly, the one forecast which we seriously underestimated in our irrational exuberance was the size of the world’s online population. In fact, according to eMarketer, last year the global Internet population exceeded 633 million, over 140 million people more than at the height of the frenzy had been estimated for 2003. So whether you are a global brand, media owner or agency or whether you are a local player, you now have hundreds of millions more people to talk to than even our wildest dreams imagined.
  
  
• Secondly, we now have models for accountable and measurable advertising, which delivers almost as much as we promised almost 10 years when we said that online marketing would be targeted, cost-effective and extremely efficient. Ten years ago we had no idea what would or wouldn’t work online – now we know that banners have shockingly poor response rates (unless they are rich-media or truly interactive), tight-integration and deep-linking rather than tenancies is the only way to get maximum value from reach media and that search and e-mail when properly used are more powerful than we ever expected and if we didn’t know already, pop-ups were a bad idea
  
  
• Thirdly, and perhaps most importantly there is now a first-generation of marketers who have not only been brought up on the principles of direct-marketing but also schooled online, who now habitually look at through-the-line communications and rather than just buying space, we can now look with the more enlightened media owners into building co-operative relationships to optimise customer acquisition and life-time value.

The bad news, is that while the media and marketing economy is starting to climb out of Sir Martin Sorrel’s famously long bath, we are still some way from a full-formed industry that supports these great underlying foundations. Perhaps that’s why although projections of the Internet population is two years ahead, the estimates for online advertising revenue are still two years behind.

In fact if it hadn’t been for the formidable innovations of accidental new media owners like Overture, Google and eSpotting in bringing self-service cost-per-click keyword advertising to a global audience, the online advertising market would probably have been even further behind its estimates. In an age of accountability and context, it’s hard to argue with a click-through rate which 15 times better on average than a banner.

In fact by creating a win-win for advertisers and consumers, Google and its kind have done automated a process which media planners and buyers have been struggling like blind-men towards – a communication which finds the right customer. No wonder last year according, these tiny text-based ads which you pay for with a credit card and manage online accounted for over $600m in revenue to Google to Forrester. In fact this kind of advertising has become such a core revenue component for the likes of Yahoo!, that in October 2003, when paid-for-search accounted for nearly 20% of its revenue, Yahoo! spent $1.6bn to acquire Overture.

We will make plenty of mistakes in the next phase of the digital marketing’s evolution as we grapple with how to deal with peer-to-peer networks, PVRs and widespread wireless broadband. But hopefully the masters of the new global media footprint will not burn bridges like Netscape and AOL did in the first phase of the Internet with fixed-formats and tenancies, which bring little long-term value to either partners or consumers but will focus on the unique ability of the Internet to thread, as Google has shown with its AdSense technology, the logical of commercial offerings into relevant contexts at scale.