The Marketleap Report
Volume II, Issue #5 - March 19th, 2002

Digital Marketing vs. Online Advertising
Breaking waves for marketers to catch
By Keith Boswell

The Internet marketing landscape has grown rapidly over the past few years, spreading out over the Internet like warm saltwater in the sea. Initially focused on banner advertising and search engine submissions, the environment has grown considerably in terms of tools and sophistication of the techniques that Internet marketers are employing.

Jupiter Media Metrix has spotted a recent shift in advertising/marketing dollars into online channels that deliver less expensive distribution, greater personalization, and higher response and tracking rates than traditional marketing dollars are able to capture.

What is emerging in the online marketing space is part digital marketing and part online advertising. Online advertising is an online marketing model based largely on traditional metrics and thinking. Online advertising learns its lessons from television, print, and radio. Examples of online advertising are banner ads and website/content sponsorships.

Digital marketing is a model based on the possibilities created by tightly networked markets. For example, in the next 24 hours web surfers will search for "used cars" an estimated 36,507 times. Marketers are able to insert themselves into these online markets in ways they never could before (see Keyword Markets to learn more). Even in a world filled with spam, consumers and businesses are finding each other on the Internet in unobtrusive ways.

Companies employing digital marketing tactics are actively working to ensure their customers are getting the best and most relevant information that they need to make purchases. Digital marketing consists of search engine optimization, permission-based email marketing, and online coupons.

Marketers were led into online advertising first because it most matched the traditional marketing channels they were accustomed to and the tools for effective digital marketing didn't exist yet. Like exploring new coasts with dated maps, it was only a matter of time before those marketing online gained better tools and information to make them more successful.

According to Jupiter, spending in online advertising in the United States grew by only 5 percent in 2001. Once the economy settles down, they expect it to bounce back and grow at a compound rate of 22 percent over the next five years, reaching a total of more than $15 billion by 2006.

During the same time period, Jupiter predicts that spending on digital marketing initiatives such as search engine optimization, e-mail, and coupons will surpass that of advertising and reach more than $19 billion by 2006.

The growth for online marketers will be huge. According to Jupiter's Internet Advertising Model, by 2006 online advertising and digital marketing will account for 7 percent of the total advertising market, up from 3 percent in 2001.

As marketing online matures, we continue to learn a tremendous amount about how people are conducting themselves online. Traditional models didn't grasp how powerful combining hyperlinked information and marketing tactics could be.

Driven quickly through hyperlinks to information, context becomes an important factor for success. Varying levels of trust are created depending on where information is found.

Companies must ensure they are being found in search engines in order to attract a captive and interested audience. A study from the NPD Group released in February 2001 found that search listings are more effective than standard banner or button advertisements when it comes to brand recall, favorable opinion rating and inspiring purchases. The study found:

• In unaided recall, search listings outperformed banners and buttons by three to one
• More than twice as many people gave a more favorable opinion of companies in the top three search positions than those featured in ads
• 55 percent of online purchases were made on websites found through search listings
• Only 9 percent of online purchases were on websites found through banner ads

These studies suggest that people are inclined to trust services like search engines much like they trust a librarian, a trust that people would not be lead wrong by those who would choose to lead them. Search engines work because they are a passive tool, awaiting input from the user to find what they want.

Email works because it takes the concept of direct marketing and turns it into an active communication channel driven by valuable information and transactions. Research released from DoubleClick in November 2001, indicates that over 88 percent of online consumers have made a purchase as a result of receiving permission-based email, up from 61 percent last year. The research also found that 37 percent had clicked through an email and purchased immediately, up from 20 percent last year.

JCPenney is an example of a company that is using email to drive sales. Between 1998 and 2000, JCPenney's online sales rose from $15 million to $294 million. JCPenney hasn't released online sales figures for 2001, but projections were for sales over $400 million. How has the business grown that much? By focusing on targeted email lists from a willing audience of over 4.5 million shoppers. A family with children headed back to school will get promotions that highlight JCPenney's back to school specials.

A blinking rich media banner ad can't begin to work that way. It might have relevant information or appeal, but only about one one-thousandth of the time. Banners, in all shapes and formats, live in the desert of the online world like billboards on a lonely stretch of dry, forgotten highway.

Digital marketing, like search engine optimization and email, fills your belly and growls at you because you're hungry for it. It's what you want...not what someone perceives you to want. When a person searches on a search engine for a specific product or service, they are qualifying themselves as a potential customer.

Online advertising reminds you that a company has not faded away, sticking to a one-sided, high-frequency push of information it believes will draw people to it like a lighthouse. Digital marketing looks to meet you up on scenic deck #2, where mutual conversations drive transactions and relationships. In a shifting sea of choices, marketers' budgets will soon reflect where the real money and conversations live.

report@marketleap.com.