Nick Nyhan, Founder and President of Dynamic Logic, is perhaps currently one of the industry’s most qualified persons when it comes to speaking to questions related to the efficacy of the Internet as a brand-building medium.

Nyhan’s Dynamic Logic (by now, a “household name” in the world of Internet Advertising) is a research company whose patent-pending AdIndex technology enables advertisers to measure the impact of Internet-based campaigns in terms of traditional branding/awareness metrics, including brand awareness, purchase intent, message association, and ad recall - performance metrics whose stature in the world of Internet Advertising is quickly growing, as agencies and content publishers move to persuade traditional brand advertisers online.

In addition to forwarding its clients’ objectives, Dynamic Logic AdIndex technology is one of the main driving forces behind some of today’s most widely distributed Internet Advertising effectiveness research (released by the likes of the IAB). And, a recently closed deal with DoubleClick, which, in effect makes Dynamic Logic one of DoubleClick’s main research arms (replacing DoubleClick’s own Diameter research unit), virtually ensures that AdIndex-powered research will become increasingly prevalent in the industry landscape.

Is the Internet an effective brand advertising medium? And, if so, to what extent is this the case? In a recent conversation with avant|marketer, Nyhan weighed in on these and some related questions of equal importance.

avant|marketer: The prevailing view is that the Internet ought to be leveraged as a direct response medium akin to Direct Mail, as opposed to a branding/awareness medium on a par with Television. What is your take on this?

Nick Nyhan: Big question. And, my big answer: Advertisers are prisoners of their metrics.

Your statement about online being purely a direct medium was the prevailing view because that was the way the medium was sold to advertisers and those were the only metrics that were provided to them. Ultimately, you really can’t blame the advertiser for thinking that way; it’s how they were told to approach it. But, with more branding data now becoming available, advertisers will be able to see that side of the equation, too - this is only a matter, I believe, of a short amount of time.

In reality, Internet Advertising is a two-sided coin: branding and direct. But either way, you need metrics to measure its effectiveness.

avant|marketer: Based on your research at Dynamic Logic, what are the main factors that are preventing the “big money” traditional advertisers from spending a more significant portion of their advertising budgets on Internet-based advertising?

Nick Nyhan: Again, I would go back to what I just mentioned. If you give an advertiser selling toothpaste click-through data, it’s not going to be that relevant to them. Historically, the largest advertisers have been brand builders. When you talk about “traditional advertisers”, that’s who you’re talking about. Therefore, when the online advertising community learns how to speak their language, those decision-makers may decide to turn more money online.

avant|marketer: And, what exactly do you have in mind when you say, “speak their language”?

Nick Nyhan: I mean that traditional advertisers are accustomed - and have been accustomed for many years - to speaking to results in the language of brand building. There is a certain set of metrics that makes up that language. If the online community can adopt that language and adapt it to the online environment, then the key decision makers at these companies will be more inclined to put their budgets into online.

avant|marketer: Having said that, do you believe that CTR on its way out as the main indicator of the success of Internet Advertising campaigns? If so, which campaign success metrics should online agencies be focusing on and content publishers pushing to their advertiser clients, going forward?

Nick Nyhan: I certainly don’t believe that clickthroughs are on their way out - that’s too extreme. The click will never die. It is a really interesting metric, just over-blown in terms of its relative marketing importance.

Obviously, CTR will become less important as Online Advertising begins to focus on branding. But, I don’t think it goes away completely. From a technical standpoint, the truth is that publishers don’t need to provide CTR to advertisers, because an advertiser should be able to tell CTR by their own logs. So I think publishers will quite naturally start to de-emphasize something advertisers can get otherwise, and start providing research data from independent third-party sources that measures the value of their advertisers’ ads in terms of the effect of those ads on key metrics such as brand awareness, message association, brand attributes/favorability, purchase intent, and ad recall. Assessing these things requires measurement that goes beyond what can be gotten from log files and other client data, and so can be a significant value add if provided to an advertiser by a publisher. And, we’ve already seen a number of publishers offering this type of data to their advertisers.

avant|marketer: You just alluded to this matter, but expand on it a bit: What sorts of new technologies are needed in order to accurately quantify the branding/awareness effects of Internet Advertising campaigns?

Nick Nyhan: The first thing to say is that this is not merely a technology question. There is also a serious issue of trust and credibility, here. Good online ad research must come from a party the advertiser trusts and one where the data is used for research purposes only - not for marketing purposes. Now, in terms of the technology itself, there are a few approaches to getting the research done. This is more about using the best possible methodology, and being able to execute a methodologically sound system, than it is about raw technology. Speaking for Dynamic Logic, we use a control/exposed methodology that isolates the variable of online advertising from offline. But, we do so in a way that allows the advertiser to compare to offline in an apples-to-apples way. I think that enabling the marketer to make such comparisons to their offline advertising efforts is going to be critical. It helps the advertisers make smart decisions in the future, and ultimately adds value to online campaigns.

avant|marketer: Everything we are saying here is, of course, predicated on the assumption that the Internet is effective for brand building. And that, of course, is the question on every traditional advertiser’s mind these days. How effective is the Web as a brand/awareness medium?

Nick Nyhan: It is effective. But - important caveat - not in all cases.

We’ve seen brand awareness lift by 6% on average and message association by 12%, on average. That is based on our own normative database. In general, our research has shown that it’s harder to move the needle on persuasion metrics such as purchase intent and brand favorability using online advertising - but those metrics do move with increased frequency.

Also, the IAB and MSN research we have done has showed the larger formats are 3 to 6 times more effective than banners on awareness and message association, but banners still work in moving the needle on these metrics. [Editor’s Note: The Dynamic Logic site contains an array of additional original Internet Advertising effectiveness research that is clearly worth reviewing. See: http://www.dynamiclogic.com/white_papers.php]

avant|marketer: Surveys have shown that most advertisers believe that the Internet provides a lower ROI than the traditional advertising media. What’s the most cost-efficient branding/awareness medium that exists right now? Is the Internet more or less cost-efficient for branding/awareness than the traditional branding/awareness media - for instance, Television and Print?

Nick Nyhan: This is a very important question, and one that was examined recently with regards to banners specifically in a Morgan Stanley Dean Witter report. The report said: “At today’s prices, we believe banners are cost-effective in generating brand recall and brand interest but they are only a moderately effective direct marketing tool.”

The truth is, the answer to this question depends a great deal on who you are - automotive versus toothpaste. Each company must seek to develop its own norms and effectiveness benchmarks, because there are going to be significant differences in effectiveness from one company’s product to another’s due to the nature of those products.

avant|marketer: Talk, finally, about the role of content publishers, going forward, in this move toward measuring the branding/awareness impacts of Internet Advertising. Many content publishers are hearing the news that there may be a coming shift from the current direct response metrics such as CTR toward the branding/awareness metrics we have been discussing, but remain confused about what exactly to do about this. What do publishers need to do now to get on top of this shift? Should they all follow CBS MarketWatch.com’s lead and discontinue providing CTR reporting to advertisers? Is this even going far enough?

Nick Nyhan: If I were a publisher or worked for one, I would ask the boss what are we doing to accommodate the traditional advertiser. Look at the packages, look at the metrics in the measurement and reporting components, look at the stated benefits of the site. Bottom line: help the advertiser achieve their objectives and if direct-response is not part of those objectives, then you don’t need CTR. But don’t bash CTR, just put it in its appropriate place: an immediate conversion - however “conversion” is defined. And, even in cases in which a conversion is the objective, considering that 99% of ad impressions will not get clicked on, ask the advertiser if those impressions are important to them, and if that value should be realized. If so, use branding metrics as well.