Darren Herman

Please excuse the diatribe, but I wanted to get my point across.

In a recent posting by Om Malik, he questions the growth in online advertising, citing that they are growing too fast and marketing messages are going to be everywhere.

One of the reports he references are eMarketer’s recent forecast – U.S. online advertising nearly doubling from $21.4 billion in 2007 to $42 billion in 2011, representing about 13 percent of the total ad-spend. I am excited for this growth, not scared of it. Let me tell you why.

Hypertargeting: Technology is finally here where we can hyper target our advertising messages. Over the past few years, there has been the opportunity to utilize niche technologies to do so, but now it’s in the mainstream, and here to stay (SocialAds, ContextWeb, Lotame, etc). Advertising overall should be a conversation and when you’re having a conversation with your friends, you don’t normally shout to a million people at once. You speak to an individual or a group of pre-determined people. The technologies are emerging to finally let this happen and they are being combined with a userbase, something in the past we forgot to do (matching the tech w/users).

Shifting Dollars: The overall advertising pie isn’t getting much bigger, but dollars are shifting away from other media into online (digital). There are many reasons why this is occurring but one of the main reasons is wastage, or if you’re a good online marketer– very little. The wastage factor is what you spend to miss your target audience, or the amount of money you’re wasting. Offline dollars are realizing that their buys aren’t as targeted (see above) and they are shifting dollars to online media. Are these dollars going to shift all at once? No. It’s going to be a long time coming as people are still scared of the Internet and digital media opportunities.

Digital Media & Online: I like to think that digital media includes online advertising. Digital media, for me, is anything that is touched by an Internet connection. Marketers use this Internet connection to deliver marketing messages. This doesn’t just have to exist online, but it can exist on mobile, digital signage, etc. Of the $21.4 billion to be spent this year online, there is a large portion of it to be spent in digital media. As much of what we use becomes digital, the opportunity becomes that much greater.

Accountability: If we’re going to spend money in marketing, we like to be able to measure what we’re spending, where it’s going, and what it’s doing. If I’m at an ad agency, I need to be able to tell my clients what their money is doing for them. One of the long-time ad industry quotes are, “One half of my ad budget is effective, but I don’t know which half.” We now know which portion of the budget is effective and can optimize a campaign on the fly to make it perform better. If you’re advertising in Car and Driver Magazine and for whatever reason, you want to pull the ad, you can’t once it’s’ been released. On CarandDriver.com, you can. Amazing.

Since the world is flat and we try to reach consumers in all different countries, I’m keeping my eyes open on the growth of online advertising in China. According to eMarketer, online display advertising in China totaled RMB 2.6 billion ($342 million) during the third quarter of 2007, up 14% over the second quarter. Display advertising in China is picking up steam and with over 1 billion citizens, it’s a very large market. Expect ad dollars to follow.

So, Om, why are you scared? Are you scared that we’re shifting money too fast? Are you scared of the entrepreneurial environment? There are so many great reasons why dollars are moving into the digital media (online) advertising segment and these are just a few. If anything, I wouldn’t be scared, I’d be excited, as marketers are becoming smarter with how they’re placing their money.

Are marketing messages going to be in our face, all the time? Hopefully not. Digital media allows us to serve the right message to the right consumer in the right place. Efficiency is the key and potentially, less messages are more. Since we’re getting better at targeting, we may be able to deliver less messages, all of which are higher targeted than previous, to individual people. So, in my perfect world, Om, there are less messages being delivered but the delivery aspect is of higher quality.

In terms of startups chasing advertising dollars, this is another posting. For each time the sun rises, new startups are created and some of their business models revolve around advertising. If there are too many startups chasing online advertising budgets, the industry can’t support it. There will be a bust because of this. Some companies will not survive. Simply put, the law of suppy & demand.

Please note – there is a time and place for traditional advertising. Depending on the circumstances and client, there is a need for more traditional advertising than digital. The entire world is not going to shift all of it’s budgets to online advertising, but a majority of the advertising that is being wasted is going to shift. Since we’re human and we make mistakes, have egos, and like to live irrationally, it may take much longer than expected for this shift.