August 31st, 2008 elitani
by Laurie Sullivan
The automotive, finance, telecom and travel industries have decreased spending for advertising, but signs point to online growth, according to a report released Friday.
Bernstein Research expects 2008 online advertising revenue to grow 20% in the United States and 22% overseas. Even if the macro-environment worsens significantly in the second half of this year, the analyst firm expects at least 19% revenue growth in the U.S. and 21% overseas.
Investors are most concerned about specific sectors cited in the recent earnings calls, where several companies referred to weaknesses in advertising, according to the report. Google, for example, cited weakness in auto and home financing, real estate and travel, describing the three sectors as economically sensitive.
Despite evidence of a downturn in automotive advertising online, the opposite is true of financial services. Outside of mortgages, the percentage of online advertising for financial services has increased significantly since the beginning of 2008.
While Bernstein Research has found that auto advertising has been “cut drastically,” its 8% share of online ad revenue still is dwarfed by the 20% share of financial services, which continue to do well despite the mortgage crisis.
Finance, Insurance and Real Estate ranks as the largest sector, accounting for approximately 29.6% of online advertising overall. Media and Entertainment follows with 25.2%. Retail comes in at No. 3, with 13.8%. Other ranks No. 4 at 12.9%, and automobiles ranks No. 5, accounting for 8.6% of total online advertising. The research shows a slowdown in growth rate from the 27.6% for automotive advertising during the last four quarters to 3.8% in the first quarter of 2008.
During the first part of 2008, automakers reduced advertising on TV by about 7.4%; print by 12.8%; and radio and outdoor, by 9.1%. Compared with overall cutbacks, “online advertising held up relatively well,” notes Jeffrey Lindsay, senior analyst at Sanford C. Bernstein.
The research firm also examined three economic scenarios to forecast total and online advertising growth for each that Lindsay dubs “current,” “pessimistic,” and “positive.”
The current economic scenario assumes a mild economic recession in the United States and a significant economic slowdown overseas. It provides a 2008 projection of 20% growth in the U.S. and 22% overseas, up 21% globally overall from 2007.
The pessimistic scenario sees a drop in real U.S. GDP of between 1.5% and 1.9% for three to four quarters caused by a declining housing/mortgage crisis, combined with resurgence in oil prices through the end of 2008. While it trims worldwide online advertising growth to 20%, it reduces the 2009 growth forecast to 17%.
The positive scenario assumes strong business performance through the end of 2008 and generally lower energy prices. In this case, the 2008 growth projection for global online advertising increases to 23% and the 2009 projection rises to 20%.
Although Lindsay notes a downturn in certain advertising categories referenced by Internet companies such as Google and Yahoo on second-quarter earnings calls, the effects have been offset by persistent growth in online ads, which gives a more positive outlook on the overall ad market.
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August 31st, 2008 elitani
By Eric Pfanner
PARIS: Drive around Nairobi these days, jokes Michael Joseph, chief executive of Safaricom, a Kenyan mobile phone operator, and every building is painted in his company’s color, green, or that of one of its rivals.
That is a bit of an exaggeration. There are still a few ad-free walls left in Nairobi, and a few advertisers outside the mobile phone industry.
But both are becoming scarcer. Outdoor advertising is one of the biggest marketing media in Kenya. Mobile operators are already the biggest spenders, and their outlays are set to rise as several new players enter the market.
“It’s the kind of spending that in the past has been associated only with cigarette brands or Coca-Cola,” said Michael Foley, who runs the East African operations of Essar Group of India, which is backing a new wireless network that is scheduled to begin operating in Kenya by the end of the year.
A boom in mobile use across the region has attracted a flurry of investment from Africa and abroad. And as competition heats up, the mobile business is turning into a bonanza for advertising agencies, too.
Perhaps no country better illustrates this than Kenya. For years, the mobile business there has been dominated by Safaricom, a local company whose biggest shareholder is Vodafone. Safaricom has a market share of about 85 percent, with most of the rest held by Zain, an operator based in Kuwait with networks throughout the Middle East and Africa.
Zain and Safaricom will soon be joined by two newcomers. In addition to Essar, France Télécom, which recently acquired a controlling stake in Telkom Kenya, is building a new mobile network that it plans to market under the Orange name.
Meanwhile, Zain this month rebranded its wireless networks in 14 African countries, including Kenya, where the company was operating under the Celtel name.
Telecommunications companies are expected to spend about 4.7 billion Kenyan shillings, or $72 million, on advertising this year, about 30 percent of total ad spending in Kenya, according to Business Daily, a newspaper based in Nairobi.
Safaricom alone accounts for 2 billion shillings in spending, according to the paper.
Given its dominant position, Safaricom plans no new directions in its advertising, Joseph, the chief executive, said. The company’s current ads, created by RedSky, an agency based in Nairobi, include pitches for a promotion in which customers can win prizes by calling more often.
“We intend to be very aggressive in the marketplace to make sure our brand stands out,” Joseph said.
Access Leo Burnett, also based in Nairobi, was recently appointed by France Télécom to introduce the Orange brand to Kenya. It has a tougher assignment, since the name and network are new to the country.
The agency, which is affiliated with the Leo Burnett division of Publicis Groupe, based in Paris, plans to align the brand with the international “positioning” of Orange, said Annette Martyres, managing director of Access Leo Burnett. France Télécom recently introduced a new ad campaign, developed by another Publicis agency, Fallon, under the theme, “Together we can do more.”
The agency handling the rebranding of Celtel to Zain - ZK Advertising, part of a group based in Tanzania - also faces a challenge, given that Celtel had been losing market share to Safaricom. Antoine Aboukhalil, a Zain spokesman, estimated that the company spent about $10 million on the rebranding alone.
Essar, meanwhile, said it planned to introduce an entirely new brand name when Econet Wireless International, a company in which Essar holds a controlling stake, starts its new network. Foley declined to say what that name would be, but he said the company’s marketing, developed by the Ogilvy and Wunderman units of WPP Group, would be aimed at users aged 14 to 35.
Mobile industry executives see plenty of room for growth, given that only about 35 percent of Kenyans have mobile phones. Across Africa, many callers use pay-as-you-go services, rather than subscription contracts, so markets can be highly fluid, with many customers switching carriers.
That has helped drive the high levels of ad spending, which has agency executives in an upbeat mood.
“There is tremendous potential,” Martyres said. “The growth of the industry has been huge. Everybody wants to own a mobile phone.”
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August 31st, 2008 elitani
By Jack Marshall, The ClickZ Network
Online and mobile formats will spearhead a period of rapid advertising growth in China, according to forecasts from WPP’s GroupM.
A report released yesterday, titled “This Year, Next Year: China,” predicts that total ad spend in the region will grow 20 percent from 2007 to 2008, reaching a sum of $32 billion.
In that period, online (including mobile) is predicted to be China’s fastest growing ad medium, experiencing 65 percent year on year revenue growth, and accounting for 7.3 percent of total ad spend in 2008, worth $2.3 billion.
The report predicts in 2009, digital revenues will grow a further 40 percent year on year, representing 8.5 percent of total ad spend, or over $3.2 billion. This leap is attributed to a surge in advertising surrounding this year’s Olympic games in Beijing. Growth will ultimately slow in 2009.
In terms of advertiser verticals, automotive, IT, real estate, and network services are attracting the greatest online spend, all of which are predicted to grow considerably during 2008.
According to the report, the most popular online activities among an estimated Chinese Internet audience of 228 million users include online music, which reached 86 percent of the online population in January 2008, and online gaming, experienced by 120 million users in 2007.
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August 17th, 2008 elitani
by Abbott Wool
The media profession seem to agree there needs to be a rational way to put a price on Web Site Advertising. One Internet advertising agency, ModemMedia, has proposed a pricing model which has received considerable attention (Internet World , May 1995, p.59). There needs to be an examination of the ModemMedia pricing model from the Media Planner/Buyer’s perspective. It is important to note that this model appears to be based on advertising which is designed only to bring people who are browsing somewhere else to the advertisers’ own web sites by use of an ad which is a clickable billboard connected to a Web site which is the true ad. A cover blurb plus a full story, so to speak. Yet, the traditional media analogies used in support of the model range from niche magazines to billboards to direct mail.
ModemMedia’s model has three elements:
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Determine the ratio of hits between the web site’s log and the number of file “hits” that make up the page carrying the ad. Divide logged hits by number of hits making up the page to calculate what we can call “page views.” Then call page views “reach.”
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Determine repeat viewing of that page and call that frequency.
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Determine the success of viewings of that billboard ad in moving readers to the actual web site and call that “depth.”
For use by media buyers, problem areas include terminology, calculations and value basis. The ModemMedia model apparently applies niche magazine CPMs of $70 to what are more billboard-like impressions. A CPM of $2 might be more typical for outdoor posters. And the model then applies a direct mail cost-per-person-opening-the-envelope to those who enter an advertised site. It also counts as impressions repeat exposure to the same page” in one reading session. Magazine CPMs, of course, don’t count more than one impression per reader per monthly issue, no matter how often the book is picked up or opened.
TERMINOLOGY
The terms as well as numerical formulae need to be understood. Reach is a standard media measurement. It refers to the number of unique, different people exposed to a campaign or schedule of advertising. This may be expressed as a whole number or as a percentage of the total population being measured. In most media–broadcast or print–this “reach” of a single ad is equivalent to the rating of a single unit of advertising: a 30 second commercial or page in a single magazine issue. This equivalence is because there is a single defined time period associated with the ad unit. A viewer of a single commercial or a reader of a magazine issue is only counted once by the standard audience research used by media buyers (even if a reader picks up a magazine issue 3 or 4 different times). Visits to a Web site are somewhat analogous to magazine audience impressions, not reach (see below). That is, the computer process of counting hits–as used in the ModemMedia model–deals with the number of time a page is viewed. It does’t distinguish between 5 people each visiting once (reach=5, impressions=5) and one person visiting 5 times (reach=1; impressions=5). Some have suggested that this should be a parallel to magazine circulation, but that analogy doesn’t work: circulation is the number of copies available for reading–it ignores how many times each could be read and is a static figure. Web site availability is virtually infinite, limited only by the numbers of people who are equipped to read the content of a site. Impressions should be counted as one per visitor per month, or per whatever the time cycle of changing site content may be. This would then create a true parallel to other media.
The dynamics of web advertising are substantially different. It’s as if a magazine had a device sensitive to touch and all copies of a magazine were collected after the issue life was over and the touch meters tabulated. We wouldn’t know who had touched or how often, only the number of touches. It’s also as if this magazine meter ticked over every time the eye move to a new article on the same page as an ad, and ticked again if the eye noted a picture accompanying the article. That, more or less, is how Web site hit count works.
FORMULAS
There are three essential formulas in the ModemMedia Model:
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A reach estimate (monthly hits divided by number of hits used to load a page), which as discussed above is actually an impressions estimate.
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A frequency estimate, which also turns out to be an impressions estimate.
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A depth estimate, which charges for readers as if they were sales.
The ModemMedia formula starts with a way to estimate hits, ie: watch the lower left corner of your Web Browser screen as a Home page is loaded by your computer. In that corner is a counter which records the bytes of the file being received (”xxx” of “yyy.” As the “yyy” number changes, it indicates a different file being accessed).
A single page may consist of 5 or 10 files: The text, plus various graphics (logos, photos, section headers, up or down buttons, mail box buttons, “click here” boxes). So, since the term “hits” refers to a count of each file used in a page and the advertiser cares about the page as a whole, ModemMedia’s idea is to watch the changes in the byte counter. Then add returns to the top page from other parts of the site as hits, and divide the total hits in loading the page or returning to the top page into the monthly hit count reported by the site. This then, says ModemMedia, gives an estimate of reach.
PROBLEMS
For a start, the browser alternates between the files in loading the page. On my browser (Netscape, the industry standard), the counter in the corner appears to show that the downloading process alternates between files, thus there are more hits apparently being displayed there than the number that a Web site log would report. Hence, ModemMedia’s formula would have the potential to underestimate actual visits.
The formula counts returns to that top page as one hit to be added to the divisor by the formula. However, most Web browsers cache Web pages and documents, and so a return to the page in question would very likely be–in actuality–a page retrieval from the browser’s cache, not an additional access to the site. This means that a return to the page during a single visit might well not add to the site’s hit count at all.
This then causes further underestimates of actual visits.
FREQUENCY
The ModemMedia “frequency” estimate is based on returns to the home page (presumably this is the page where the billboard ad is). This involves multiplying the so called “reach” estimate by the previously estimated number of returns to the home page. Again, this would actually be an impressions figure. Note that “reach” above already counted these impressions, though now they are discounted by two-thirds before being applied to the $70 magazine CPM.
One justification cited for acceptance of ModemMedia’s generous audience counts is reference to the industry’s crediting every ad in a magazine with the entire reader audience measured, even though not every reader may see every page. By the same token, a web browser returning to the typical home page on which the billboard ad was located may not see that ad on the PC screen which displays less than the full page in one screen. As stated above, impressions should be counted only once per visitor. While I have pointed out some minor undercounting of visits in watching hits on the screen corner, the overcounting of impressions caused by including revisits to the same page on the same trip is a more extreme exaggeration of impressions.
DEPTH
Now, ModemMedia suggests that a direct mail value model of $1 per piece which is opened should be applied to those who click on the ad, which they estimate to be 20% of those reached, and go to the web site being advertised. This is based on an average price for a direct mail piece of 75 cents and 75% opening of the mailing.
PROBLEMS
Mechanically, clicking on a link to an advertised web site seems like a reasonable analog for opening a piece of direct mail, but there are other issues.
Leaving aside for the moment whether or not the 75 cents and 75% are realistic, there is an inherent illogic in the formula suggested, of 75 cents/75% = $1 value. If only 50% of the recipients opened the mail, then the calculation becomes 75/.50 or a value of $1.50. In other words, this would dictate that the less often a direct mail piece gets opened, the more valuable it is: a confusion of cost and value. ModemMedia’s formula makes the weaker advertising more valuable. To take the logic to its extreme. In a mailing of 75,000 pieces, if only one was opened, that one has a value of $5.6 billion dollars. Yet if one less than that is opened, clearly the total mailing has a value of $0. By the way, direct mail advertisers typically track response, which may be 5%, rather than “openings.”
All this is meant to suggest is that using this arbitrary direct mail valuation has no relevance to the web site ad. The value of direct mail is sales generated per piece, not readers.
Finally, it is suggested in the model, that an estimate of 20% of those reached by the billboard ad will click on the link and enter the advertisers website. Therefore, the above $1 cost per opening is applied to the estimated 20% of 10,000 reached who will “click”, for a total of $2000. This $2000 is added to $700 for the 10,000 reached by the clickable billboard at a $70 magazine CPM, plus one-third of the repeat links to the home page (.333 x 10,000 x 4) for $930 for a total price of $3630, for an ad with an estimated 2000 readers, or a CPM of $1815! Or, to be most fair, $1630 being charged for the 10,000 “reach,” creates a $163 CPM. If you accept the discounted 40,000 return impressions, which of course shouldn’t be counted in a CPM, you have a $70 CPM for impressions which are most comparable to outdoor billboard impressions. Which leaves the $2000 for the 2,000 actual readers of the Web site for a $1000 CPM.
SUMMARY
Bottom line, the Modem Media model seems to over-count impressions, call them reach, and justify CPMs of $1815 for an audience whose quality is only assumed. Web ads are magazine-like, not direct mail-like, unless they generate orders, which may well make them worth $1815 CPM, but at least will make it easy to put a value on them.
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