IAB Must Set The Agenda: Online General Advertising Needs A Rocket

If the Australian IAB were a stock on the ASX, and its fortunes rested on the performance of online advertising market, then the latest quarterly report into online advertising expenditure would have caused a major sell-off, with warnings of further downgrades.

The December quarter’s online advertising expenditure report put out by PricewaterhouseCoopers (PwC) and the IAB estimates total online expenditure for the 12 months to Dec 07 rose 34%, compared with 61% and 60% for the two previous years respectively.

Broken down by classification, general advertising rose 17.7% (56% in 05/06), classifieds by 19.3% (45% in 05/06) and search & directories (S&D) by 55.95% (81% in 05/06).

From a market share perspective, general online advertising now represents 27% of the total. Likewise, classifieds sit on a market share of 27%, with S&D the only classification to improve its standing, rising from a 40% share to 46%.

In aggregate, the online advertising market has a value of A$1.346b (06/07), compared with 05/06’s figure of just over A$1b.

The protestations which have accompanied the report’s release follow the line that the slowdown in growth is due to a “maturing” of the industry. In fact, this nascent industry has no-where near reached its potential in terms of share in adspend. Instead what is impacting these growth figures, particularly for general advertising, is rather more complex.

From a methodologcal point-of-view, the PWC-IAB report captures data from at least 1,000 websites - but not all. The contention is that online general advertising, in real terms, has not declined in the previous 12-months. Instead the dollar value of general advertising may have risen (even to the point that its share of total spend is steady or rising?) yet we are ignorant of this fact because a higher proportion of general advertising is now spread across the long-tail of niche and super-niche sites. This argument holds validity in an environment where ‘audience engagement’, rather than audience size, is gaining the ascendency.

The alternative argument is that general advertising has indeed shifted down a gear, with S&D siphoning off discretionary dollars because of the perenial issues of audience measurement standards, and relatively poor methodologies which underpin audience counting in a general advertising environment. And what of the ‘great white hope’ of true behavioural targeting? Why in 2008 should I be exposed to a banner promoting the 2DayFM program, Kyle and Jackie O when I’m trying to read a story about Hezbollah threating Israel with war? I’m not the optimal demographic for this campaign, and my click-stream certainly doesn’t suggest an inkling for light entertainment. Even the comments I post on the same website fail to sustain a case for serving up the breakfast duo.

In short, online businesses which depend on general advertising have significant structural issues to address - both in terms of content, and their remits around product development, the standardisation and quality of audience measurement, as well as real-time audience profiling and segmentation. Multi-million dollar ad accounts are increasingly gravitating towards those entities which make the case using robust audience metrics and analytics. This is where the gap needs to close, and fast.

The current measurement regime in Australia provides neither standardisation or integrity for agencies, advertisers or publishers. As part of a 2008 roadmap, this is the industry’s number one priority.