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MEDIACOM Marketing Digest 27 October 2004

MEDIACOM Marketing Digest 27 October 2004

27 October 2004

Online AdSpend Is Here (sort of) As noted in an earlier issue, Nielsen Media Research have, from September, added Online AdSpend to the collection of adspend data on which they report - though the new addition is accompanied by more caveats than a real estate convention.

Firstly, of course, these are ratecard-value spend figures, so discount by your percentage of choice. Secondly, note that only a limited selection of NZ websites is included in the data collection, so the results, though indicative, will necessarily understate the true position - and will fail to identify those marketers who make use of the small and obscure sites that aren't included in the selection. Thirdly, understand that the data is supplied by the web publishers, so there may be variables and inconsistencies in the data - though we expect any contamination to be minimal.

Ignoring all that, we note that the reported total adspend for online activity across the first nine months of the year is $11.5 million - 0.7% of the total reported adspend for the year so far, not enough to make the mass media quake in their designer footwear, but a useful beginning.

Top five categories were the usual suspects:

* Travel $2.4 million * Investment/Finance/Banking $1.9 million * Computers $1.6 million * Business Services $1.2 million * Leisure & Entertainment $0.8 million

To no-one's surprise Air New Zealand was the top travel spender, with a reported $1.4 million online total across the measured websites - nearly 10% of Air New Zealand's reported adspend across all media for the period. What's surprising is not that Air New Zealand's online adspend is so high, but rather that it is still such a small percentage, given that online bookings have climbed from 4% to an incredible 42% of the airline's revenues - and that 65% of Air New Zealand domestic sales are generated by direct bookings.

Online AdSpend in the Financial category was far more diversified, with top spender Westpac (on $471,356) not a world away from National ($329,219) and the ASB ($175,945).

Nielsen//NetRatings reports on Kiwi Internet Activities demonstrate why both the travel and financial categories are hot online spenders. The Top Five NZ Internet Activities for Q2 2004 (excluding email and general surfing) were:

1. Internet Banking 31% 2. Product/Service Info 29% 3. Education Research 23% 4. Travel info 22% 5. Listening to music 21%

Business is looking up for the internet space, with the tech wreck well behind us. Key media figures are now starting to chime in with positive predictions for the medium. As recently as yesterday, James Packer, Executive Chairman of Australia's PBL (owners of ACP Magazines & the Nine Network and part-owners of Pay TV provider Foxtel) told the PBL Annual General Meeting that "the internet is now a genuine mass medium with mainstream advertising brands increasingly embracing online as part of their media schedules. Globally, within two years, the internet is expected to account for at least 15 per cent of the total time individuals spend consuming all media."

Mr Packer has his own axe to grind - PBL operates the ninemsn internet portal business, a 50:50 joint venture with Microsoft - but ninemsn posted a turnaround profit of A$7.2 million for the company in 2004 after a 2003 loss of A$2.9 million, so this time it's not just talk.

A quick google of "online advertising forecasts" finds some 116,000 listings, so there are plenty of opinions on the likely future of the medium, ranging across the spectrum.

Our own view:

* the medium is growing again, in New Zealand as elsewhere * most NZ online advertising is still sales promotional in nature * Kiwi marketers are not yet using online advertising to its full potential * the killer app of online advertising - the single campaign which gets tongues wagging and reawakens excitement in the medium - has not yet been discovered

Now that the invisible medium has suddenly become visible (i.e. adspend data is now available), more advertisers will be attracted to the medium in response to competitive activity. It may not be the purest of motivations, but we're sure that web publishers won't be too fussy if they're getting the results.

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Cell Sell The October issue of Grocer's Review contains some fascinating facts on the Service Stations retail channel, courtesy AC Nielsen. For the fortnight leading up to Christmas 2003, the two best-selling items in BP, Caltex & Mobil service stations were Vodafone $20 Airtime Vouchers and Vodafone $20 Prepay Recharge Cards. Overall, only five of the top twenty items were not tobacco. The other three were V, Anchor Milk - and (at Number 13) Telecom $20 Go Prepaid cards.

As we noted a few issues ago, cellphones are great at soaking up disposable income. These figures simply illustrate the reality. They also demonstrate the real competition for those marketers who target the route trade - and for organisations such as Lotto, whose existence depends on the disposable dollar.

Perhaps an anti-cellphone campaign might have been a more effective strategy than a Bob Kingsman pitch?

Getting The Vote Out The US presidential campaigns have virtually ignored the internet as an advertising medium, according to the first-ever systematic study of online political ads. The 2004 campaigns have spent more than US$100 on television ads for every dollar they have spent on web ads. We wonder if it would have been another story entirely if Al "father of the internet" Gore was in the running?

The few ads that ran online between January and August 2004 mainly sought $25 and $50 campaign contributions. Although parts of the online world are a public "Wild West" where few standards of taste, civility, and accuracy prevail, political advertising on the internet has generally behaved itself: a few remarks taken out of context, but no obscenity, graphic violence, or manifest smears and lies.

Of course, that was just the advertising. Websites from the politically motivated committed just about every politically incorrect sin imaginable...

Location? Location? The accepted wisdom for bricks and mortar retail is that it's all about location. But what about clicks and mortar? With the web worldwide, does location matter? And, if so, how?

That was the question with which Wharton marketing professor David R. Bell grappled, and which led to a research paper appealingly entitled "Social Contagion and Trial on the Internet: Evidence from Online Grocery Retailing", released earlier this year.

Bell and co-author Sangyoung Song were able to tap into data from US online grocer, following sales across nearly 30,000 U.S. zip codes over the first 45 months of Netgrocer's existence.

The key finding: once Netgrocer started making deliveries to a specific neighbourhood, there was a 50% increase in other consumers from that neighbourhood trying the service.

Although the available data doesn't identify specific reasons for the neighbourhood effect, it's most likely to be a combination of word of mouth from satisfied customers and such serendipitous side-effects as "keeping up with the Jones" - a neighbour might observe another's Valentine's Day delivery from and want to join in the fun.

Bell noted that "it's not the location of the store relative to the customers that's important, it's the location of the existing customer relative to potential customers."

Netgrocer gave Bell access to sales data from the time of its May 1997 launch until January of 2001 - a complete and exhaustive list of all 382,478 transactions that had taken place throughout the US. "I plotted over time and space how these customers evolved and grew," commented Bell. "What we saw was the thing spreading out like a disease. When we started to look at these patterns in more detail, what we found was that the new customers were not appearing randomly on the map. They were appearing in places that were contiguous to areas that already had customers.

"You and I might live in the same apartment building and one day you come home from work and see this box in front of my door with written on it," Bell said. "Or maybe we work together and I mention my experience using We can't say whether it's passive observation or direct communication, but there seems to be, after controlling for everything else, a real social effect when it comes to online buying. We think this research would apply to any online business where there's potential for repeat or emulation."

What actions could you take as a result of this wondrous research? Start thinking about ways to accelerate the process.

* If you focus on densely populated urban areas and encourage people in those areas to buy first, your customer base should spread a lot more quickly than if you do it somewhere else. * If your external packaging is boldly labelled with your URL, you'll increase your chances of being noticed by passersby. * And, of course, work on ways to stimulate word of mouth, including offering friend-get-friend incentives.

Areas with greater numbers of wealthy and college-educated people were also quicker to try an online retailer, with an increase in young wealthy individuals adding an additional positive effect and higher percentages of elderly slowing trial times. A region's size in terms of land area was unimportant, but the number of households, population density and urbanization were all critical, resulting in a "significant positive effect on the time to first trial," according to the paper.

As usual, we have the full 45-page Social Contagion paper available in electronic form. Drop us an email and we'll send you a copy.

We Have A List ... The number one item on consumers' Christmas Wish List this year is "peace and happiness," but HDTVs are high on the list, too.

In anticipation of the holiday selling season, the US Consumer Electronics Association (CEA) has released its 11th Annual Holiday Sales and Forecast Survey, and - gosh, really? - 76% of U.S. consumers plan to buy at least one consumer electronics (CE) product as a gift during the upcoming holidays.

The report, based on interviews conducted in early October, finds that consumers claim to yearn most for what money can't buy. But after "peace and happiness" and spending more time with their families, adults want clothing. Kids, on the other hand, get right into the spirit of the shopping season and make toys and video games their first choice.

The CEA says that retailers should expect to see strong sales of:

* Digital cameras * DVD players * Cordless phones * Game systems * Wireless phones * Desktop computers * Laptops and notebooks * Portable MP3 players * HDTVs

The top planned CE gift item for 2004 is the digital camera, displacing DVD players at the top of the "planned gift" list for the first time in years. Consumer interest in buying a digital camera increased to 29%, up from 24% in 2003. Overall interest in purchasing DVD players declined six points from last year, from 31% to 25%. Interestingly, 30% of respondents said they would purchase a gift certificate from a CE retailer, higher than the planned gift purchase of any individual CE category.

The survey also found that the number one desired CE gift item this season is a plasma TV. Other top desired gifts this holiday season include digital cameras, notebook or laptop computers, colour TVs (27-inches or larger) and portable MP3 players.

The CEA survey also revealed that 38 percent of US consumers currently own a media server, either with a desktop or personal computer acting as the server or a dedicated media server. CEA Market Research defines media servers as "devices that store of all a consumer's digital content (music files, home video, digital images) in one location, allowing it to be viewed or listened to from multiple locations in the house".

Close to 19 percent of consumers indicated they plan to purchase a media server in the next two years. The most compelling media server features required by consumers:

* the ability to store music on a PC and listen to it anywhere in the house * being able to sit in one's living room and view digital pictures on the TV that are stored in the PC

The CEA also noted that over 85 percent of consumers wanted a media server that stored digital content - movies, music, digital images, home videos - on its own hard drive and 72 percent of consumers wanted servers that could distribute digital content throughout the home.

If this sounds like overwhelming demand for the device that chews up and spits out advertisers - you're right. This has been Warning #253 in an ongoing series.

ABOUT MEDIACOM MEDIACOM, with offices in 80 countries (and now part of the WPP Group of companies), is one of the world's largest and most respected media service companies.

We create media solutions that build business for a wide range of local, regional and worldwide clients.

With $13 billion in global billings, a commitment to strategic insight, total communications planning, tactical media brilliance and tough but creative media negotiating, MEDIACOM provides unsurpassed value in today's chaotic media marketplace.


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