Online Retail Sites Buoyed by Web Ad Campaigns, Report Says

An "increasingly strong, positive" correlation exists between online retail advertising and the number of "engaged visitors" to online-only retail sites, according to a new report, The Rise (and Fall?) of Online Retail, by AdRelevance, a division of Media Metrix. Engaged visitors are people who spend more time per Web page than the average person--at least three minutes a day--and view more content on retail sites.

The top three visited online retail segments in the month of April--books/music/movies, flowers/gifts/greeting cards and computer hardware/software--show a correlation* of 0.83 between advertising impressions and engaged visitors. Of the top three categories, flowers/gifts/greeting cards had the lowest correlation at 0.78, while the more competitive sectors of books/music/movies and computer hardware/software both show correlations of 0.82 and 0.87, respectively. Top online-only retailers run regular Internet advertising campaigns amounting to 168 million average monthly impressions, says New York City-based AdRelevance. Although retail ad impressions declined significantly with NASDAQ's April downturn, falling from 19% growth in February to a 9% loss in April, they rebounded in May, showing six percent growth, says AdRelevance.

Some of online-only retailers, such as Amazon.com and eBay, have created a brand name by running regular online ad campaigns consisting of 168 million average monthly impressions. Smaller, lesser-known companies, which often struggle with brand identity and differentiation issues, often have little to no online advertising and tend to operate in highly saturated or fragmented categories. The report says. Successful online retailers appear committed to online advertising to drive traffic and build brand awareness, it says, but online retailers that don't have the same level of brand recognition can still be competitive using online advertising. The AdRelevance Report shows that some companies, such as Reel.com and PlanetRx, build good traffic using direct marketing impressions, it says. "It's a challenge to find the right balance between online branding advertising and online direct marketing, and it will be those businesses that do that will survive the predicted shakeout," concludes the report.

*-1 would indicate a perfect negative correlation and 0 would indicate no correlation, while +1 would indicate a perfect positive correlation.