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For years e-commerce has been tipped to transform traditional notions of buying and selling. Actual brick-and-mortar stores with walls, doors and floors, investors were assured, would eventually be overtaken as people learnt they could buy almost anything from anywhere, more cheaply and without even leaving the house. Critics of this theory have been legion, and the growth in online shopping, thanks to broadband, and spurred by advertising, has giving them more than a little proof of the pudding.

With a global standard being chalked out for ad impression measurement, the buying and selling process for online advertising is getting simpler than a mouse-click. The improvement of online shopping sites, increased use of electronic banking and payment systems along with higher Internet speeds are considered the main reasons for the growth of online shopping, while better product selection, cheaper prices and no crowds are big-draw cards.

According to The Interactive Advertising Bureau and PricewaterhouseCoopers, Internet advertising sales in the US set a record last year of $9.6 bn. This figure was up 33% from 2003 and exceeded the previous record, set in 2000, by almost 20%. But this is just a chink in the humongous ad sales pie, which is largely driven by "keyword purchases"-shoppers using search engines of shopping websites to find and buy products.

Online advertising has come a long way since those first ad banners on HotWired and CIA Advertising in 1994. Interactive advertising online is now a critical part of the marketing mix in developed Internet economies. Consumer advertisers in the US accounted for 49% of last year's interactive ad spending, with the strongest categories being retail, automotive, leisure, entertainment and packaged goods. Computing contributed 18%, financial services 17%, telecommunications four per cent and health care six per cent.

Direct marketers seeking immediate performance results, as well as brand advertisers looking to create or enhance an image, product or service have an interesting year to look forward to, say advertisers. In India, the average adspend by a brand is around Rs 6 to 7 lakh over a 30-day run period on a leading portal like Yahoo! India. This is up from an average spend of Rs 1 lakh about four years ago. "Brands now, on an average, are allocating 1% of their advertising budgets online and the Internet share of their advertising pie is bound to increase with the growing confidence in this medium's delivery. Also, the base of online advertisers is growing and we are heartened to see more and more traditional advertisers incorporate online into their media plans," says Pearl Uppal, Director (Sales) with Yahoo! India.

Indian companies are still finding the going difficult while framing the right online advertising strategies. Uppal notes that this is because their traditional advertising agencies have not invested adequately on this medium, to arm their clients with the required insights and tools. However, successful digital agencies have emerged to plan, buy and execute online campaigns for advertisers. "The online media planning and buying space should mature over 2006. However, to increase the speed of the same, all stakeholders-agencies, online publishers and the interactive media champion at the advertiser's end-need to come together and work as a team. To frame the right online advertising strategy, brands should encourage and strengthen this teamwork."

Yahoo! reported earnings of $205 mn on revenues of $1.17 bn for the first quarter of 2005, compared with net income of $101 mn on revenues of $758 mn in the year-ago quarter, according to ClickZ. Marketing services revenues alone rose 54% to $1,025 mn for the quarter, representing all but $149 mn of total revenue.

Yahoo and Google have been among the primary beneficiaries of the surge in Internet advertising, and both have enjoyed rapidly growing sales and profits.

Analysts now say that online advertisers will be more insulated than print companies in the event of a downturn in the advertising market as they come cheaper.

Media multiplicity
Contextual and targeted marketing will become more and more important. Consider Proctor & Gamble, the largest mass advertiser in the world. Jim Stengel, global marketing officer of P&G, which has a $3.2 bn advertising outlay annually, has said, "...in the old world, five or ten years ago, it was a bit simpler. We put messages on mass media about our brands, and we have a large percentage of spending in mass television. Mass television is still important, we still spend a fair amount of money there, but we're trying to do is to be much more focused, and we want to communicate with consumers on their terms. We want our messages to be more creative, more entertaining and persuasive, to set our brands apart."

Indeed, online markets are slipping their names into every conceivable venue-like cellphone screens, bathroom posters and TV shows via product placement. But there are times when an ad that almost disguises its sponsor can be more effective. Many of these ads have taken the form of specialty websites, like subservientchicken.com.

Pay-per-click ads have seen phenomenal growth in reaching targeted audiences at lesser costs. Yahoo! is training its sights on the growing number of neos (young adults who are heavy Net users) in Asia. Neos are a prized advertising demographic deeply immersed in the Internet and other digital media.

The paid search space-which experts say accounts for 40% of online advertising as well as brand advertising, is finally seeing a boom online. Amazon is launching its A9 search engine with this market in mind. On the other hand, Google's proprietary AdSense program helped it gobble more than $369 mn in profits in the first quarter of 2005. Yahoo! and MSN's arch rival is tweaking its advertising strategy to grow beyond small ads related to what people are searching for on the Net. Google is presently testing changes to its advertising program that will give advertisers more control over where their ads are shown, how they pay for them and what they look like.

At the crossroads
Largely viewed with suspicion, banner advertising via email is increasing in popularity because of the relevance and the reach it offers, says Yahoo!'s Uppal. Yahoo! Mail reaches 14 mn users in India every month through targeted email ads. "To deliver a banner ad exposure you do not have to wait for the consumer to open your mailer... you deliver the exposure and if the communication is compelling, the user interacts with your advertising and seeks more information from you," Uppal says.

While high-quality leads have captured between 30% and 40% of dealers' online advertising dollars, according to Jupiter Research, poor closure rates still dog retailers. How can websites generate high-quality leads? Notes Uppal, "Websites cannot perform the role of a direct sales agent. We can provide content to the relevant target audience and deliver the advertiser's message. Thereafter, the website has no control over the response of the consumer to the communication. Our strength is in laser-targeting the advertiser's message to the relevant audience."

The click of the rebels
Like a sleeping giant, Internet radio is quietly attracting more and more listeners and advertising dollars, leading some experts to predict that some day soon it will eclipse the popularity of satellite radio and iPods. Ratings company Arbitron says that some 37 mn Americans tune into Internet radio at least once a month, up from 11 mn four years ago. With its growing audience, it could start to take a bigger bite of the $11 bn spent annually on online advertising. But Internet radio faces hurdles because digital copyright laws make it less viable than rivals.

Still, entrepreneurs overseas have found legitimate ways to overcome the barriers and are now moving Web radio forward, fuelled by views that wireless broadband will turn it into a "killer application." They are set to put it onto cellphones, MP3 players and other devices beginning as soon as late 2005.

Like Internet radio, user ratings (also called 'collaborative filtering') are another emerging angle to online advertising. These were pioneered by Amazon.com. When two out of four customers read other people's ratings on a project, it raises the bar for online advertising managers. This is a trend in sharp contrast against the "exclusive", "premium" and "niche" as defined by an advertising-equals-mass-equals-success dominated world.

So what does all this mean for businesses? For one, online communities like Yub.com, a subsidiary of Buy.com and Orkut will define purchase decisions without interference of the marketers. Collaborate filtering also helps consumers find relevant solutions to targeted questions, unlike the ads. As serendipity flourishes online, the very nature of linked and related recommendations will lead to more impulse and surprise buys happening.

Upcoming Web and advertising models will build relationships that promote unique user involvement and personalization, "loyalty without reason", while at the same time accommodating traditional advertising objectives of reach and frequency, in an effort to enhance brand recognition. The network is now the individual.

Ravi Menon For complete story please visit dqindia.com

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