January 28 2007

[Editorial] 2007 will see increase in brand building online

Christian Panayi, Head of Marketing for online marketing specialists Fuel, looks into his crystal ball for 2007.

The retail sector has seen incredible take up of online marketing activity, reflected in the ongoing proliferation of countless online-only retailers, and by the enormous investment by high street brands to establish and market their online and e-commerce offerings. And for good reason: according to the Evening Standard of 13 September 2006 "Next Directory saw its profits rocket by 45% in the six months to the end of July while its high street shops saw profits down by 8%. The Internet has become a vital sales channel for Next, with online orders growing by 33% in the past year. About 45% of the directory's orders are now online."

The high street is in fact in decline as the rapid take-up of broadband fuels a corresponding growth in consumer spending online. Furthermore, the Internet is revolutionising the way we shop for products. The user's "journey to sale" is becoming more complex and convoluted, much more self-regulating and independent. We are becoming Pro-Active Consumers (Prosumers appears to be the latest acceptable jargon phrase) no longer content just to click on the advertised banner site, but indulging in more research online by visiting comparison sites, review sites, blogs etc before undertaking the purchase decision.

Within this environment, transparency over the sales chain and real visibility on the user journey to sale is harder to come by than in previous times. Advertisers are increasingly looking for greater accountability from the Internet as the proclaimed "most measurable medium" as they move towards highly integrated campaigning across search, affiliate marketing, online advertising and email marketing, in an effort to find out where in Cyberspace their customers really are.

Online marketing providers will need to respond to this demand by delivering effective solutions geared towards addressing key issues of sales allocation and de-duplication across channels to optimise the retail advertiser's spend based on what's really influencing the customer to purchase and what is really delivering a return on investment.

In this context, 2007 will see greater challenging of online's ability to build brand, not only in terms of increasing brand awareness, but also in terms of its impact on resulting sales. Brand building is something that the Internet has traditionally been accused of being unable to deliver. However, the development of streaming media and its ability to be received in a broadband-based society is propelling a convergence of Internet and TV advertising methods that will challenge the more traditional ways of delivering online advertising. Internet video advertising is set to move towards a hybrid of TV and multimedia techniques, integrated between or actually within programme content, increasingly using either dedicated internet video or product placement.

Pricing models for online advertising will also be affected. Time-based pricing (an approach more akin to TV ratings measurement), may replace the traditional CPM pricing model, as well as mounting a challenge to the increasing demand for low-risk CPA-based activity from acquisition-focussed e-tailers. Its success will depend on the effectiveness of available methods of tracking the "eventual" sale resulting from ad views as opposed to simple clicks.

The prospects and potential for online advertising will increasingly attract advertisers from conventional off-line markets, for whom online has presented a barrier to full entry. A clear differentiation that already exists in the online retail world is highlighted here between dedicated sales-based sites and the FMCG sector.

For e-commerce-enabled retailers, sales generation through direct response activity will still be a primary focus. In contrast, the driver of growth of brand building online is likely to come from the FMCG advertisers, for whom total e-commerce fulfilment is not viable or available. FMCG e-commerce enablement is currently limited to the likes of downloadable PDF vouchers or targeted offer leaflets redeemable at selected stores, customer registration and free sample ordering. FMCG advertisers will therefore have to spend much more time and effort in examining and supporting channels that influence sales as well as improving their branded online presence.

Integrating on and off-line campaigns is essential in this respect (as it is for the retail sector generally). Over time, FMCGs may move towards greater e-commerce enablement, but in the meantime brand building will be the primary focus of their online efforts. And this will come with its fair share of growing pains. Conversely, direct response retail activity will reach a level of maturity, but eventually the two will converge as the ability to measure the impact of each on sales generation becomes more available, more accurate and more relevant.