Online and upwards: interactive advertising soars in Canada

Canadian firms bought $364 million worth of online ads in 2004, and that number looks set to increase by mid-double digits again this year, but that doesn’t mean the Internet is topping advertisers’ lists of media yet, says Canada’s interactive advertising trade body. "That $364 million for 2004 is only 4% of the total advertising spend in Canada, so other media are getting 96% of the dollars from clients," says Paula Gignac, executive director of the Interactive Advertising Bureau of Canada in Toronto, adding that American firms weigh in at double that amount. "They’re at 8%, and according to our...studies they should be at 10% to 15% if they’re going to get the full value of the medium’s capabilities." The 2004 dollar value represents a 54% increase over 2003, when $237 million was spent on advertising products and services over the Internet in Canada. By the end of 2005, IAB Canada predicts a gain of 43%, meaning a total spend of $519. "What other market is growing at a double-digit rate of 37%, 54% and 43% ?" asks Gignac. Two forms of Internet advertising dominate the Canadian market, with a combined 75% share: display, which are the graphic horizontal banners and vertical boxes found on most websites; and search, which involves either contextual keywords or for-fee placement in search engines. The other 25% of interactive online advertising is made up by classified, directory, and direct response advertising, as well as email ad campaigns. Despite the higher spending on online media in the U.S., Canadians are well ahead of our neighbour to the south in terms of broadband penetration, time spent online, and number of pages viewed in the average online session. "The broadband Canada is obviously very high," says Brent Lowe-Bernie, IAB Canada’s chair. "Our current number for July 2005 is 19.1 million people using the Internet every month." Three out of every four unique visitors from Canada are accessing the Internet via broadband connections, he adds – well above the U.S. average of just below 60%. In Canada, "88% of pages are consumed by broadband, and 84% of all minutes are spent with broadband access," notes Lowe-Bernie. Part of the reluctance to adopt web-based advertising may be due to its rocky and relatively short history: during the early Wild West days of the Internet, online advertising got a black eye from unscrupulous marketers and web site operators alike, who bombarded web surfers with wave after wave of untargeted advertising in miniature browser windows known as pop-ups. "The first thing that people think of when they think of things they don’t like about online advertising is the pop-ups," Gignac says. However, not all pop-ups are created equal; she adds: there are the "branded" ads directly relating to the web site the user is viewing. Then, there are "unbranded" ones, seemingly unconnected to the content – these tend to travel in packs and reopen hawking a different product after users close them. Add to that the plethora of "adware" and "spyware" programs that press users to install them, and then monitor users’ surfing patterns and other private information, and it’s not surprising many Internet users became hostile towards advertisers. While there is software available today that blocks the most bothersome spyware and adware, few on the Internet opt to block all online advertising altogether because there is valuable content out there as well, says Gignac. "You really don’t know if you’re missing a publisher’s advertisement, which might save you 20% off your subscription tomorrow, or a special notice, so most people don’t go to that second level." Another factor that may have impeded faster adoption of interactive advertising is the lack of industry-wide standards for "creative," or the actual advertisements themselves. Gignac says a typical firm that wanted to advertise on the web sites of several large daily newspapers might have had to create an ad specifically to fit each site’s format, driving up production costs. To that end, IAB Canada has created something it calls the Canadian Universal Ad Package, which sets standardized sizes for common horizontal and vertical advertising formats. "Anyone who’s entering the industry right now...can produce three types of ads and virtually cover the Canadian landscape," Gignac claims. "You can achieve pretty much 100% penetration across all Canadian advertiser-supported sites, and definitely across IAB member sites for sure." Gignac says proof that Canada’s interactive advertising market continues to gain momentum can be found in the growing interest in the Canadian market on the part of large U.S. advertising networks such as Emeryville CA’s Tribal Fusion Inc. and Westlake Village CA’s ValueClick Inc., which offer bulk advertising services and representation to hundreds of clients and web site publishers. In Canada, the largest sources of online content have developed their own in-house sales forces, similar to the way things work at their bricks-and-mortar print or broadcast operations. "You have Rogers , you have Transcontinental , you have St. Joseph , you have Canwest , you have all the Torstar properties...they all have their own individual sales forces, and they all sell all their advertising, whatever types they offer, by themselves," Gignac says. Large U.S.-based portals and search engines such as Yahoo Inc., Google Inc., MSN, and America Online Inc. (AOL) are also starting to develop their in-house advertising packages in an attempt to get into the lucrative ad business in many jurisdictions, including Canada. "Google was really well-known for search and pay-for-performance advertising; now, they’re going to be featuring display," Gignac says. The reason for the new direction is a growing recognition on the part of everyone concerned that the two formats fulfill very different purposes in reaching an audience of potential buyers. "Search is for direct response, is for awareness and brand-building, emotional engagement," she says. " realizing in order to become financially stable in coming years, they’re going to have to have ." AOL recently rolled out its Voice-over-IP telephony service in the U.S., creating another opportunity for advertisers to reach consumers that the Dulles VA-based firm hopes to capitalize on, Gignac says. "When you go to check your VoIP mail messages, you can check them in your email or you can check them on a main account site on the web – for AOL that will be more advertising real estate for them." Future increases in Internet advertising spending in Canada will likely come from growth in the display and search categories but also several other sources, says Gignac. For instance, IAB Canada’s figures only pertain to business-to-consumer transactions, and do not include the business-to-business market that was vaunted during the dot-com heyday but never seemed to materialize in force. "They’re now starting to figure out search and where they should be using display," she says. "Maybe they should be using display on somebody else’s directory site." However, she adds, increased demand from the business-to-consumer segment might leave ad agencies with few resources to devote to business-to-business clients, forcing them to create in-house advertising shops. "It will be interesting to see how they’re going to learn to do that themselves – they’ll probably make lots of mistakes out of the gate, and there’s not tons of budget to be throwing money around within B2B operations," she says. Gignac also says she believes classified and directory advertising will flourish in the future. "Newspaper is going to lose share because it’s so much easier to search classifieds and directories online," she predicts. "You ask people where they primarily search for jobs now, it’s online."

Online and upwards: interactive advertising soars in Canada

Broadcast | September 16, 2005

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