How much should a business spend on Web Advertising? Is it possible for a business to make money in Web Advertising? Check out this interesting article....
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The Interactive Media Budget: How High Is Up?
Jim Houck
CEO
Media Strategy
Every time one of my clients wants to flirt
with interactive media, I am confronted by
the same question: How much should we
spend?
Now, my knee-jerk/agency-guy reaction to
that is, How much can you afford?
Obviously, that isn't quite the response
most marketers want to hear. Most
marketers want to hear that we have a
formula for determining the media
investment.
In the established world of terrestrial media,
we managed to cobble together some
pretty decent theories based on
competitive spending, delivery goals and
percent of sales. These seemed to work
reasonably well for entrenched categories
like breakfast cereal or luxury cars. The
rules were well known and the players
scrambled mostly for share of a mature
market.
In this context, the internet presents us with
a new set of problems and a new set of
opportunities. Specifically, the relationship
between the rules for the marketplace and
the rules for the medium are nowadays
completely reversed.
Here's what I mean.
Today, the internet can help us make the
link between ad exposure and transaction.
Provided that we can consummate our
transactions on the web, we can derive a
predictive formula for the interactive
medium very much akin to traditional direct
response.
Problem is, the foundation of the new
marketplace is warping so quickly, no one
can predict the competitive landscape from
one quarter to the next.
Generating I-Commerce
The simplest scenario for the marketer
occurs when the communications medium
and the marketplace are linked together
with microchips. If you can manage the
hand-offs between computers on the web,
you can know that 1,000 ad impressions
yielded 20 inquires which yielded 5 sales of
so many dollars per.
As a marketer, all you really need to do is
tweak the formula to optimize response and
boom, you're making money while you
sleep.
Given, however, that the barriers to entry
are probably pretty low in your electronic
market, nothing is stopping your upstart
competitor from burning through a couple
million in venture financing in an effort to
capture some of your market.
See what I mean?
Even though technology enables you to say
very precisely how much advertising is
enough, the computer-mediated
marketplace changes so rapidly that you
might be hard pressed to recognize your
business in six months.
Generating Brand Awareness, Or Intent
To Purchase
What happens when the transaction needs
to happen off-line?
If you can't sell a product in the same
medium as you advertise it, you're back to
the old unscientific problem of predicting
results from ad spending.
Share Of Voice?
One of the traditional schools of thought
says that if your competitor spends $1,000,
then you should also spend $1,000.
On the web, how are you going to find out
whether your competitor spent $1,000 or
$10,000? It's not like you can count 30
second commercials or magazine pages.
You can't audit the whole web for ad
banners or sponsorships. And sometimes,
it isn't even clear who your competitors are.
Delivery Goals?
In traditional media, we key our efforts to a
particular reach/frequency or a minimum
number or TRPs. As of today, there are no
standards for measuring these things on
the internet. Without these measures, we
need a little wild conjecture to build a
rationale for pegging investment to delivery.
Most people find Web sites through the top
search engines. Or do they?
Georgia Tech's GVU surveys indicate otherwise.
They show that links from other Web pages are
the most popular way people find new sites.
Which means that you need lots of "other web
pages" to link to your site as well.
Click here to find out more about how people
find Web sites and about building a link partner
program with ClickTrade.
Let's say that we want to market sports
sunglasses through our web site. We want
to move people to retail, or we want to
deliver some sort of promotion offer. We
know our target is skiers. We also know
what these skiers are likely to look at when
online.
Knowing this, we need to audit the web's
impressions inventory for content and
keywords that would make for suitable
banner environments.
Here's a sample content universe:
Site Impressions/Month
skiing.com: 20 million
Mountainstuff.com: 20 million
skifashion.com: 15 million
coloradoweather.com 20 million
Search engine keyword inventory: 35
million (sunglasses, goggles)
Total: 110 million
So, if you bought every impression that was
pertinent to your product, you would be
buying over 65 million banners (that'll
probably run you about $3.5 million at a $30
CPM).
Obviously you don't buy every monthly
impression available. You only buy every
nth impression.
You may decide that you only need every
20th impression because the average user
session on these sites consists of 10 page
downloads. By buying run of site, you
hypothesize that you will hit every other
visitor. (You might call this a 50% reach, but
I'm not inclined to go there yet.)
This nth impression scenario calls for 5.5
million impressions per month at a cost of
$165,000. If you want to cover off a three
month ski season, you've just determined
that you need an interactive media budget
of $495,000.
Maybe you don't have half a million to
spend. If you had something less, you could
still do the exercise to understand the
delivery trades-offs involved.
Or, you may decide that your objectives
need to be tightened up if you have
something less than the optimum budget.
This isn't science.
As a matter of fact our example (like all
media planning) is a dramatic
over-simplification of real world conditions.
It is, however, something to say to your
client that'll come off a lot better than, "Well,
how much can you afford?" |
