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Internet Ad Revenues Still Down

Dawn Anfuso
Internet Ad Revenues Still Down Dawn Anfuso

According to the Internet Ad Revenue Report, sponsored by the Interactive Advertising Bureau (IAB) and conducted by the New Media Group of PricewaterhouseCoopers, Internet advertising revenue in the United States totaled $1.55 billion for the first quarter of 2002, declining 6.5% from the 2001 fourth quarter, and down 18% from the first quarter of 2001. The IAB notes that ongoing weakness in revenue results continues to mirror the experience of most of the entire advertising market. (www.iab.net/news/pr_2002_08_02.asp)

The first quarter online ad revenue figure was estimated by surveying and compiling 2002 first-quarter data from a group of leading Internet ad sellers, which have consistently accounted for the lion's share of 2001 revenues. The results of this revenue compilation were then extrapolated to calculate the total industry revenue figure. The first quarter figure is an estimate, and actual first quarter results will be disclosed along with actual second quarter revenues later this month. The structure of the report is being changed in the interest of timeliness, with estimates based on the methodology noted above for first and third quarters, followed by the actual results released following the second and fourth quarters.

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Translate this into interface design. First, place features you know they'll use or have asked for on the new interface. Second, give them access to the old interface when they can't find what they want on the new one... even if what they want is right there in front of them on the new interface.

We removed the bold while making it available for those who want it. Another suggestion was to use a different font size. Okay, and ditto.

800, 600, 1024, 768, Hike!
Jan also sent me screen shots of how our site looks at 800x600 and 1024x768. NextStage's original website was designed for 640x480 screens and stayed that way for quite some time. Then our web designer told me that the majority of people visiting our site had 1024x768 screens. "Dang the small screen! Use the space!" I cried. Then our designer let me know that the majority of people coming to our site had 1280x1024 screens. "Get me one!" I cried, shortly followed by "Use the space!"

Prompted by Jan's screen shots, I asked the designer how many visitors we had in the past month that used an 800x600 monitor. The answer was two. Two? How many are using screens less than 1024x768? I'll admit it's more than two but it's still much smaller than a breadbox.

Still, and because Jan's advice is sound and reasonable, I asked our designer if our pages could be made to fit easily into a 1024x768 screen and still do one thing which is extremely important: allow visual separation of screen targets.

Visual separation of screen targets is important from a neuroscience perspective. It gives the mind-eye-brain system a chance to recognize, internalize and memorize what it's just seen before it sees something else. Visual separation is the silence between musical notes, the restful sigh before taking on more yard work, the appreciation for what you’d done in preparation for doing more, and is important.

And yes, the "recognize, internalize and memorize" comes from the 1-3, 4-7 and 7-10 second intervals mentioned in Websites: You've Only Got 3 Seconds.

Simple fixes are the best fixes
NextStage consultants make it a point to start clients with quick to implement, easy to validate, simple fixes. Ninety-nine per cent of the time the simple fixes will go a long way to improving site performance, and this is what Jan did.

Go to the NextStage Evolution site now and you'll see a button, "New Style", on the bottom of each page. Click this button and the page loads a new CSS with no bold, a decreased font size and a comfortable (I hope) fit into a 1024x768 screen. Click it again and you go back to the old CSS with bold, larger font size and a larger screen footprint. Think of this as A/B testing where the participants know what they’re voting on.

Yes, this is a simple fix. Being a simple fix is what makes it:

  • An excellent first step to a complete redesign

  • An easy step for regular visitors to accept or not while getting use to a new look and feel

  • An example of good consulting practice

Don't overwhelm the client the moment you walk in the door. Whelm them, don't overwhelm them.

Jan had several other suggestions and I'll share them and the results of this A/B test on my blog, along with the exchange between Jan and myself.

Additional resources:

Note: I'll be speaking at the San Francisco April ’07 Emetrics Summit on Quantifying and Optimizing the Human Side of Online Marketing on May 7, 2007. Come on by and say hello.

Joseph Carrabis is CRO and founder of NextStage Evolution and NextStage Global, and founder of KnowledgeNH and NH Business Development Network. He is also author of the Biz Media Science blog. Read full bio.

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Hutchinson: In a noisy attention economy, the metrics of reach, frequency, impressions and click through seem to be crumbling beneath a growing need for more relevant metrics, like say, (drum roll please) "engagement."

Of course, the trouble with engagement is that it's tough to measure. But at a recent ad:tech conference, you presented to a full house what seemed like a perfectly sound and universal way to measure engagement. Has EMM Group split the atom here?

Hastings: I like the analogy (especially since it was a scientist from my Alma Mater, Cambridge University, who identified the nucleic model of the atom).

The analogy we used at ad:tech was another scientific one: the transition from one S-Curve to another. In technology, the S-curve portrays the life of a technology that starts with a disruptive innovation, advances through competitive exploration of possibilities to achieve the breakthrough to industry standards, and then reaps its economic rewards in maturity.

As it does so, the next S-curve starts to form as a new disruptive cycle begins, and will eventually replace the old one.


Marketing is at the end of its old S-curve, where no matter how much effort we put into it, we will not improve returns.

One of the phenomena of the old S Curve is the model of marketing communications as a funnel. We put communications in at the top, and it gurgles through the funnel to turn -- by increasingly smaller percentages -- communications into awareness, and then awareness into consideration, trial, repeat purchase and loyalty.

It's frighteningly inefficient, and the inefficiency is designed in!

The new S-curve is based on the new concept of customer engagement. Engagement is a dialog conducted via a multiplicity of contact points, selected by the customer. Engagement is built around two key changes in the operating environment:

1) First, the addressable consumer or customer. Increasingly, we are able to reach our customer individually as an electronic address as that consumer moves between a desktop computer attached to the internet, a laptop on the go, a web-enabled mobile hand held communications device or an iPod. They might be using email, instant messenger, blogging, knowledge management tools, collaborative business software or shopping. We can reach them at most times and follow them around the web to analyze behavior that reveals their needs.

2) Second, customer control over the content they choose to receive. Advertising -- or indeed anything that we might typically have thought of as "marketing communications" that simply interrupts them before they have put their hands up to say "please tell me something" -- is anathema.

Engagement is customer controlled. To engage with a customer, we must understand their needs and preferences pretty much as individuals, or at least in very, very finely segmented groups, and communicate with them when they choose, rather than when the brand owner chooses. Engagement requires personal, individual meaning, and therefore it requires personal, individual understanding.

In order to become a standard for marketing, the first requirement of customer engagement as a marketing tool is that we have measures of engagement. At ad:tech, we introduced the concepts of :

  • Customer Engagement Points

  • Share of Customer Engagement

  • Engagement Conversion Rate

These are the cornerstones of the new engagement measurement system. They generate derivative measures like cost per engagement point and cost per share point of engagement.

It's a complete new paradigm, and it unleashes the new marketing S-Curve. Its key points are:

  • It embraces all contacts with the consumer from the web to word of mouth to conventional communications. The customer tells us what qualifies as a contact.

  • Every contact has a value, weighted by combining cognitive value (information generating a rational shift in favor of the brand), affective value (generating a positive feeling about the brand) and persuasive value (generating a shift in behavior towards the brand).

  • All the values roll up to a total brand engagement score. This is a global currency. A brand engagement point in Berlin can be compared to a brand engagement point in Beijing, or Buffalo or Buenos Aries.

Next: What does this do to the brand-agency relationship?

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Hutchinson: So what does this new environment, or discipline of process, metrics and "hyper-trackability" in modern marketing do to the brand-agency relationship? 

Hastings: The old form of agency relationship is at the top of the old S-curve. It's run out of steam.

The new relationship has to be built around integrated marketing: how to get the most Brand Engagement Points (BEP) from the array of communications, website contacts, CRM, trade shows, word-of-mouth, product placement and product-in-use experience, all at the most efficient cost per BEP.

That requires a complex integration algorithm, and it requires a single role of integrator.

It remains to be seen if any agency can operate the new algorithm. They can run the model and do the math, but can they play the integrator role? That requires the objective allocation of dollars between all the methods of contacting the customer for engagement. It requires that the choice of contact precede the choice of creative theme, a difficult shift of priorities for agencies.

It was thought that the creation of the new conglomerates like WPP and Omnicom would offer integration to the client but it has not happened yet. We see the integrator role being played inside the client organization. That makes the agency just one of a choice of vendors, and a choice that is governed by scientific resource allocation methods.

On what will the new relationship be built? We believe it will be in efficiency (cost of service optimization) rather than creativity. We don't see a lot of agencies stepping up to the plate.

Hutchinson: Perhaps these pressures between the new and old S Curves are also contributing to the grim statistics we keep seeing from Spencer Stuart, wherein the average tenure of today's CMO keeps dropping: from 23.6 months in 2004 to 23.2 months in 2006?

Hastings: The CMO is not a real "C" in many organizations. The idea of having a head of marketing on a par with the CFO, CTO and so on is a vaguely nice concept, but the responsibilities are not well defined.

And the reason for that is that most CEOs don't understand marketing and its role in the corporation. They appoint CMOs and expect some kind of a miracle to happen, such as great PR or a brand turnaround, and get impatient very quickly when it doesn't happen. They fail to think hard enough about the organization design, process, technologies and other needs of the CMO to have a true impact.

There's a ton of resistance to CMOs from business unit heads who want command of their P&L and budgets. Unless organization design and process design ferrets this out, the BU heads will win.

Hutchinson: Your book, "The New Marketing Mission," was the first book I had ever read by a group of marketing executives to deliberately include the practices of project and program management as a means to organizationally align or "re-shape" the company around customer insights and brand. 

Typically, marketing and project management have been diametrically opposed cultures and communities. Is enterprise marketing management changing this?

Hastings: Enterprise marketing management combines process, metrics, organization and technology. It employs one sub-process to generate insights and another, linked sub-process to go from insights to innovation, and a third sub-process to get the innovation to market. It develops repeatable capabilities and models such as product launch models that can be used again and again as templates. It absolutely uses project and program management principles, tools, methods, measurements and technologies.

When you see the new organizational construct of Marketing Operations popping up in technology companies, those are built on project and program management principles.

Marketing Operations will be a new dominant paradigm in marketing: highly disciplined, highly scientific, highly measured, highly enabled with technology. The old idea of marketing as an ad hoc, "pull it out of thin air" creative artistry is dead. Creativity has its role, but it plays the same role as it does in architecture: it's a contribution to a scientific and technically robust engineering process that produces a building that is beautiful but also functional, reliable, and built on a solidly engineered foundation.

Additional resources:

Listen to a podcast of Hunter Hastings' ad:tech session.

Download the PowerPoint presentation.

David Hutchinson is Senior Vice President of Program Partners. Read full bio.

The same spending trend for brand display advertising is occurring with video: ad dollars are moving from the portals and top 100 branded content sites into mid-size sites with quality editorial environments and passionate users. Sites with unique content and display ad inventory that is represented by a dedicated sales force or a rep firm are now enjoy strong CPMs. What industry rates should a publisher expect for use of their video inventory? It depends on the demand for a particular vertical market consumer, competitive advertiser demand and the length of the campaign. But, on average, the range is from $14 to $20 gross CPM and, in some instances, up to $25.

Content management systems
Adding videos to one's own website site is very different from uploading videos to a massive user-generated video content site. Publishers need a more comprehensive solution utilizing a full content management system (CMS). Publishers with a lot of videos need to be able to organize them into playlists and channels. Some site owners have their own content, while others want to retrieve and regroup the best video content on the web for their site's audience. Access rights also need to be considered for those wishing to create and publish playlists. A fully functioning CMS should provide the publisher with easy-to-use tools to upload, manage and analyze each video presented.

Video player
A video platform needs a versatile player that supports different use cases. For example, a small video player is fine for presentation of a few videos or playlist embedded into an article. A larger video player, on the other hand, can deliver multiple channels, advanced controls and viral capabilities.

Well featured players now include related content videos, continuous play, full-screen play, sharing aspects and can be used with the publisher's existing RSS feeds. Some of the newest players even support a custom skin kit that allows publishers to customize the look and feel of their player with their own graphics and colors, reinforcing the publisher's brand rather than the player's brand.

Video consumption is viral by nature, so some publishers may want their video players shared as widgets so their users can take them to social networks, message boards or simply as email to share links. Player technology around flash evolves very quickly, so platforms with plug-in distributed architecture enable the download of new features automatically without the need for changing the player. Seamless upgrades mean no downtime, no development effort and an up-to-date player with the latest features that position you as a leader.

It's important you have access to the data you need to assess the cost effectiveness of your video efforts. You should be able to determine how many video streams are served per day, which ad played with which video, how long a user watched a certain video, where the video came from, what CPM was earned against each particular ad, and total revenues per day.


Customer support
Like any other product, getting the best out of a video player may require some personal service for technical support at different phases of implementation and ad campaign management. Customer support also should include an aggressive marketing effort on behalf of the supplier to insure a platform achieves critical mass and becomes widely used. This encourages advertiser preference and ongoing innovation.

To summarize, this chart outlines the above key decision factors by comparing three video players available today.

For web publishers, now is a great time to embrace the opportunities for online video ad revenue. And armed with the knowledge of the right questions to ask, you'll be able to select the right platform and the right player for your particular website. The convergence of the internet with television has been discussed for decades, and now that mid-size and smaller publishers can easily adopt video technology -- and make money doing so -- it's happening right before our eyes.

Christophe Louvion is CTO of Gorilla Nation.


Getting into pitches

Photo: NES Jumpman

Winning new business has always been a primary concern for agencies, wherever headquartered. For this article, I spoke with 23 people and most acknowledged that being a second city can affect their ability to get into pitches.

A leading pitch consultant, who asked not to be identified, believes the reluctance of some brands to consider second city agencies stems from perceptions about scale and expertise, in addition to vanity.

"It can be hard to convince some clients to consider [a] second city agency because of fear they lack the resources [and] expertise to serve major accounts. They may also question whether an agency keeps up with digital innovation. Sometimes it comes down to emotional factors, like wanting to feel 'big time', or reluctance to travel to 'Omaha' for meetings."

Quite a few of the folks I spoke with acknowledged that they get their share of questions regarding resources. Most believe that this sort of concern is an issue of perception versus reality.

Tamara Bousquet, Executive Media Director for San Diego-based MEA Digital, said:

"I'd bet my job that our work, our people, are better than most that come out of leading cities and shops.  Our clients, who have been working with us for 4 plus years, 8 plus years, are getting better work than they've received at other agencies. These long-standing partnerships are proof of our staff and agency's excellence."

Smart second city agencies recognize opportunities to take advantage of their location by differentiating themselves from the dozens of medium-sized New York shops. Consider Richards Group -- it's spent years selling Dallas as a reason why they are so adept at persuading Middle America. 

Recruiting and retention

Photo: David Berkowitz

When you run an agency, you need a host of skills sets. Many people with desirable skills choose to live in leading ad markets. That being said, a number of great people are unable or unwilling to live in Chicago, Santa Monica, or Chelsea.

Such people are not evenly distributed in every city and town. It's certainly no accident that many agencies locate in tech hubs and college towns with strong technology and marketing programs. Steve Parker, Jr., co-founder and managing partner of Levelwing, pointed to Charleston as a perfect example:

"Our largest office is in Charleston, SC. Although many see Charleston as a destination for vacation, it is home to some large and highly sophisticated technology businesses such as Blackbaud, Benefitfocus and Boeing.  Additionally, many software companies are based here. Colleges such as The Citadel, Charleston Southern University and College of Charleston are part of our community.  Close-by Clemson University and the University of South Carolina have strong mathematics, engineering and technology programs.  In December 2009 Forbes rated Charleston as the 8th Smartest City in the World."

This leads us to the subject of salaries and retention. There's an urban legend about an AMP who started in Manhattan making $13,000 a year, lived with 11 others in a studio, and ate nothing but ad-network-branded Tic-Tacs for a year. In reality, ad people in the top markets make significant coin. But when you buy your Tide at Gristede's, the "fat" paycheck doesn't go far. Most second cities are far less expensive. The chart below calculates the cost of living equivalent to $75,000 a year in Manhattan.

Those I spoke with emphasized that rather than offering people a precisely equivalent salary, they pay people to have a better life. Credit altrusim and the reality that an Atlantan wouldn't be willing to live in an apartment where they can stand in the center and touch all four walls.

No one I interviewed said that being in a second city automatically made for greater employee commitment, but several said that the issues facing major markets don't reflect their daily experience. According to Bousquet:

"I'm not dealing with the 'entitled'; those who think because they've worked in this business for 6 months they deserve a raise and a promotion.  Our folks appreciate the opportunity to do great work on great brands with great people; we don't deal with the ego of younger employees that many large agencies in large cities say they deal with daily.  In fact, our average employee tenure is 3+ years and that's something we're proud of."

Second cities and specialization

Photo: Marshall Astor

Detroit and Las Vegas are two markets highly focused on business verticals. While agencies there work across many sectors, they are most known for auto and hospitality respectively.
Shawn Rorick, President of LVIMA, suggested that hospitality defines a big part -- but not all -- of Vegas.

"It's a safe bet that an agency in Las Vegas is going to really understand the travel business. There are many world class experts in that sector here. Las Vegas marketers in particular can be more adept in getting insights through data collected by the casino/resorts.  Recession made our community of professionals even sharper because it requires the utmost sophistication to maximize ROI."

Lissie Heinkele, a long time Detroit agency leader, considers regional expertise as particularly relevant.

"In auto, the three tiered marketing environment -- national, dealer associations, dealers -- is absolutely central to the business of moving metal. But there's more than that. Auto marketing is some of the most sophisticated in digital. You can more readily find uberexperts here. There's also a passion -- many of us are true "gearheads." When you're amping up for a major launch, having that passion for cars brings out the best in programs."

Being known for a segment has its challenges. "Sometimes people think we are all travel, all the time," Rorick said. "That can be a hindrance when you are working toward broadening your category base."

"It can be challenging for agencies to overcome the 'category town' perception. But many Detroit agencies have clients far afield from the auto world. They serve these clients very well," Heinkele said.

Doing business with partners

Photo: Shinya Suzuki

Many agencies in smaller markets report that fewer vendors visit them. These agencies experience fewer phone calls, "drop bys," and requests for meetings. Thus, it is arguably harder for second city shops to keep abreast of important developments because the companies creating them don't come knocking as often. While the internet certainly eases the strain, second city folks have to be more proactive about pursuing knowledge.

From the sell side, there appears to be great business in serving second city agencies. "It costs you a little more to get a rep to Dallas. But it's worth the expense. When you make the effort you find a high level of 'engagement' from the agency teams in those markets." said John Durham, CEO of Catalyst S+F and a long-time digital solutions sales leader.

Durham also notes that there is also a perception that second city professionals are better mannered.

"I appreciate manners. Agencies in smaller markets generally show a high level of professionalism. Mutual respect. It runs the gamut, but when you call on an agency in a second tier market, chances are the people will show up and engage."

Adam Bergman, Senior Account Executive for Yume, emphasized that there is real money to be made in such markets:

"Some of these agencies are a heckuvalot bigger than they seem. Being in New York doesn't necessarily mean a shop is big; being in a 'second tier' market doesn't prove that an agency is small. Additionally, many of these agencies are careful to stay at the bleeding edge of the industry -- to 'prove' that you don't need to be in Midtown to be redefining and shaping the industry."

More sellers are seeking local people to serve these second cities. Lynn Ingham, a leading digital marketing recruiter, argued that it's harder -- but not impossible -- to find great people in these markets.

"Many top-notch digital sellers are in the big three markets. There are a few in the other cities, but you need to dig deeper to find them. Over time we're seeing more great sellers native to these markets, and leading sellers trained in the big three markets deciding to move to other cities for a plethora of reasons."

Lori Xeller, Director of Digital Sales at Republic Media in Phoenix, believes the talent is definitely out there.

"It's true that the total pool of digital sellers might be smaller than a major market like LA or San Francisco, but they ARE out there. We've built a strong team by constantly keeping our eyes open for great talent and creating real career paths to keep our A players satisfied and growing.  I've found that our digital sellers are focused on being long-term digital consultants for their clients so they have deep relationships.  They are loyal to their clients and with their internal teams."

Managing the exit

Photo: Nick Stenning

Many second city shops are independents, and some hope one day to sell to a holding company. Proximity helps when you are trying to make your business known to would be acquirers. Mark Naples, managing partner of strategy and communications firm Wit Strategy, underscored the importance of developing a prominent agency profile.

"There are so many solid agencies out there.  Getting noticed by would-be acquirers requires a clear strategy that will generate a distinct identity, rather than more broad awareness.  For example, at the height of its powers a few years ago, CP+B had Alex Bogusky as the tip of its spear, smirking to us knowingly from the covers of national magazines.  But, what is CP+B's identity today?  For non-New York based agencies, it's harder to pull off getting the right kind of notice because proximity within a roughly 50 block radius drives a large measure of perceived importance to the trades and the holding companies. If the cool kids aren't seeing you on their playground, it's harder for them to accept that you might be cool too."

What clients say about second city agencies

Photo: Jon Dawson

When asked to draw some general distinctions, most of the clients I spoke with were careful not to make assertions beyond the experience they had with a particular shop. Most said that location had no real impact on the quality of work and relationship and that it's about the agency, not the city.

One acknowledged that the out of town "thing" did affect the perceptions during the pitch, but that daily experience with the team quickly mitigated their concerns:

"You always have vibes, gut feelings, and concerns when you are picking an agency. During our last RFP, we questioned whether a non-New York agency would 'get' fashion. We ultimately chose them because they seemed like they'd be great to work with. They really are."

Perhaps that's a fitting conclusion. After all, we are in the perception business. Although it may not be a "real issue," it is a genuine concern for some. Despite this, many second city shops are succeeding because ultimately what matters most is the quality of the team, not the address.

Jim Nichols is vice president of branding at ROI DNA.

On Twitter? Follow iMedia Connection at @iMediaTweet.

"Pins of various colors," and "Map of U.S.A. 3D render" images via Shutterstock.


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