The strength of the internet advertising market is well documented (The Internet Advertising Bureau puts the UK online ad market at just shy of £1bn for H106 and growing at 40%). It is rare to see a large market with this sort of growth, and the good news is that it has still got a long way to go. 30-35% of media consumption is on the internet, and that is way ahead of the 10-12% of media spend that is online. The growth in online ad spend will continue until they are more or less matched.
The strength of the market was one of the reasons we made our investment in Buy.At last year and our experience since has only served to deepen my conviction that this is a great place to be.
AOL gets it too. Their bid (WSJ link to only half an article, unless you subscribe) for Buy.At competitor TradeDoubler at $900m is circa 4x revenues – showing that they share my enthusiasm for the sector and see the growth continuing for some time to come.
One of the reasons that media spend lags media consumption online is that ad budgets from FMCG giants like Proctor and Gamble and Unilever have yet to come to the web in a big way. They want to get there, it is no secret that to reach the young they have to, but they are unsure how to do it.
In November 2006 Caroline Shootweg of Unilever said:
It’s important for advertisers to understand what’s happening across the media landscape and within their own sector as they monitor the progressive shift to online. Changing media consumption habits and the growing importance of digital technologies are prompting brands to review their media budgets and allocate an increasing proportion towards developing a consistent and strategic approach to online media.
FMCG companies are big spenders on TV advertising and that is all about brand. The biggest challenge they have is that internet advertising has been more like below the line marketing – driving transactions and clicks. The strength of internet advertising is it’s measurability, but that doesn’t really work for brand awareness.
Coupons are one solution to this problem (and something we are working on at Buy.At). The sponsorship activities on sites like MySpace are another, and I’m sure there will be others.
There will be rich pickings for the companies that find a way to move FMCG budgets online and 2007 might just be the year when it starts to happen.