Capitalizing on the Massive Shift to Online Advertising Spend

By Roman Lenzen, director of analytics, Quaero

It’s time! Online ad spend is predicted to reach $100 billion in five years, up from a predicted $61 billion this year. That’s a huge shift in advertising spend. Who is best poised to tap into that incremental online advertising revenue, other than the advertisers?

Aside from paid search—which is dominated by the portals (Google, Yahoo, etc.) —it will be those who can efficiently analyze online user behaviors, turn those behaviors into known interests, and effectively serve advertising online based on those interests to enhance advertising relevance.

The ad servers and ad networks are best poised to physically serve up the ads, and that most likely will not change much in the near future, although new ad networks are popping up, which is a good thing as that forces evolution.

What will change, and quickly is evolving now, is the companies that capture, store, and analyze the online data to determine true interests at the individual user level so the online content and ads may be targeted and made more relevant. Some of the largest advertising supported sites have the capabilities to develop internally (Google, Facebook,etc.), but most will look to outside online firms for help. In terms of those outside online firms, a few players exist in this space including-

Online Analytic Vendors (Omniture, Web Trends, Unica, etc.): Current online analytic vendors capture and store the online interactions and provide business intelligence interfaces to their clients so they may track online usage.

Current Advantages:

1. They hold much of the online data that drives much of the required analysis.
2. A strong technical online presence.

How they will need to evolve:

1. Either partner with current ad networks and ad servers or build (or buy) the ad serving capability.
2. Build or enhance their analytic capabilities.
3. Build the client relationships so other non-online data sources are incorporated into their solutions.
4. Enhance their online data capture capabilities

Marketing Service Providers (MSPs): MSPs, who traditionally handled direct mail, phone, and now e-mail communication channels, are evolving their marketing services to the online channel because they must as marketing spend is fast shifting to online.

Current Advantages:

1. Strong database, analytic, and marketing experience.
2. MSPs traditionally either build and/or host client marketing databases that already contain offline data and possibly some online sources.
3. MSPs already predominantly interface with the marketers on the client side.

How they will need to evolve:

1. Enhance their technical online capabilities.
2. Enhance their database and analytic skills so they can efficiently handle and analyze the massive online data sources.
3. Build partnerships with the ad networks and ad servers.
4. Build out an online data capture capability and/or form solid partnerships with the online analytic vendors.

Online Decisioning and Targeting Firms (X+1, Tealeaf, etc.): Online decision and targeting firms provide services and products that allow for varying communications and advertising to users based on site behavior and other available user attributes.

Current Advantages:

1. Typically 100 percent focused on online decisions and targeting.
2. A strong technical online presence and understanding of what works out of the box given they are 100 percent focused on enhancing online communication relevance.

How they will need to evolve:

1. Either partner with current ad networks and ad servers or build (or buy) the ad serving capability.
2. Build the client relationships so other non-online data sources are incorporated into their solutions.
3. Become huge data experts and enhance their online data capture capabilities

New Startups that 100 percent focus on online analytics and online communication relevance optimization.

Current Advantages:

1. 100 percent focus on this business or a portion of this business such as database products.
2. Typically small and medium in size, new, nimble, and hungry.
3. Many of these firms have a technology focus and have individuals with a strong online technology background.

How they will need to evolve:

1. As with all startups, they will need to build credibility through online client work.
2. Continue to evolve their products and services, especially their products since many are unproven.

Imagine a day where most of your video and audio content is available online and most ads will be targeted at an individual level based on your interests. Imagine a day when the same is true on your wireless device. That day is coming, which will open up an even greater flood of advertising revenue to the online channel.

So, who will capture the most online ad revenue in the next five-plus years (other than the advertisers)? Easy, those firms that stay focused on storing and analyzing online data efficiently develop strong partnerships in areas of weakness and are willing to quickly evolve as the online space is much more dynamic than other media channels. There will be winners and losers in each category above as they are all well positioned to capture at least a portion of the shift in advertising spend to online.

Roman Lenzen is director of analytics at Quaero, a marketing services provider that  helps companies use customer insight and strategy to drive business decisions. For more information, visit www.quaero.csgsystems.com.