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Future of Retail Advertising Online Looks Rich
A new eMarketer report sees some surprises in store for a segment of the advertising business that could become hotter that a half-off HDTV sale.
There are two aspects of the Internet economy that no one is arguing about — advertising is up, and so are online retail sales. This holiday season, everything from books and apparel to electronics and automobiles is being sold online in record numbers.
In fact, advertising and online sales are proving to go together like icing and cake. They are a great combination. And more and more retailers, both online and off, are taking note. As the new "Retail Industry: Online Advertising Spending and Trends" report from eMarketer indicates, that portends big changes for both the retail and advertising industries.
Currently, according to a breakdown of advertising spending by product category, aggregated by AdvertisingAge, TNS Media Intelligence/CMR, Yellow Pages, and Deutsche Bank, the automotive industry leads all other advertising groups with $18.4 billion in ad spending across all media during 2003. But the retail industry ranks second, with $16.2 billion in advertising spending, while consumer goods manufacturers such as home furnishing and appliance makers spent $5.9 billion on advertising last year, compared to apparel makers, which spent $2.3 billion.
The budgets of most leading retailers go toward perfecting their e-mail marketing by improving customer segmentation or fine-tuning their paid search advertising. Banner advertising and sponsorships have been on a slight decline. But just because retailers did something yesterday, doesn't mean that is what they will do — or should do — tomorrow.
"In order to keep up with the competition, retailers need to stay on top of the leading trends in online advertising," says Steve Butler, Senior Analyst at eMarketer and author of the report, "especially now that the previous emphasis on customer retention has shifted to a focus on sales and revenue growth."
So what is next on the horizon for retail advertisers?
Mr. Butler continues: "Over the next several years, rich media advertising will bring significant changes to both online and offline advertising."
With broadband penetration set to surpass 53% of online US households in 2005, rich media advertising is coming into its own. eMarketer estimates that spending on rich media advertising will increase by 27.8% next year, topping $1.0 billion by the end of 2005. By 2008, rich media advertising spending will have more than doubled, reaching $2.2 billion in four years' time.
"Rich media can do things that no other advertising in any media can do," says Mr. Butler, "as a result, retail advertisers need new strategies for integrating their online advertising campaigns with their brand advertising efforts across other media. They should start planning now." 10.12.2004, eMarketer
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