The blogosphere is filled with diatribes bemoaning the disparity between the (large) number of people online and the (small) fraction of brand ad dollars spent online. There is no doubt that sites like YouTube, for instance, have enormous reach - 63.5M US uniques monthly, according to Quantcast. But YouTube's rumored revenue in 2007 was a mere ~$80M, despite Google's powerful monetization machine behind the site. The impending US recession certainly won't push brand ad dollars online, and many startups, including portfolio company Slide, are evolving their business models to dip into consumer pockets directly.
So why aren't P&G, Clorox, Nestle, et al, pouring money into sites like YouTube and Facebook, whose reach and engagement are indisputable? And how and when will brand dollars move online? I've been debating these points with Cheryl Tam Cheng, who joined BRV recently after several years in brand management at Clorox. Her insights, after having managed ad budgets bigger than most Web 2.0 companies' revenues, opened my eyes to the challenges - and opportunities - as online advertising tries to take a bigger chunk out of the multi-hundred billion TV ad market.
M- Media plans are put together through an
integrated process that includes the agency, the media buyers, the brand team
and other cross functional marketing people such as online, PR, in-store and print, with the brand manager giving direction on messaging,
creative strategy and budget splits. Startups trying to extract ad dollars from brands should remember that:
- Brand managers are smart. Very smart. And conservative, but not unreasonably so, given that they are nurturing product franchises developed over decades and worth hundreds of millions, if not billions, in annual revenue. These folks have to deliver growth in fiercely competitive markets while dealing with fickle consumers who have many choices; they need measurable results to engage with a new advertising channel
- CPG companies are very metrics driven. Ironically, the typical CPG company might have more and better quant jocks analyzing consumer data than all except the biggest Internet companies.
- TV has worked quantifiably well for brand advertisers: TV has mass reach, great recall, and well-segmented viewer demographics. The long-form content on TV allows for ads that are mini-stories that appeal to consumers' emotions. Most CPG brands sell offline, and must either create an emotional connection that persists between viewing the ad in the morning and driving to the store in the evening, or advertise at the point of decision, i.e., at the store.
- CPG ad budgets are relatively inflexible: Perhaps 80% of a typical brand manager's budget is allocated to TV, with the remaining 20% split across in-store, print, outdoor - and online. The brand manager controlling this mix has a tenure of 18-24 months, a number of short to medium term imperatives, and little interest in experimentation without relatively quick payback. Scaling from a 50K experimental buy to a 2M campaign requires a fundamental shift in how the brand is marketed, and will only happen if there's a clearly demonstrable ROI.
- Brand ads are bought for well-defined campaigns, not as part of an almost infinitely elastic lead-gen budget. Andrew Chen explains that well here, and the savvy startup will realize that they should be chipping away at brand budgets, selling small campaigns and delivering ROI, rather than hunting elephants.
- Startups are better off appealing to new, hip brands like Method than tilting at windmills (pitching to giants like P&G). Edgier brands with smaller footprints, like Method, that are still establishing themselves and target a younger, hipper, urban consumer are more likely to experiment with online marketing. Their budgets are much smaller, but only after these early adopters succeed in building a brand online will the giants follow.