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New Ways of Selling

Online advertising could revolutionise the industry, says Michael Nutley of NMA. But only when it stops trying to imitate its offline counterpart.

People used to talk a great deal about the transforming power of the Internet. It was one of the defining ideas of the boom years but it seems to have disappeared. At some point between putting the emphasis on ROI and the Internet becoming "just another channel", the idea of transforming the world was quietly ditched.

What started me thinking about this was the juxtaposition of two events: the Internet Decade evening run by E-consultancies, and the announcement of the latest figures from the Interactive Advertising Bureau. These show that, at the half-year, online advertising accounts for 3.2% of the UK's total spend on advertising, an increase of 76% year-on-year.

This is remarkable growth, and worth celebrating. And the details are even more impressive. Search marketing, for example, now accounts for the same amount of advertising spend as cinema. But flip the basic number on its head, and we're still talking about 96.8% of ad spend going elsewhere. Is that the kind of transformation that we were all expecting?

It's often said that, when confronted by new ideas, people tend to overestimate the short-term impact and under-estimate the long-term effects. What's also true is that progress never happens the way you expect it to. The Internet has had a dramatic impact in some areas; iTunes and eBay are two examples that spring immediately to mind. But in other areas the changes have barely begun. And one of those areas is online advertising and marketing.

When talking about how important the Internet could be as an advertising medium, the two numbers that everyone talks about are the amount of time people spend online, which is around 12% in Internet households, and the amount advertisers spend online. Then they join the dots and suggest the two should be roughly equal.

This ignores two things. The first is that time spent online is continuing to climb, particularly among people with a broadband connection. Indeed some industry experts put the ultimate figure for online ad spending at 25% of the total. More importantly, it ignores the question of what is going to fill the gap. Because one thing that is for certain is that it won't be filled by more banners, buttons and pop-ups.

I've written before about the decline of interruptive media; about the way people are seizing any tools that enable them to reduce the number of advertising messages to which they are subjected. PVRs, pop-up blockers and telephone preference lists are all part of this phenomenon. At a recent NMA round-table on online advertising, someone summed up what this means for interactive media very neatly. "Until now the role of the advertising industry has more or less stopped at the point of purchase," he said. "Interactive media give us the chance to move beyond that."

This is the real transformation that the Internet can effect in advertising and marketing. It's the original promise of the medium: mass personalisation, mass targeting, brand and consumer in a dialogue that puts customer wants and needs at the centre of the organisation's business. It's also yet to happen.

But there are signs that things are changing. Old school advertising types will dismiss advertising-as-service models as "just CRM", and certainly CRM has got a bad name over recent years. But being able to influence the lifetime value of a customer is too important to be dismissed. It's no surprise that P&G, which three years ago was saying that TV could no longer deliver mass audiences at an acceptable price, is in the forefront of this sort of online marketing.

In etail too there are signs that marketers are taking over from retailers in running the show. What's important now in that world is customer communication and meeting customer expectations; it's no longer a question of stacking the shelves.

Our customers are online; there's no question about that. There's also no question that they want to interact with their chosen suppliers online in many cases. But until now we've concentrated in the most part in trying to conduct those communications according to the rules of offline business. What we're beginning to see now is the rise of truly interactive advertising and marketing.

About the author: Michael Nutley is the editor of New Media Age.