Advertising on the Internet - a threat to conventional advertising agencies?

The Internet as an advertising medium has been an amazing success. Last year it took over two billion pounds in advertising revenue in the UK and accounted for 10.6 % of all advertising spends.

Even more impressive was its relative speed of growth. In 2001 Internet ad spend was £166 million accounting for just 1 % of the total. Between 2005 and 2006 alone, Internet advertising grew by 48%.

This has panicked traditional service providers into jumping on the bandwagon without much understanding of how and where future returns on this new and large investment was to come from.

Consider where the Internet gets its advertising revenue.

77% of total revenue is classified advertising. Two-thirds of this is for search, an electronic and creatively more exciting version of the old directory advertising. Google dominates the search industry in the UK and elsewhere. None of its rivals have been anywhere near as successful.

Much of search advertising reaches people researchers describe as “engaged”. The distinction is between people who need to be “interrupted” from their usual preoccupations as when, seeing an advertisement for a chocolate bar, you stop at the local newsagent and buy the brand on impulse.

Engaged people are seeking, actively or casually, information about a specific category, product or service.

Advertising is not the only way to reach these people. Brands can raise their internet profile by clever web site design using more relevant copy, careful repetition and providing more information so that Googles web crawlers find it and push it higher up the rankings.

Advertisers can then also use search optimisation by buying specific keywords in an auction bid system. Actual keyword choices become important. Some advertisers use their competitors’ brand names to redirect their traffic. Knowing what price to bid is also very important.

Other than search, of the rest of classified internet advertising, £202 million is accounted for by the online recruitment sector. That slice of the cake is dominated by online specialist operators who account for two-thirds of this spend. Newspapers are making a strong bid to retain their minority share.

Which brings us to the area of traditional “interruptive “and brand advertising. In the internet online display field, banners, buttons, skyscrapers and interstitials rule.

Few advertising agencies regard this as mainstream.
After all it is difficult to be creative in such a limited format. Yet many advertisers think that all advertising on the internet is waste free. I wonder if John Wanamaker who first said: "I know that half my advertising is wasteful, I just don’t know which half " would agree with this view of the internet