 
It is often said by brand managers at traditional goods companies that Internet advertising is still in its embryonic stages, and that the impact of the Internet on their business is still very minimal.
While it is no doubt true that Internet marketing channels have a long way to go before reaching maturity, it is dangerously easy to forget that in just a few short years the Internet has fundamentally altered the economics of entire business categories - of Travel, for instance - forcing marketers in those categories to revise their strategies wholesale or perish.
At bottom, the Internet has changed consumer behavior: it has changed the way product awareness is created, has created new modes of product consideration and new means of purchasing those products.
Continuing shifts in consumer behavior resulting from the ongoing evolution of the Internet are creating unprecedented opportunities for marketers, today, as they did in years past. Certainly, these shifts are not as visible as they once were. But, ultimately, many will prove no less disruptive. And therein lies the danger for established brands.
Recent research shows that the Internet is continuing to create subtle shifts in a number areas that have a critical bearing on marketing strategy: According to data from research firms BigResearch and MultiMedia Mentor, media multitasking (wherein the traditional media are consumed simultaneously with the Internet) is creating a situation that could threaten the effectiveness of traditional advertising channels such as TV. Research from search engine optimization firm iProspect indicates that search engine marketing might be creating a leveling effect that threatens to dethrone leading brands lacking visibility in the search engines, across a wide array of business categories. And case studies from a significant range of sources suggest the emergence of complex patterns of online purchase consideration/offline purchasing and vice versa, that indicate the need for new means of tracking and deploying all marketing efforts.
Smart marketers will always seek to fully understand these subtle shifts, and to find ways to exploit them to gain market share and consumer mind share, to the disadvantage of their competitors.
In what follows, we present the first in a multi-part series of releases that captures strategic insights from an exclusive roundtable discussion hosted by avant|marketer between three of the world’s foremost Internet advertising and marketing analysts: Forrester Research’s Jim Nail, eMarketer’s David Hallerman, and Jupiter Research’s Rudy Grahn.
Our objective in this series: to uncover for marketers emerging Internet marketing opportunities and to provide a strategic view on what can be done to exploit them.
In the present installment, we capture the analysts’ general thoughts on untapped opportunities in Internet advertising and marketing, and on emerging Internet marketing channels. Subsequent releases in this series will deal with the role of the web site in the overall marketing mix, and the importance of Internet-centric cross-media marketing.
The analysts at a glance
Jim Nail, Senior Analyst, Forrester Research: Nail covers Internet marketing and advertising for Forrester Research, where his current research focuses on the role of the Internet in the overall media mix. Nail’s other areas of expertise include ad serving, targeting and tracking technologies, advertising formats, promotional tools, and email and media strategy.
David Hallerman, Senior Marketing Analyst, eMarketer: Hallerman is responsible for eMarketer’s widely-discussed annual Online Advertising report, which details the growth of the online advertising industry, emerging issues in the space, and the continuing convergence of online and offline marketing channels.
Rudy Grahn, Senior Analyst, Jupiter Research: Grahn covers online advertising for Jupiter Research, where he is a featured speaker at Jupiter’s annual Jupiter/IAB Online Advertising Forum, and focuses on online campaign measurement, analysis, and optimization, data management, and media buying and planning.
avant|marketer: As recently as two years ago, permission email was considered an under-exploited channel, and now clearly it’s mainstream. One might argue that those companies that built a competency in email marketing - some as far as four or five years back - have developed something of a competitive advantage, while many new-comer firms still struggle to find their footing with email today. What are some of the most significant, but underutilized channels that are emerging on the Internet advertising and marketing landscape where large companies ought to build competency, starting now?
Rudy Grahn (Jupiter Research): Hmm ...if I was sitting atop a brand and was trying to get the jump on interactive marketing, I think I would try to master something akin to PR. Not PR in the sense of trying to calculate the ad value of getting mentioned here or there; but rather, understanding what online chatter about my brand means, and how it can be optimized.
What does it take to get someone to actively promote my brand versus waiting to be asked? How can I get community thought leaders to buy in to my value proposition? How can I get my brand referenced positively?
We talk lots and lots about interest and awareness and affinity as if they are chemicals in a vial to be mixed by marketers just so ... as if those who can contrive the best communications program out of them always wins hands down. This seems fundamentally at odds with how real human beings actually live their lives.
Nothing can be consumed that one does not first become aware of, interested in, and intent on consuming. But, why do we as marketers assume this process only takes place when a marketer is the prime mover? In truth, marketing is probably responsible for a small, single-digit percentage of instances where there is the discovery and consumption of something.
It seems the Internet still holds out great potential yet for marketers to understand the “natural” process of awareness, interest, and, intent as it “naturally” occurs our there in the real world. Interactive PR seems a pursuit that could well unlock what this natural rhythm of human discovery is. A marketer would only need to harness such a rhythm in small part to see a great increase in communication effectiveness, while also greatly decreasing marketing noise.
Jim Nail (Forrester Research): I think Rudy is right that an untapped opportunity of the Internet is to tap consumers’ natural process of decision-making and influences. Marketing tries to understand this through research, but traditional research techniques face three limitations: they are limited in size (a few dozen people in focus groups or a few hundred or a couple of thousand in a quantitative study), are occasional (so you only get a snapshot of a point in time), and they’re artificial (sitting in a room with a bunch of strangers, or answering pre-existing questions).
In contrast, the Internet provides high volume, ongoing, and spontaneous feedback from consumers. While there is a valid question around how representative any Internet data is of the entire population, I do believe there’re valuable insights to be mined.
Where I diverge from Rudy though, is that I’m not convinced that marketers should jump into the middle of this online and try to steer it directly. There’ve been a few cases of corporate lurkers being exposed in a chat room and the flaming that ensues. I’m also skeptical that a company can “do” viral marketing. If something has [inherent] “virality”, perhaps the company can facilitate it. But, I’m not convinced a company can create buzz from scratch. Instead of trying to do that, companies should use this insight to inform their other marketing efforts: are the messages resonating? Does the product need to be improved?
Overall, I view the opportunity here as one of interactive market research rather than interactive PR.
Rudy Grahn (Jupiter Research): No question ... contriving anything viral is almost a lock to come across as clumsy and slutty, or worse. And no doubt, PR has huge potential applications as a source of market research.
What I’m trying to articulate, however, is a future vision of optimizing PR that is much less about lurking, and more about observing, understanding, and subsequently sharing with consumers within a brand’s orbit. A re-definition of PR as meaning literally, “relating to the public”. I believe this is what the Internet finally makes feasible.
The fact is, many people enjoy consumption, and do so of their own freewill. Many people love good brands; and the perceived value of a brand can produce a very real positive feeling. To this end, no one knows more about a brand than the marketer producing it. Rather than shouting, or flying under the radar, I think the greatest untapped area of potential for the Internet is to allow the marketer and the brand to relate with their public, unfiltered. The aim is to allow the creator of the brand, and the brand’s aficionados to become more transparent to each other.
This to me is the optimization of a “true” online PR ... A system of feedback between brand and consumer that allows the marketer to “read” the emotion of their consumer, and to use that understanding to expand the affinity of the brand.
avant|marketer: Supposing marketers are able to gain sufficient insight to be able to “read the emotion of their consumer,” as you say, through what channels can they effectively use that insight to communicate with their customers? Are we talking about exploiting traditional community features such as message boards and the like, or are there other more unorthodox approaches the marketer can take here?
Rudy Grahn (Jupiter Research): Even if the Internet proves an amazing tool for learning to read purchase consideration, I wouldn’t extend that to say that it has any inherent advantage in capitalizing on what a marketer learns. I think we in online marketing have overdone the whole “1-to-1” thing. That model has many nice applications, but it is far from universal. There are brands that would likely do just as well to simply observe their customers and change their overall marketing program ... talking to nobody. Or, they may want to call important customers at home. The dynamics of the brand will dictate what the appropriate communication and optimization program will look like.
Not to get too nerdy about it, but a quote from Wunderman’s Len Ellis, and his Ghost In The Machine speech from Jupiter’s recent ad show may be useful: “ the knowledge class of the post-industrial societies is making itself visible and addressable for the first time in its history in this [i.e. the Internet] medium.”
Learning to read them, and consumers in every market segment for that matter ... that’s the untapped marketing application of the Internet.
avant|marketer: David, what’s your take on where the most under-exploited channel opportunities exist right now in Internet advertising? Where can large companies get in early and build a strong competitive advantage?
David Hallerman (eMarketer): As we move into 2003, search engine marketing appears to be at the same underutilized stage that permission email found itself a couple of years ago. One way I see the parallel is that those channels - email then, search engine marketing now - have been first adopted more by small and mid-size companies than by larger corporations.
As we all know from our own online experience, people use search engines frequently. In fact, search comes in second to email in all the most popular online activity research eMarketer sees - such as from Jupiter Research or the Department of Commerce. The important thing is that search’s popularity will remain high, even as Internet penetration’s growth rate among Americans subsides.
What search engine marketing can do well for large companies is play to the Internet’s strength by mingling direct response and branding goals. That is, while the user-click on a paid-search listing is a form of direct response, how the user is engaged once he or she arrives on the company’s website is easily part of the branding game.
Be warned, however: Just as the rising tide of emails in people’s inboxes makes them less likely to read any individual message, so will the increased use of paid search listings make users more likely to bypass any individual entry. In addition, as more companies bid--and bid higher--on prime keywords, the pricing may get all out of whack, making paid search less attractive.
Rudy Grahn (Jupiter Research): Without a doubt, the full capabilities of search remain largely unexplored. What does it mean to a brand to consistently be #1 in the results around certain keywords? Can that type of ROI alone pay the freight? Is it more effective to simply pay for prominence, or, continue leveraging SEO? These questions certainly merit testing.
As David mentioned, the effectiveness of paid search is tied directly to its cost. As everyone migrates in the direction in paid search, one can reasonably expect prices to rise. Equally as threatening, however, are the ways in which continued adoption by marketers will likely impact search’s ability to drive results at [the] scale [required by marketers]. Even now, the demand for this inventory exponentially exceeds the supply; and increased competition stands only to exacerbate this problem.
Don’t get me wrong ... to my mind, paid search is the phone book of tomorrow. It’s that rare instance where what the consumer wants to see is the exact thing the marketer wants them to see. When I want a pizza, the ads in the phone book are very helpful ... and the more prominent the ad the better. To that end, I’d say we are waiting only for the day when paid search is as effective for the local advertiser as it is for the national advertiser; then I think we’ll finally see its maturation.
avant|marketer: Let’s return to email marketing. I started off this conversation by saying that email marketing is clearly mainstream. And it is true that few would call garden-variety direct email marketing an untapped opportunity. Nearly every significant company is building a permission-based housefile email list and has at one time or another delivered direct marketing-style offers to that list. Yet, it would seem, this is the most primitive form of email marketing - phase one, if you will, in the medium’s development. Beyond this, where are the other important opportunities with email marketing that companies ought to be pursuing?
Jim Nail (Forrester Research): The next frontier of email marketing is breaking the mold of a “campaign” and creating a dialogue with the consumer. There are two aspects to this.
The first is to create a single company-level relationship, instead of having multiple product relationships with the consumer. HP’s Newsgram, and P&G’s Home Made Simple are the pioneers in this.
But beyond this, emails need to become more focused and value conscious. Wells Fargo lets the consumer sign up for an alert when mortgages hit a specific rate, instead of a weekly summary about what rates are this week. This is really smart and ties in to consumers’ needs in the process: if the consumer has a 7% mortgage, there is no point in receiving an email that rates are 6.5% this week, it won’t be worth their while to refinance. Another example is Rogaine, which has done an extended series of emails tied specifically to the stages of using the product. From a traditional marketing standpoint, creating a program that is limited in time or only promises to send information based on an external trigger are radical ideas. The marketer now can’t use these names to mail whenever he is short of reaching his quarterly goals. But they will end up delivering more value to the marketer by raising the level of the relationship with the consumer.
avant|marketer: David, what is your take on this? Is Jim right that the real emerging opportunities in email marketing are on the side of using the medium as a retention-focused customer relationship tool, as opposed to a direct mail-style marketing tool?
David Hallerman (eMarketer): My thinking is that email can fit into a useful place between direct response and relationship marketing, taking on characteristics of both. For the consumer to want a continuing relationship with a company, the requested responses must be limited. Take Jim’s example of the mortgage alert program from Wells Fargo. When customers sign up for the alert, the bank could also ask why they’re considering refinancing. Then, if the customer agrees, the bank could send third-party information on home improvement, say, if that’s the customer’s reason for the refi. The response to those third-party sites could be tracked both for marketing analysis and potential partnerships with those third parties.
In fact, using email to open up marketing beyond the company’s own products and services, to offer information the recipient may not have seen elsewhere - especially when the company sending the email clearly doesn’t profit by it - is another way to strengthen the customer relationship. The personal nature of email makes it the perfect venue for creating real trust with the customer, and that trust encourages relationships. It might seem counterintuitive, but not selling builds trust, and that trust helps a company sell.
[All this means that beyond clickthrough rate,] traditional branding measurement tools will be needed to measure these kinds of marketing emails, using the softer attitudinal metrics of recall and interest. Even if there’s a clickthrough to the third-party site, say, you’d still want to measure the customer’s attitudes about the company that sent the email.
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