Marketing Newsletter - Minds Eye from Marketing Minds

	Minds Eye The Marketing Minds Newsletter	July, 2006

	In This Issue:
	Market Data What Happened? Marketing News Random Thoughts iPod - It's Not Music in Everyone's Ear Interesting new links Just for Fun - New Word - Jokes Minds Eye Article Cut Your Marketing Budgets – Advertising v. Online Marketing They wouldn't do that, would they? Marketing supplier insights: Search Engine Companies

Market Data

US TV's Low Watermark
In the USA during the week of July 4th holiday fewer people watched the big four TV networks than at any time in recorded history. CBS, ABC, NBC, and Fox averaged a combined 20.8 million viewers during the average prime-time minute. The previous low point was 21.5 million during the last week of July 2005. (Nielsen Media Research)

India mobile phone subscribers top 100 million
As at the end of May 2006, India became only the fifth country in the world to have over 100 million mobile phone users, joining China, Russia, Japan, and the USA. India is currently adding about 3 million new telephone users a month (including land line phones), according to government figures. Bharti Airtel, India's largest mobile operator reported its subscriber numbers to be growing at 86% in it's most recent quarterly report.

Broadband Growth in India
Growth is also occurring in the number of broadband connections in India, though overall numbers are still small: According to the Telecom Regulatory Authority of India, there were 1.55 million broadband connections in India at the end of June 2006, compared with just 390,000 a year earlier.

Over 50% of World's Mobile Phone Users Live in Asia Pacific by 2010
There were over 2 billion mobile subscribers worldwide at the end of 2005. By 2011, this number is forecast to grow to 3.96 billion. Of these, over 50% will be in Asia Pacific, and India and China are expected to have a combined 1,067 million subscribers.
Portio Research Limited

Bebo 25 million Subscribers
The UK's Largest social networking site, Bebo now has 25 million subscribers.
Nielsen//NetRatings

MP3 and iPod growth Continues
1.95 million MP3 players were shipped in Australia during 2005, up 180% on 2004. 60% of the 1.95m were iPods. In its latest quarterly announcement, Apple reported global sales of 8.1 million iPods in the 3 months to July 1st, up 32% on the same quarter a year ago.
MP3 data from IDC, quoted in AFR 240606

2/3rds of AOL's US Subscribers Still using Dial-Up
Despite the obvious growth in usage of broadband internet connections, AOL has announced that of it's 18 million subscribers in the USA, one third of these had been paying for broadband services (the remaining 2/3rds still being dial-up). AOL is no longer charging for services to broadband subscribers. For comparison, AOL has 1.2 million subscribers in the UK.

Online Advertising Spend up 65% in Australia
Australian companies' spending on internet advertising increased 65.3% in the March 2006 quarter, raising the possibility that spending may reach A$ 1Bn during 2006 (total spend for 2005 was approximately A$620 million). Online ad agencies report that most online spend is made by financial services, travel, IT, communications and automotive companies. (AFR 170706)

China Search Advertising Spend Tops US$ 1 Bn
While dwarfed by levels of expenditure in the US market, a total of over US$ 1 billion is forecast to be spent advertising online to Chinese consumers in 2006. Of this, search revenues will be worth $450m, and online sales advertising will be $570m. China's domestic search market is currently dominated by local firm Baidu.com. iResearch of Shanghai, quoted in the UK's Financial Times 230506

Average Cost per Click
Among large US advertisers (particularly ones who need to advertise in mass-markets) the average pay-per-click search-term (key word) cost in Q2 of 2006 was $4.51. This is the average figure paid within the categories of retail, financial services, health and fitness, technology and entertainment advertising. Far lower cost per click rates can be achieved in more specialist categories, and by tightly aligning target keywords, "sponsored link" advert copy, and landing pages. Financial Times 170706

What Happened..
(Marketing News in recent weeks)

Online Advertisers Believe One in Seven Clicks are Fraudulent
Data gathered from more than 1,300 online advertisers suggests that around 14% of clicks on adverts sold by search engines are fake. Put another way - one whole day's online advertising is wasted each week, or nearly two months every year.

Click Forensics, a monitoring service for advertisers, said a “Click Fraud Index” it had compiled showed bogus clicks increased from an average of 13.7 per cent in the first quarter to 14.1 per cent in the second. For online adverts costing over US$ 2 per click the amount of click fraud is even higher - about 20% of clicks.

Responding to this problem, Google has announced that it will not charge advertisers for clicks it believes are invalid as a result of click fraud. Google AdWords online billing summaries (retrospective from June 06) now show a line item each month called "Adjustment - Click Quality" and a corresponding credit to the advertisers account reflecting charges that are associated with clicks which Google believes are the result of click-fraud.
Related article: Advertising GYMnastics
Click Forensics data reported in Financial Times 170706

TV Ad Spot Viewing Figures Being Measured in the USA
Nielsen Media Research is to produce viewing figures for TV adverts for the first time ever in the US television market. Service providers in Australia claim they already effectively deliver this, by reporting viewing figures in 5 minute increments.

Coca-Cola Heads the List of Top 100 Global Brands for 2006
Valued at US$67 Billion, Coca-Cola has been ranked the world's most valuable brand in the annual listing published by Business Week. Also in the top five (in order) are Microsoft, IBM, GE, and Intel, who all retain their positions as the five most valuable Global brands. The top ten is rounded out by Nokia, Toyota, Disney, McDonald's, and Mercedes-Benz.

52 of the top 100 brands are from the USA, with the next largest group coming from Germany with 9 of the top 100. France and Japan are next with 8 brands each, followed by Britain with 6, Switzerland with 5, Italy with 4, and South Korea with 3 of the top global brands. Bermuda, Finland, Spain, and Sweden are each home to just one of the most valuable global brands.

Data for the survey is provided by Interbrand, whose calculation of brand value is based on projected earnings to 2011 (using reports from analysts at J.P. Morgan Chase, Citigroup, and Morgan Stanley) discounted by various risk factors). Airlines are excluded from the survey since the methodology used cannot separate out the value of their brands from other factors such as routes and schedules. Since the survey is of global brands, to be included a brand must generate over a third of its revenue from outside its home country (resulting in Visa, Wal-Mart, Mars, and CNN being omitted).
http://bwnt.businessweek.com/brand/2006

Cadbury protects reputation with UK Products recall
On June 23 Cadbury Schweppes recalled over 1 million chocolate bars in the UK and Irish markets in a precautionary move, because they could contain minute traces of salmonella. Cadbury suspended its TV adverts on the Coronation Street soap opera after recalling chocolate bars in the salmonella scare. Cadbury is the Coronation Street sponsor in a £14million per year deal.

Random Thoughts

iPod - It's Not Music In Everyone's Ear
It is becoming quite common to find business people "admitting" that their iPods contain either no music or very little. All these people use it for is listening to podcasts of various types.

Many business professionals are using their iPods more like a Tivo device for audio: that is, to selectively download programs of particular interest to them and to replay it at a time that is convenient to them. For busy professionals, this often means listening to podcasts on their iPod in the car (or on the train) when commuting to and from work.

New research by Nielsen Analytics finds that nearly 9 million US adults (overwhelmingly men, for some reason!) have downloaded at least one podcast in the last month. Of these, about 10% report downloading eight or more podcasts each week (most people download between one and three shows per week). The Economics of Podcasting, July 2006, Nielsen Analytics

For all the attention that is given to music downloads (legal or otherwise), podcasting is of far greater relevance to most marketers. Podcast listeners are almost certainly going to be listening to something that they have a high interest in, and which is very relevant to their intellectual needs. Audio has long been regarded as the most intimate of media, which generates the feeling of having a one-to-one listening experience.

By careful targeting of marketing messages into (and through) the podcast medium, companies can "get the ear" (sorry!) of the business professional segment.

This is nothing new, of course.

For many years many business to business companies, pharmaceutical companies, and others with a need to educate and engage their markets, placed considerable emphasis on distributing audio cassettes. That technology died and is now very unfashionable.

Podcasts are a much cheaper method of delivering market education and employee training (unit costs are usually zero $), and are far easier to put together and distribute than the once popular cassettes ever were.

Apple Computer's iTunes website listed 60,000 different podcasts in early July. They are mainly free, and include feeds from most major broadcasters and news organisations.

Interesting New Links

What TV Ratings Really Mean (Nielsen Media)
Nielsen Media operate an important TV program ratings system in the USA, and provide most of the information used by broadcasters and the media industry in deciding the popularity of a TV show.

Nielsen Media have produced a good background note about how the US TV program ratings are calculated. To read it, go to:
www.nielsenmedia.com/whatratingsmean

Just for Fun
(essential marketing mind-flexing exercises!)

Q: How many mediators does it take to change a light bulb?
A: So what I hear you saying is that you want more light.

Why do ducks have webbed feet?
To stamp out fires.
Why do elephants have flat feet?
To stamp out burning ducks.

A blonde was bragging about her knowledge of US state capitals.
She proudly says, "Go ahead, ask me, I know all of them."
A friend says, "O.K., Wisconsin?"
The blonde replies, "Oh, that's easy, W."

There's a new bumper sticker that says "Run, Hillary, Run."
The Democrats put it on their back bumper, and Republicans put it on their front bumper.

Minds Eye Article

Cut Your Marketing Budgets – Advertising versus Online Marketing

While the internet accounts for about 15% of all media consumption by consumers, its share of marketing spending is less than 5% (AFR 170706).

In the US newspaper industry, online advertising is only about 5% of total newspaper advertising revenue. Advertising on newspaper websites rose nearly 35% (to US$0.6 billion) in the first quarter of 2006 compared with a year ago. During this same period, print advertising revenue rose just 0.3% in US newspapers, to US$10.5 billion. (Newspaper Association of America, reported by Reuters 020606)

The online advertising industry and search engine marketing companies talk up the importance of internet-based promotion and forecast the day it will take the lion's share of total advertising spend.

Managers who directly control a marketing budget may well recognise that such talk is illogical, particularly those working in businesses which have good data on customers and prospects. What is really happening is a shift towards more targeted marketing communications.

The internet, for most businesses, offers tremendous opportunity to make marketing expenditures much more profitable. Online, it has become possible to make advertising highly relevant - not just to a target market, but also to the activity and frame of mind that prospective customers are likely to be engaged in at any particular time.

Furthermore, by its nature, online marketing is much more interactive, engaging, and can be designed to encompass a call to action which directly links and draws customers into purchase evaluation and order processes.

When businesses have sufficient customer information to perform direct marketing and sales engagement activities online the returns can be enormous when compared to traditional methods.

In short, online marketing is far, far cheaper to implement than traditional marketing communications. The fact that it is also much more easily targeted (and can be optimised throughout a live campaign) means that companies can much more easily deliver relevant communications to individuals. This combination means that you can achieve far more with much lower expenditure.

Compare this with a typical advertising campaign, either in print or on TV. While some broad demographic targeting is performed by media buyers, nine times out of ten the success of the campaign boils down to whether overall sales went up during and shortly after the adverts ran.

The old joke "I know that half of my advertising spend is wasted, I just don't know which half" is actually true for traditional media.

The whole point of online marketing is that it is possible to do more with less. A much more targeted and higher-return market impact can be achieved for much less money.

This combination usually makes the case for focusing time and money on online campaigns overwhelming.

In such circumstances, however, Marketing Directors and business owners need to take care that they are not hoodwinked by media buyers and the advertising industry.

When online marketing is properly used, managers should not simply re-allocate the advertising or marketing communications budget. A dollar spent on traditional advertising is far less effective that a dollar spend online.

Marketing Directors, Brand Mangers, and the like should put aside the "prestige" of managing as large a budget as possible. Online marketing means that far less should be spent on marketing communications than was done in the past. Budgets should be reduced.

Online is not the answer to everything, and traditional advertising media should and will be with us for a long time. However, expenditure on traditional media will decline.

What most business managers will want to ensure is that this is not a zero-sum game.

Far less should be added to the online budget than is cut from the traditional advertising one.

They Wouldn't Do That... Would They?

Advertising GYMnastics - Transparency lacking in the online world

At a recent event billed as a "Google Master Class" held in Sydney, several employees of that firm conducted a very informative and useful seminar for online marketing professionals.

While the Google team were not giving any secrets away (since exactly how Google's algorithms work is a closely guarded secret), a good overall impression of Google's approach to it's three main services (Google search, Google AdWords - it's paid search business, and Google AdSense - its retail partner business for advertising inventory) became clear. Not surprisingly, all three services revolve around Google's advertising revenue generation.

Google is no different from the other major search companies: Yahoo! Search Marketing, and MSN (collectively referred to as GYM). Their business models are quite similar, and all provide advertising services which are based on an extensive (and very secret) set of algorithms which drive such things as the placement of sponsored adverts on their own websites and on partner networks, and the order in which websites and sponsored adverts appear on their search pages.

Early in the day, it emerged that only about 20 businesses in Australia have direct access to a Google services team (Australia has in the region of 1 million businesses country-wide). The impression was given throughout the day was that the majority of these (and the people the Google team were most used to talking to) were in fact search engine marketing, online media and advertising agencies.

When a vendor of advertising inventory (ie all the GYM companies) do business with online media agencies or search engine marketing companies, it is to be expected that the focal point of discussion is maximising the ROI of clients' search advertising investments.

What is in the interest of both parties, however, is that the search advertising budgets of major clients be as large as possible. Similarly, the discussion between media agency and marketing director will often be around the question of "how much do you want to spend" (budget allocation), just as much as "what are you trying to achieve". The logic of online search advertising is that as long as the "unit economics" are good (ie each click-through costs less than the margin it generates), spending should be encouraged. In this world, it is up to client's to watch out that they do not over-spend on their online marketing.

So far, so good. This is simply basic commercial reality. Far less comfortable for most business managers is the lack of transparency around the details of how paid search campaigns run and are billed.

Putting aside the topic of "click-fraud" (see news item above), GYM companies require search-advertisers to take an awful lot on trust. Most of these areas would never come to mind when placing campaigns through online media buyers or search engine marketing companies. Just a couple of basics need to be understood before we consider transparency issues:

Firstly, all online search campaigns involve creating short adverts (the items called "sponsored links" on search results pages). Each of these adverts is connected to two things (by the advertiser): a destination web page, which the customer is taken to if they click on the link in the advert, and a number of search terms which the advertiser has specified as being relevant to the advert and the destination web page (called keywords by Google). Together this is called an AdGroup (on Google's system).

When a campaign is being built, the advertiser (or their agent) specifies the maximum amount they are prepared to pay if an advert is clicked on. A conscientious agent will specify this maximum amount not for each advert but for each keyword (the search engine companies charge at the keyword level). Different keywords can have different maximum bids though they are associated with the same advert.

Google and the rest set a minimum bid price depending on how relevant a keyword is to both the advert and the web page it leads to. The search companies want to deliver adverts which are relevant to each person's search, and not throw up irrelevant adverts (you are more likely to click on an advert if it is relevant to your search). Finally, advertisers compete for each keyword by saying what the maximum price is they will pay for each keyword (the higher the bid, the higher up the list of "sponsored links" your advert will appear).

So... (at last!)... what are the problems in transparency? Well, they include:

You have no information at all about the level of competition for a keyword, and you have to take it on trust that there are other people bidding on it (would you feel comfortable in a house auction if you were bidding for a new home when there was only you and a dozens of "telephone bidders?").
Over time, you will notice that the "minimum bid" on a keyword increases. You have no information about why this is happening. Is this how search engine companies raise prices?
You may have a mix of inexpensive and very expensive keywords in the same adgroup. If a person does a search that includes both the inexpensive keyword and the expensive one, and they end up clicking on the advert, which keyword does the search engine company charge you for? For all we know they might always charge you for the most expensive keyword.
There is no known way to audit the text advertising impression and % click-through statistics for a paid search campaign reported by the search engine company. They are "marking their own homework".
(n.b. Some search engine companies have recently introduced support for graphics and video adverts. These types might be trackable using techniques employed for banner advertising campaigns.)
There is no known way to audit where and when text adverts actually ran.

There are other uncertainties which require a more complicated explanation.

No doubt the search engine companies would respond to this by saying the focus should be on the results: Are the average Cost per Click and the average Cost per Conversion acceptable? Does the campaign generate measurable business results (ie generate sales)?

Value for money of search marketing campaigns can certainly be assessed by Cost per Click and Cost per Conversion metrics, but what is very unclear at the moment is how much lower these costs could be if the rules behind advert placement algorithms were better known.

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