SAN FRANCISCO (05/10/2000) - The numbers were flying at the Ad:Tech conference, the premier fete of online advertising that convened this week in San Francisco, as researchers struggled to understand how this burgeoning-yet-immature industry is taking shape.
Recent findings from the Association of National Advertisers, Jupiter Communications and the NPD Group were at the center of the discussions, which analyzed corporate online ad spending, e-mail marketing, the integration of Net resources into offline ads, and consumer use of electronic coupons. Large corporate advertisers tripled their online ad spending last year, to $1.9 million, according to a survey completed by the 114 member companies of the Association of National Advertisers. Overall, however, the percentage of companies advertising online was up only slightly, to 64 percent from 61 percent the previous year.
Online advertising still represents an average of less than 3 percent of total ad budgets, the study found. The main inhibitor of online advertising spending, cited by 50 percent of companies surveyed, is concern about returns on investment. Low click-through rates and fears that online ads have only minimal impact were cited by about one-third of the companies surveyed.
But monitoring ROI might prove difficult, given that the top three measurements used to evaluate the success of online ad campaigns are based on clicks or impressions rather than on conversion, or rates of registration or purchase.
Half of the responding companies monitored click rates (the overall number of clicks compared with total impressions) as their primary ROI metric, while ads delivered and click counts both were utilized by about one-third of companies surveyed. Jupiter Communications used the industry show as an opportunity to size up e-mail marketing, a particularly hot segment of the online advertising market. According to the research firm's estimates, spending on e-mail marketing will reach $7.3 billion in 2005, way up from the $164 million spent last year.
Some of that growth will result from the cannibalization of traditional direct-mail revenues, according to Jupiter. Currently, two-thirds of companies are spending from 1 percent to 5 percent of their total marketing budgets on e-mail marketing. About one-fifth are spending more than 5 percent. The growth in spending means that consumers can expect an onslaught of commercial e-mail by 2005. Jupiter projects that some 1,600 commercial e-mail messages will be received yearly per user, or more than four marketing e-mail messages per day.
At that rate, marketing messages will make up more than a quarter of total nonwork-related e-mail.
The NPD Group rolled out the results of two marketing-related studies that targeted the presence of URLs in print-magazine ads and consumer usage of online coupons. In general, the research found that companies excel at tapping into their Net presence through offline marketing efforts. For example, the study found that 70 percent of advertisements in the top 50 magazines contained a URL or e-mail address. Not surprisingly, the most Net-savvy ads were those in business and computer magazines, which included a URL or e-mail address about 90 percent of the time.
NPD found also that more than one-quarter of Internet surfers use e-coupons.
Among those that take advantage of coupons, e-coupons now constitute 10 percent of their total coupon use. The top e-coupon site, according to NPD, is CoolSavings.com, which drew more than half of all online coupon users in March and topped a total of 4 million users to become No. 12 in site ratings by Media Metrix. Coupon usage is concentrated in a few categories.
Among those topping the list were groceries (59 percent), books (32 percent), health (30 percent) and music (26 percent). Some categories of coupons, such as fast-food and groceries, are redeemed almost exclusively in retail stores, whereas coupons for other items, such as toys and books, tend to be redeemed primarily online.