MITEF - Digital Living Begets Digital Advertising

When it comes to Internet advertising, Baba Shetty, a media guru at Hill Holliday, can’t figure out why the migration from traditional platforms isn’t happening faster. His firm, one of the largest ad agencies in Boston, handles between $200 million and $1 billion in ad placements annually (he had to be cagey about specifics), so he knows whereof he speaks.

In the 1950s, advertisers could reach nearly 70% of their target audience via a hit TV show like “I Love Lucy,” Shetty explained to approximately 200 people attending the MIT Enterprise Forum’s recent “Digital Living” panel. That was back in the days of three major networks and a much less fragmented audience.

But today, prime-time TV reaches about 30% of households and the viewing audience is scattered across hundreds of channels. Internet advertising will grow 19.5% this year, but may not be moving fast enough. Morgan Stanley’s 2007 forecast on ad spending reports that $75 million will be spent this year on television and just $20.4 on Internet advertising. Shetty suggests that, in general, companies are overspending on TV and underspending on the Web.

Earlier this month, The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) announced estimated Internet advertising revenues for 2006 at $16.8 billion, up 34% over 2005.

What’s holding up a stampede to Internet advertising? It requires a learning curve and a cultural shift. Marketing executives who are unfamiliar with the ins and outs of advertising on the Web perceive risk, and clients and agencies work under a dated model that suits traditional advertising. In some cases, those who own the budget fear giving up control to the unknown, or decision-making may be more distributed, that is – online advertising may live in a different budget.

Shetty observes that a number of factors can accelerate the movement of advertising to the Web:

• A CEO or CFO who gets it
• Analytics that support the move with cold, hard facts
• A strategic process that fundamentally rethinks the process
• Competitors are doing it!
• A marketing culture of innovation

A fun aside from Shetty: He recently heard a Procter & Gamble executive remark that they had considered advertising on podcasts and concluded that their budget would allow the purchase of every bit of advertising available on all podcasts. This, of course, would completely disrupt the economic model of one new medium, and gives you a feeling for just what early days we’re in.