subject: Impact of Digital Marketing? [print this page] The economics of Internet advertising are likely to make current business models obsolete. New capabilities will be required as creative production speeds up and becomes more closely integrated with marketing activity. A deep understanding of enabling technologies will become a prerequisite for fresh forms of advertising.
Our views on the evolution of Internet advertising and its impact on traditional marketing may seem provocative to some, premature to others. But the intriguing marketing experiments taking place on and off the Internet suggest it is time for consumer marketers to begin looking to networks for new ways of thinking about the marketing theories and approaches on which they have long reliedand to begin capturing the lessons Internet advertising holds for all their advertising practices, online and conventional.Looking at today's Internet advertising to predict what tomorrow will bring is about as helpful as using a rear-view mirror to watch the road ahead. But a point of view about what online advertising will look like in three to five years' time can and should influence current management decisions about how to invest marketing communication dollars on the Internet. A number of fundamental forces are currently reshaping Internet advertising: the near-daily emergence of new technologies that improve measurement, targeting, and data interpretation; the strenuous efforts of primarily entrepreneurial marketers to make business use of the Web; and the establishment of patterns in consumers' use of these new interactive networks. Thanks to the impact of these forces, tomorrow's ads will differ from today's in the shape they take, in the metrics available for gauging their effectiveness, and in the pricing structure that governs their purchase and sale.
The first and most obvious change in advertising will be in what consumers see on their screens. Ads are likely to change in terms of their content, the type of customization they employ, and their delivery to the consumer.
Second, ads will be customized on the basis of information voluntarily provided by users. The key to making this approach work will be to overcome consumers' desire for privacy or anonymity by offering them rewards for personal details in the form of special information, discounts, or promotions. On ParentTime, for example, users who enter the ages of their children receive relevant care information as well as Pampers ads geared to those age groups. Experience suggests that consumers are willing to release information about themselves as long as they are the prime beneficiaries.
As online advertising develops, advertisers will discover that the Internet is the only medium that can deliver certain types of message, such as multisensory and interactive ads. These new forms will allow advertisers to achieve several objectivessome of them unattainable via conventional mediasimultaneously (Exhibit 1). They are likely to make Internet advertising more important in the overall marketing mix as marketers capitalize on their unique capabilities. At the same time, our glimpse of the emerging future casts doubt on the merit of current heavy investments in big brand sites that require content to be "pulled," or in banner ads thatlike most on the Internet todaymerely replicate the forms of advertising that exist in the physical world.
Whereas marketers tend to have fairly uniform objectives in traditional media, such as shaping attitudes in television or obtaining responses in direct mail, the Internet, as we have seen, allows them to pursue several different goals simultaneously. In the same way, the standard types of pricing used in traditional media, such as CPM (the cost of exposing a message to a thousand viewers of TV or readers of print), will give way on the Internet to pricing that varies as widely as the objectives of the ads themselves. Indeed, the technology can support several pricing mechanisms at once: pay per click-through, lead, transaction, dollar spend, or conventional CPM. This kind of variegated pricing is already appearing in the marketplace: P&G has pushed for pricing per click-through; CD Now pays Web sites commissions on the transactions they generate; and Destination Florida pays according to leads generated. Similarly, DoubleClick is introducing an advertising network, DoubleClick Direct, whose rates are based on results, and has already signed up clients including Alta Vista and GTE's Internet service.
Because of these factors, pricing for Internet advertising is likely to be multi-tiered, based on results, and tied to marketers' objectives. At least three pricing mechanisms will coexist: pricing by exposure, response, and action
First, new ways of advertising on line will inspire new creative approaches elsewhere. Second, the Internet will prompt marketers to reevaluate their use of traditional media. Third, Internet advertising will help marketers to improve their understanding of consumers' needs, preferences, and product usage. Finally, once marketers get a taste for the measurability of Internet ads and the tailored pricing it enables, their expectations of the effectiveness and measurability of other media will rise.
