Reply to Susan Mernit on Online Ad Spending

Susan Mernit’s Blog

My friend Susan Mernit, whom I respect, expressed her perspective on what it would take for online advertising to eclipse magazine advertising.

Unfortunately, her argument is based on two key points: 1) demographic data is necessary for precise targeting, and 2) demographic data is necessary to establish ROI.

Clearly, demographic data is valuable to advertisers. Such data provides a basis for understanding ones existing customers, and sourcing (i.e., lead generation) additional potential customers.

However, with the rise of search engine marketing (SEM), it has already been shown (to the tune of ~$2-$2.5B in CY2003) that a user’s “intent” is more than sufficient for targeting. Hundreds of thousands of businesses large and small have continually spent more per click to capture user intent over the last few years, all of them implicitly understanding that they are segmenting online users into potential customers through the user’s expression of intent through search keywords.

And guess what? These businesses are more than capable of understanding the ROI on their advertising spend; simply, the margin on sales to the converted subset of these leads, minus costs. In fact, internal calculations at Overture shows some businesses generating ROI approaching 8000% (yes, eight thousand percent). Much like phone books of old, online search is minting millionares left and right, comprised not only of those running the search co’s, but those building their businesses through them. All without knowing age, gender, surveying, etc.

All of which is NOT to say that demographic data isn’t valuable. In fact, a far more powerful advertising model, one that mixes intent, contextual setting, demographic, pyschographic (et al) targeting will emerge in the future (with pet projects already in the works at Tacoda, Overture and others).

But such complexity isn’t necessary for online advertising to surpass magazines… all that is necessary is for SEM and similar solutions to be packaged appropriately for your average SMB.

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4 comments on “Reply to Susan Mernit on Online Ad Spending
  1. Susan says:

    Hey–nice post. All true and all right EXCEPT I seriously doubt that brand focused marketers driving awareness are going to take dollars away from TV and cable and put them into SEO only–there is always going to be a need for rich meda advertising–and the metrics to justify the spend.
    It’s not one or the other–it’s two different sectors, IMHO.

  2. Özer Khalid says:

    From Ozer Khalid:

    Interesting points you herald. So long as a combination of online ad efforts such as AIDA and DAGMAR techniques be adequately adapted to the virtual universe, online ad spending is rightly projected to catapult.

    Optimized query search word functionality, page ranking through SEO & SEM as well as IP address and consumer pre-emptive behavioral tracking models will generate specialised segmentation modalities based on
    maximum OPT, pay-per-click revenue models, banners and link farming.

    These sustained initiatives are bound to eventually overtake, and be more interactive than print media advertising revenue models.

  3. Özer Khalid says:

    Online advertising revenue models are likely to overtake those of print media, due to their highly captive, competitive and interactive targetting methods such as link farming, banners, pay per click, page ranking optimisation, SEO and SEM.

    Özer Khalid

  4. Özer Khalid says:

    By Ozer Khalid

    Dear Susan,

    Fair comment and to justify it
    witness how advertisers are plucking into the triple bundle
    convergence between TV, internet
    and telephony.

    It is interesting to note that Google is pouring investments into
    the EchoStar cable TV network
    for a more targeted advertising audience.

    Rationale: peak rate viewing on prime time television always empirically translate into profit margins.