Online ads expected to rise – but will it be enough?

Advertisers are turning to online news portals and social networking web sites to connect with customers - but this shift to digital might not offset ad-dollar losses in traditional media, according to industry insiders. While market analysts haven't crunched the numbers yet, the situation seems dire for broadcast and print companies. Major Canadian newspapers and broadcasters are cutting jobs (the Halifax Chronicle-Herald recently chopped 20 newsroom staff members) because of poor advertising revenue. And with the economy now in recession, things could get even worse. Compounding this is a general shift to new media. "Any executive with teenagers in their households sees the writing on the walls," says Darren Kelly, general manager of social media marketing firm Com.motion. Youngsters prefer streaming services, blogs, text messaging, Twitter, and social media networks to TV and magazines. "There's an awareness of this sea change in where the eyeballs are." That audiences are moving to the Web is good news for new media organizations, especially regarding advertising, which is projected to increase. The Interactive Advertising Bureau of Canada (IAB Canada) predicts online ad revenue in this country for 2008 will hit $1.5 billion, once the numbers are in. That's 21% more than 2007. But any online upswing wouldn't be strong enough to counter a major dip in traditional advertising - a real threat in today's economy. According to Kelly, the TV advertising industry is worth approximately $60 billion. "That's a big number," he says, pointing out that it would take a substantial amount of Internet advertising to come close to matching TV. "You can only buy so many page views." And while the numbers look good for 2008, "where we'll go from there, we can't predict," says Paula Gignac, IAB Canada's president. "It's such a rare situation we're in now - it's difficult to apply formulas to it." Still, media companies are applying a formula where possible: combining various media streams to present advertisers with holistic outreach platforms, encompassing traditional and digital media. It's the best way to ride the electronic wave while maintaining tried-and-true ad opportunities. Studies suggest advertisers using TV, radio, print and online vehicles attract more attention than single-minded companies do, Gignac says. "If you have four horses on your chariot, you're going to go a lot faster." Canwest Global Communications Corp. seems to exemplify this trend. According to the firm's Q1 2009 financial report, while newspaper publishing revenue decreased 7%, digital revenue (e.g. the online news portal Canada.com) increased 17%. Recently the company revamped its newspaper Web pages for improved content-access and advertising. "Digital is a smaller part of the business, but the faster-growing piece," says Joel Strolz, Canwest Digital Media's VP of sales. "The trick for us is creating consolidation across all of the properties." It's not exactly a shift from traditional to digital media, he adds. It has more to do with developing an advertising platform using all of Canwest's assets across broadcast, print and the Web. "Our clients are interested in opportunities characterized by complementary platforms." Canwest still had to chop jobs to save money. In its Q109 report last month the company said it had already let go 242 of the planned 350 staffers. But the firm is also investing in its digital assets, Strolz says. According to Gignac, although businesses are laying off workers, "if you look at the layoffs, very few of them are happening in the digital parts of those media companies." Does the drive for consolidation mean pure-play media companies are doomed? Not necessarily, says Com.motion's Kelly. "The specialists who really nail their part of the media mix will be successful." TV stations with community relationships online, for instance, could do well. "It can come in different ways." One of the more popular ways seems be social networking. According to a recent Com.motion/ Pollara survey, 82% of Canadian marketers plan to spend as much or more on social media campaigns in 2009 than they did in 2008. Meanwhile only 65% said they would spend as much or more on banner advertising, and 66% said they'd spend as much or more on newspaper advertising. In Com.motion's collective opinion, banner ads have lost their lustre. "We're already talking about them as old school," Kelly says. "They're not going away... But some of the out-of-date media that gets stale a bit faster or that makes it easier to zap through the advertising will see declines." Strolz from Canwest is skeptical about social networking, and he questions the timing of Com.motion's survey. "I'd call anything done before October invalid," he says, marking the timeframe of the global financial crisis that helped usher in the current economic recession. Since then, untried marketing methods such as social networking have become passé. "Moving product has become far more sexy." Noting that the survey was conducted in October-November, Kelly says he understands Strolz's concern. "There's a kernel of truth there, but I don't think it's because advertisers don't want to spend money on social media. It's that the mechanisms for buying social media aren't as entrenched as they are for traditional media." Whereas buyers-organizations and platform packages exist for traditional advertising, there are fewer established paths for advertisers to "engage influencers" on blogs and social media sites, so advertisers are sometimes frustrated. "We need to make it easier for Pepsi to spend $10 million." Meanwhile the industry is bracing for a period in which Pepsi and other brands may well decide to spend very little money on advertising overall. But Strolz figures the ad dollars will return, one way or another. "Look at the engine of the economy," he says. "It's been consumer spending....Although the current situation is unprecedented, I don't hear anyone talking about a dramatic shift in what drives the world's economy."

Online ads expected to rise – but will it be enough?

News | 02/06/2009 5:09 pm EST

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