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Big Package Goods Marketers Pouring Money into Online Ads

I started my career in marketing in packaged goods brand management, so I was interested to read that some of the largest packaged goods advertisers were finally embracing online advertising, according to the Wall Street Journal
 
(4/17/06). It seems that some of the big packaged goods marketers had been slow in adopting online advertising, but now companies such as General Mills and Kraft are increasing their online spending by significant amounts, (WSJ 4/17/06).
 
New Measurement Tools
 
This represents a big shift from a few years ago, when brand marketers weren’t able to determine the impact of online advertising on store sales and had dedicated only a small portion of their sizeable ad budgets to online ads. Why have things changed? Part of the shift can be attributed to a service called Consumer Direct that can measure how Internet ads affect sales. Yahoo and ACNielsen got together to develop Consumer Direct, which “can track when the display of an online ad leads to an offline purchase.” (WSJ) In addition, a study conducted by MSN, in conjunction with Kraft’s Jell-O brand, “…. showed about 8% higher purchases by consumers who had seen the online ads compared with those who hadn’t.” (WSJ)
 
Online Video Should Further Spur Online Ad Spending
 
The growth of online video has also fueled packaged goods marketers’ online spending. Brands such as Anheuser-Busch believe that much of consumer video viewing will shift to the web from TV. (WSJ) This is being facilitated by the shift to broadband usage by 60% of U.S. Internet users. Expect this to be an explosive area of Internet ad growth over the next several years.
 
Shift from TV to the Internet
 
As with other forms of advertising, once consumer adoption reaches a certain critical level then ad growth takes off, but then eventually levels off. However, for the foreseeable future, I predict that brand advertisers are going to be focusing their ad dollars where the consumers are. And increasingly, they are on the Internet. For example, Unilever’s Axe brand, which is targeted at young men, initially spent the majority of their ad dollars on TV, but now has shifted those dollars to the Internet (WSJ). Anheuser-Busch’s research shows “that their target 21 to 34 year old consumers spent about six hours a week online, compared with just 10 minutes a week a decade ago.” (WSJ)
 
Keeping Up with Increased Demand for Online Ads
 
Small shifts in the media spending habits of marketing giants such as Procter & Gamble, Kraft and Unilever can have a profound effect on web advertising inventory, since package goods companies represent 11% of the $145 billion in U.S. ad spending in 2005 (TNS Media Intelligence & WSJ). Sites like MSN are having a hard time keeping up with the advertising demands of the package goods advertisers (WSJ). It will be interesting to see how things play out over the next several years and how big increases in online spending will affect smaller advertisers’ ability to advertise cost effectively online.

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