The Current State of the Internet Economy
With Kevin Rowe, a Principal for Lake Capital, moderating a session on the current state of “The Internet Economy,” my ad:tech Chicago experience began (that is, after a five hour flight delay due to bad weather in Chicago). Participating in the discussion were Matt Moog - Founder and CEO of Viewpoints Network, Gian Fulgoni - Executive Chairman and Co-Founder of ComScore and Matt Spiegel - CEO of Omnicom Media Group Digital.
With increasing gas prices driving—no pun intended—consumers away from in-store shopping, it’s safe to say inflation is currently the biggest threat to traditional retail sales. That said, though there still has been a noticeable decrease in growth for online advertising, something that hasn’t really been seen since the mid 90’s. While online sales have continued to grow, multiple research studies show that for every one product purchased online, four to five were purchased in-store after using the web for product research. The only real exception to this rule seems to be multi-channel retail outlets like Amazon.com (which recently released its second quarter sales, more than doubling what analysts projected for 2008).
Many companies lump any dollars spent on maintaining or “upgrading” their corporate site in with the online advertising budget. The panelists agreed that this was a poor practice. Corporate websites should fall under a branding budget, rather than take away from the online media buy. Also, most brands do not leverage their corporate website as a vehicle for third party revenue. An example given was Expedia.com, which makes over $200 million per year in advertising revenue in addition to any actual sales made via the popular travel portal. If a brand isn’t using their own website as means to drive people to their retail stores or as a new source of revenue, then they are missing out on a large piece of the online pie.
Another key take-away from this session was the importance of connecting the consumer’s online behavior with their in-store experience. Countless brands use their website as an e-commerce platform, however failing the brand experience when they do not allow for consumers to use their stores as an extension of the online purchase. This includes offering in-store pickups and the ability to return or exchange a product purchased online in a local store. Because of this, these brands tend to inhibit a repeat online purchase from consumers who would prefer not having to ship off products that require service.
The old metric system of judging CPM or related clicks against impressions is outdated for today’s online behavioral model. The session even closed with Matt Spiegel from Omnicom Media Group Digital stating that the most important thing that needs to happen in the next few years is the emergence of a more robust analytical model. There has to be a better, more standardized method for tracking consumers who make their purchasing decision online but visit the store to actually buy the product.
