Americans spend an average of 14 hours a week online and 14 hours watching TV. But US marketers spend 22% of their advertising dollars on TV and only 6% online, according to data compiled and analysed by Google Inc.
Why are some chief marketing officers (CMOs) and major advertisers reluctant to add digital technology to the marketing mix, despite the Internet’s ability to help target huge audiences?
(Illustration by: Malay Karmakar/Mint)
Wharton marketing professor Patti Williams says that while the Internet provides advertisers with the ability to closely track consumer response to ads by measuring clicks or other online behaviour, their reluctance to embrace the Internet may be due to uncertainty about how well it can shape broader brand messages. “For the biggest bulk of media spending, online is just hard to figure out,” she says. “The Internet is not that good at big brand building objectives, so there are a lot of companies struggling with a way to take advantage of the tremendous opportunity Google and other searches offer.”
Spending on Internet marketing is expected to grow 13.4% in 2008, but that will only add up to 7.2% of the total amount spent on all US advertising, which is expected to hit $153.7 billion (around Rs6.16 trillion), according to TNS Media Intelligence.
According to Wharton marketing professor David Reibstein, another obstacle to moving advertising online is the difficulty of reaching a broad audience with an efficient media buying operation. When three television networks dominated the US advertising world, it was easy for mass advertisers and their agencies to place commercial messages. Now, they are confronted with a complex web of options, including the Internet, which itself is highly fragmented, in-store promotions, social networking and mobile phone technology, as well as traditional media.
“Each one of the pieces is effective, but that effectiveness is overwhelmed by management of the pieces,” says Reibstein, adding that many small start-up companies are going into business to help advertisers reach specific markets online, but that may only stymie advertisers more. An advertiser’s response to these companies and their promising technology “is likely to be, ‘Great, but I would have to deal with 10,000 of you’”.
According to Wharton marketing professor Peter Fader, the possibility of a US recession may further slow advertising’s move online. In an economic slump, he says, marketers should move spending towards Internet platforms because they are more targeted and customer-centric, with easily measured results. “Here’s the irony,” he notes. “When bad times come, people say, ‘We can’t abandon the brand. We can do those customer-centric things next year.’ The CMO will stay with the skills and responsibilities that he has traditionally relied upon.”
Foreign stocks help to diversify and reduce risk