Consumers hate online advertising.
Mention the words "online advertising" to the average person and watch their expression twist into that of repulsion. "Online advertising?" they'll say, "You mean spam, pop-ups, and annoying blinking banners?" Clearly online advertising has a negative connotation among the general public. So why is the online advertising market growing so fast?
The truth is that consumers don't hate advertising - they hate advertising that is not relevant to them. A consumer that's in the market for a car would welcome offers from advertisers offering them discounts and information on cars that meet their criteria. This would reduce the time they need to take doing research and comparing their various options online. A recent study by Yahoo and OMD revealed that the Internet's greatest impact on shopping is assisting consumers in the decision-making process, regardless of whether purchases are made online or at retail stores.
If this is indeed the case, then advertising can go a long way towards helping consumers efficiently find the information they're looking for, at the moment that they need it. This takes us back to relevance, and helps explain why advertising that can drive relevance is so valuable to everyone along the online advertising value chain.
The research suggests that before consumers make a purchase they first they gather a lot of information. It is at this crucial stage that companies should want to communicate with those consumers. The Internet is the first medium in history to enable this level of engagement with an advertiser's potential consumers. However the online advertising opportunity is still in its infancy, both in terms of its size and in terms of its potential.
Google's database of intentions has taken the industry a huge step forward towards more relevant-driven advertising. In effect the search giant's contextually targeted ad network is able to deliver advertising at the moment that the consumer is actively requesting it. This explains why Google's 2005 revenues of $6BB make up close to 50% of the total $12.5 billion total market.
However there is still a long way to go. Media convergence could extend the Internet's targeting and measurement qualities to other mediums, including TV and radio. New mediums such as mobile, RSS and podcasting may allow advertisers to keep up with changing ways that consumers now create, access and share their media. Interactive product placement still has a long way to go before it becomes an efficient market. Meanwhile lead generation services will continue to create great value across new categories and mediums by aggregating advertiser's offer and presenting them at the moment that consumers are actively requesting them. The emergence of social networks, blogs and other community powered services have the potential to usher in a new era of advertising communications - one where companies engage in active dialogs with their consumers, listening to and adapting their feedback into their products and services.
Over the next few years there are likely to be plenty of privacy battles, as the line between personal information and advertising relevancy continues to be drawn. However in the end consumers will benefit from more meaningful advertising that is presented to them in a much more "on-demand" way. This in turn benefits advertisers who are reaching much more of their true prospects than before.
In conclusion, this report finds that the online advertising market will continue to be rich with investment opportunities for many years to come.