Academic journal article The McKinsey Quarterly

The Real Impact of Internet Advertising

Academic journal article The McKinsey Quarterly

The Real Impact of Internet Advertising

Article excerpt

Will the Internet have as big an impact on advertising as radio and television did?

Most marketing executives say no

Here's why they are wrong

How much impact is the Internet really having on advertising and marketing? Is it just another emerging niche medium with some peculiar creative capabilities and constraints? Or might it transform consumer marketing in the same way that network television revolutionized consumer culture and commercial practice four or five decades ago?

Interviews with marketers reveal that few believe the Internet will change their approach to advertising. Most see it as little more than a complement to traditional marketing practices, and don't expect it to reduce expenditure on broadcast and print media or change the form, pricing, or delivery of advertisements. Their view is probably a reaction to the early hype about the Internet and the World Wide Web, which created unrealistic short-term expectations among marketers and frustration with the inadequacies of the delivery technologies among consumers.

We take a contrary view. We believe that Internet advertising will account for a growing proportion of overall advertising expenditure. Moreover, advertising - and marketing in general - will adopt practices first developed or deployed on the Internet. As the technology improves, the impact of Internet advertising will increase and become easier to measure, and the gap between this new precise, interactive marketing capability and conventional "fuzzy" passive media will widen. Over the next few years, advertising agencies and consumer marketers will be under pressure to change their whole approach to marketing communications.

Marketers will become more accountable for their results, and they will pay more attention to building a total customer relationship. Offering consumers value in return for information will become vital in eliciting their preferences, which in turn will be critical to customizing advertising.(*) And companies' entire marketing organizations will be progressively redesigned to reflect interactions with consumers on the Internet.

For ad agencies, fees based on results will become standard. 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 relied - and to begin capturing the lessons Internet advertising holds for all their advertising practices, online and conventional.

Caution: Changes ahead

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. …

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