Online advertising is struggling for the first time in years. After growing at double-digit rates since the beginning of the decade, online ad revenue grew at a barely perceptible .4 percent last quarter (it still grew a total of 18 percent in all of 2008) and market researcher IDC is predicting a 5 percent drop in the first quarter of this year. IDC says that could get worse in the second quarter.
This is distinctly better than the results from conventional advertising. But as Sarah Lacy points out the difference between conventional advertising and online advertising is the difference between an amputation and a broken leg.
So what went wrong?
A lot of things. This is, after all, the worst economic situation on 75 years and it's no news that a lot of people got a lot of things wrong. Compared to, say, bankers, the online advertisers and their evangelists look like geniuses.
That's the good news. The bad news, I think, is a combination of wishful thinking and jumping the gun. Bluntly some of the factors which were supposed to keep online advertising growing aren't in place yet.
For example, online advertisers maintained that online ad results were more measurable and hence a better value than print or electronic ads.
There are two problems with this argument. First, the superiority is more theoretical than practical and second, just because something is self-evidently true doesn't mean that people will act on it.
To take the second point first, the advantages of online advertising over other media haven't sunk in yet with a large fraction of advertisers. They may have heard it, they may even generally agree with it, but they haven't internalized it in a manner that really matters when they have to trim their ad budget.
The first reason is a little simpler – and somewhat more depressing. The theoretical ability to do precise measurements of customer response to online advertising hasn't translated broadly into such measures. Most online advertising measurement is stuck back in the cost per thousand page views era.
As I pointed out in an earlier post in this blog, page views are a poor measure of ad success. They don't reflect the impact of the ad on the viewer and they don't translate directly into reader responses. There are more sophisticated tools available, but most sites don't offer them.
This is compounded by the attempt to get page views at all costs – including turning the potential customer off with irritating ads. It doesn't matter how many page views an ad gets, if it irritates the viewers to the point where they don't want to deal with you, it is not a successful ad.
If online advertising is going to live up to its potential it is going to have to recognize its problems and fix them. It needs a lot more promotion based on success stories and less on “logical” PowerPoint slides. It needs to offer easy-to-use metrics that relate ad spending on line to the bottom line. And it needs more innovative ad strategies designed to produce action and not just page views.
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