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Advertising faces another sluggish year, and prospects don't look much better for years to come. The economic slowdown isn't the only reason, though that obviously hurts. Growth will likely be only 2.5% this year, and much of that is a result of the quadrennial infusion of dollars from the elections and the Olympics.
What really hurts is a sea change in business' strategies. Companies are rethinking how they spend their advertising dollars and asking what they get for them. Often the answer is, not much. Business executives have complained for decades that advertising was scattershot at best. Retail pioneer Frank Woolworth observed that he wasted 50% of his ad spending, but couldn't figure out which half. But thanks to the Internet and digital innovations, businesses today have much better methods of finding out what's working -- and what's not.
"The net and digital media allow advertisers to measure the effectiveness of their ads and change them far faster than any other outlet" such as TV, radio, newspapers or magazines, says David Hallerman, a senior analyst with eMarketer, an online business consultancy.
The ability to track ads plus reach the 75% of Web-using consumers is prompting big and small firms to turn to Web banners, e-mail blasts, paid search links and ads embedded in videos. Web advertising will grow 30%, taking 9% of ad dollars this year and over 15% by 2013. By 2020 or so, look for online sites to capture around 25%, as companies beef up spending to reach consumers on the go via mobile phones, plus social networking sites such as MySpace and Facebook.
The Internet gives companies two other big advantages, says Hallerman: The ability to precisely target the consumers most likely to buy a given product or service, as well as engage people like no other media can, with videos, sound and special effects.
It levels the field for small companies, too, and allows them to target best sales prospects nationwide and do so on shoestring budgets.
Also gaining are digital displays with eye-catching billboards as well as big indoor monitors in malls, individual stores, office buildings, buses and trains. Their messages can be changed rapidly to attract attention and push different products, depending on factors such as the time of day and the changing demographics of consumers who drive or walk by the displays. Another incentive for businesses to put their message on digital outdoor signage: It's the only media consumers cannot tune out, mouse click or channel surf past.
The trend is obviously bad news for traditional broadcast and print media outlets. The 5% to 10% annual ad revenue gains they had counted on for decades is history. Of course, most traditional outlets now also have websites replete with ads, but most of these cost a fraction of an on-air spot, or display print ads. However, the digital trend is good for advertisers, offering them more bang for the buck.
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