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Online marketing predictions for 2006

November 29, 2005 |

Interactive marketing experts at 24/7 Real Media have revealed their Top 10 online advertising and interactive marketing predictions for 2006.

Interactive marketing experts at 24/7 Real Media have revealed their Top 10 online advertising and interactive marketing predictions for 2006.

Among the most remarkable revelations, 24/7 Real Media's experts predict that search engine marketing, which helped boost the entire online advertising sector in 2005, will reinvent itself as a lead-generation channel while continuing to drive significant advertising revenue. Podcasting, blogging and mobile applications will become more attractive to advertisers, as behavioural targeting becomes increasingly indispensable for delivering the right content to the most receptive audience.

The 24/7 Real Media experts' Top Ten Online Advertising Predictions for 2006 include:

1. Consumer-generated media will become increasingly attractive to advertisers.

2. Advertisers will continue shifting traditional ad spending to the Web due to increased Internet consumption and better targeting/reporting capabilities.

3. Advertisers, cable providers and interactive marketing experts will collaborate to address "The TiVo Effect".

4. Brand advertisers will drive the next wave of growth for the paid search market.

5. Best practices in localised mobile marketing will be perfected overseas in 2006.

6. Online advertisers will employ holistic targeting methods to deliver better results and reduce reliance on high-profile, high-CPM ad buys.

7. Technology and better data access will transform online advertising success to a formulaic equation.

8. Japan will be the next frontier for paid search and interactive marketing.

9. Mobile carriers will adopt new ad models to boost revenue beyond usage.

10. Performance-based pricing models will demonstrate the true value of search engine marketing (SEM) as a lead generation channel.

"Thus far, 2005 has been a hallmark year for the online advertising industry, led by the explosive growth of the paid search market, and richer, more interactive and creative advertising facilitated by increased broadband penetration around the globe," said Richard Foster, commercial director at 24/7 Real Media UK. "We believe the momentum of the past 12 months is likely to continue in 2006, and our experts in media, search and technology are already anticipating the key trends and developments they believe will play a significant role in shaping the continued evolution of the industry in the year ahead."

1. Consumer-generated media will become increasingly attractive to advertisers

Podcasting, blogs and 'wiki' will continue to gain momentum and attract an increasing number of consumers - both content creators and content users. All indicators point to consumer generated media becoming a promising 'ad spend' opportunity, particularly for advertisers looking to reach specific micro-communities. Interactive advertising service providers seeking to capitalise on these opportunities will need to provide scale in both global advertiser acquisition and service delivery, and in data complexity - handling hundreds of thousands of sites with millions of transient visitors. New technologies will make ad delivery easier for publishers and advertisers, including filtering unsuitable content to protect advertisers from unwanted impressions. Better blog and audio/video search tools will increase traffic and dramatically improve relevance metrics.

2. Advertisers will continue shifting traditional ad spending to the Web due to increased Internet consumption and better targeting/reporting capabilities

The Internet has replaced the TV as the most sought after medium across different demographics, and time spent online continues to grow. This trend will enable Internet advertising to steal a greater share of advertising dollars away from TV networks. To illustrate this point, Google will sell more advertising in 2005 than any of the major TV networks or newspapers. 24/7 Real Media anticipates that in 2006, Internet advertising will continue along on the same trajectory that the cable TV industry travelled during the 80s and 90s. The key differentiating factor that will continue to fuel growth of Internet advertising is its transparency, flexibility and accountability, making it the ultimate marketing tool.

3. Advertisers, cable providers and interactive marketing experts will collaborate to address "The TiVo Effect"

In the past, TV advertisers knew that 50 percent of their advertising was wasted, but were unsure which 50 percent. With the proliferation of DVRs, and the inevitable commercial-skipping "TiVo Effect," advertisers suspect the waste is increasing, but have no real way to measure. Interactive TV is the answer that advertisers are looking for - incorporating the creative bandwidth and storytelling capabilities of television combined with the real-time delivery and tracking abilities of the Internet.

4. Brand advertisers will drive the next wave of growth for the paid search market

Even as performance- and acquisition-focused advertisers gravitate towards the direct response benefits of search, 24/7 Real Media experts expect to see a significant uptake in search from the major agencies and traditional off-line advertisers. This will be led, at least in part, by continued research and data into the branding benefits of search, studies into assisted and unassisted recall of brands based on participation in both display and search results in the same user session, the emergence of view-through data, as well as the tendency both from the engines and search engine marketers/agencies to bundle search messaging with display/affiliate/e-mail/other elements into consolidated media plans. This will allow the search sector to continue its current growth rates, reaching a critical mass in terms of benefit and audience that will enable it to finally become more than just a speck on the "big agency" media schedule.

5. Best practices in localised mobile marketing will be perfected in the developing world in 2006

The explosive growth of mobile ownership and the emergence of novel mobile behaviour in India and China will far overshadow mature markets elsewhere in South East Asia. With low PC ownership rates, cell phone and TV will continue to dominate the consumer's interactive media experience. Less restrictive regulatory environments coupled with the introduction of current generation mobile infrastructure have created a thriving market for rich media mobile content and value-added service providers. Wireless carriers will soon deploy services with the ability to pinpoint local audiences and serve them targeted local advertising using enhanced, searchable "yellow pages" functionality. These markets will not only see the emergence of new use models, but also new business models. As a result, best practices in local advertising will be perfected in the developing world long before they arrive in the UK and United States. Interactive advertising providers with global reach and scale will benefit most from this trend in 2006, and be able to leverage these opportunities well before their landlocked peers.

6. Online advertisers will employ holistic targeting methods to deliver better results and reduce reliance on high-profile, high-CPM ad buys

In 2006, advertiser focus will be more on the audience itself and less on where or how the audience is captured. There is a nearly unlimited supply of ad impressions, but a limited number of Internet users. With growing Internet adoption rates, advertisers have gravitated to a handful of popular sites or portals in hopes of reaching their intended audience though this narrow tract of ad space.

Next year, advertisers are going to take a more holistic approach to reaching their audience. Rather than purchasing high-CPM ad buys on high-profile, heavily trafficked sites, advertisers will merge behavioural, demographic and geographic methods to generate better results across a wider range of niche sites. In addition, audiences will be segmented similarly to the offline market so that tried and true methods, perfected over decades, can be applied to the online world.

7. Technology and better data access will transform online advertising success to a formulaic equation

Online advertising will become a pure mathematical equation in 2006 and see the emergence of a new "CPx" (Cost Per (variable)). Online advertising will be driven by more strategic quantitative analysis across segmented audiences. Media companies will have greater access to more finely tuned targeting methods that segment out audiences based on the most important variables. The new statistics will help advertisers and publishers to identify and influence audiences more efficiently and effectively. The ultimate result will be new models of how to approach advertising, and new ways of reaching consumers.

8. Japan will be the next frontier for paid search and interactive marketing

With an economy poised for dramatic expansion next year, Japan has the second highest number of Internet users and broadband users in the Pacific Rim after China, according to PricewaterhouseCoopers. 2006 will prove to be "the year of search engine marketing" in Japan, and the country's Internet advertising sector will experience its strongest year of growth ever. According to PricewaterhouseCoopers, Japan already has the second largest online advertising market globally, behind the United States, with revenues projected to increase nearly 20 percent to $1.7 billion by the end of this year. However, paid search is the area that is poised to show dramatic increases over the next twelve months, with the major traditional advertising giants in Japan all vying for a piece of the action.

9. Mobile carriers will adopt new ad models to boost revenue beyond usage

The next year will see mobile carriers begin to experiment with a variety of ad models and delivery platforms as they look to expand their revenue beyond usage. In addition, 24/7 Real Media experts anticipate that video ads will begin to appear on phones as mobile video usage increases to the approximately 6.1 million subscribers, reported by M:Metrics. SMS will be utilised primarily as a customer relationship management (CRM) tool for advertisers to continue dialogue with existing customers much in the same way email is currently used. Ad standards will also begin to shake out for WAP display ads through the efforts of the major carriers, service providers and mobile industry group, MMA.

10. Performance-based pricing models will demonstrate the true value of search engine marketing (SEM) as a lead generation channel

The majority of the market has left traffic arbitrage behind, and search engine marketing is more credible for it. "Value" arbitrage, however, has yet to be fully exploited to any significant extent. With the ability of sophisticated SEM tools to understand both the market price for inventory and the true value of that inventory to the advertiser, coupled with margin pressures on "managed services," 24/7 Search experts anticipate that SEM firms and agencies will more willingly embrace and participate in performance-based pricing models. This will transfer some of the performance risk to the operators, who must use their experience and tools to deliver the value they have long promised, and who will share in the return generated.

For the skilled SEM firm and tool developer, this will drive higher returns and closer client relationships, while maintaining transparency of the medium. For the savvy marketer, particularly in acquisition-based industries, this will transform the view of search from an advertising medium to a lead generation channel.

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