The company plans to use the funds to expand internationally.
Mass media re-emerges in the fight for online brand dominance as e-retailers take to TV and national print to drive sales.
No question that pay-for-performance advertising has soared online in recent years as its providers and users alike have gleefully extolled its advantages over both traditional advertising media and CPM-based online advertising: it’s more cost-effective; its impact is more immediately felt and its effects more easily measured.
Why, then, did online discount merchant Overstock.com fork over millions this year for a national television advertising campaign? And it’s not the only online company that’s ventured into offline advertising in major media recently. Shopping portal Shopping.com is testing TV campaigns in three media markets with an eye toward bigger roll-out, while competitor PriceGrabber.com has in the past year shifted up to 50% of its advertising spending from online outlets to magazines, billboards and radio. Digital music site BuyMusic.com choose cable TV ads to announce its launch this summer, while eBay’s TV ads still run on cable, a year after they first aired.
As the fight for survival among now-established online companies gives way to the fight for brand dominance online, it’s a war too big to be won exclusively on the web. While online ads may be the surest, quickest route to shoppers accustomed to purchasing on the web, online ads fail to tap a huge source of potential customers: the estimated 150 million or more of the U.S. population that has yet to shop online. Online companies have realized it takes more than direct marketing on the web to establish a brand and make it grow, and some are calling in reinforcements in the form of traditional advertising media from broadcast to print to billboards.
Companies like Overstock, which had earlier resisted pricier broadcast advertising, now see traditional media as a critical element. “We’ve made 40 million Americans aware of who we are in the past few months,” says CEO Patrick Byrne. Overstock launched its TV, print and radio campaign last summer. “It’s hard to do that just online.”
For companies such as Buy.com Inc.’s BuyMusic.com, whose growth depends on connecting with music lovers new to the digital category as well as those already online, the broader reach of traditional media looks good as well. “Especially with a category like digital music, if you stay only online, you may just be preaching to the converted,” says executive vice president of business development Elizabeth Brooks.
Spreading broader awareness is a problem for online-only companies without other channels to help anchor their presence in the marketplace. Yet they must battle for consumers’ attention with companies that have the multi-channel advantage. Overstock, for instance, competes with both online liquidator sites and offline liquidation outlets. BuyMusic.com competes with the digital music offering of established offline brand Apple. Shopping comparison sites Shopping.com and PriceGrabber.com compete not only with each other but also struggle simply to be understood, as a new category, by consumers.
Given its relative lack of accountability compared to the precise measurement that characterizes online pay-for-performance advertising, traditional offline advertising is a big leap for pure plays. “It’s a tough pill to swallow for people like me. We’re used to measuring everything, and we’re held strictly accountable for measurement ourselves by the people who advertise with us,” says PriceGrabber president Kamran Pourzanjani. “But we are trying to bring in people who are not already online, so offline is the only place to do it. We have to go to them where they are, if you will, by advertising in the publications they are reading and on the radio stations they are listening to.”
And on the TV programs they are watching. Though the CPM of some print advertising may actually exceed that of TV, depending on the outlets involved, TV makes a bigger dent in the budget if the audience is bigger. Surviving Internet companies that were themselves burned or saw competitors damaged by big spending during the expensive and largely unsuccessful TV dot-com ad blitz of a few years ago have generally avoided TV since. Nevertheless, those who can afford to do so are beginning to reevaluate the medium. Says Jupiter Research analyst Patti Freeman Evans: “Tracking results is important, but there is an understanding of what TV and print are able to do.”
The television medium in particular can create an emotional connection with consumers that online advertising doesn’t, another reason online companies now trying to strengthen their brands are eyeing TV with renewed interest. “TV advertising is overpriced and has its limitations. It isn’t as accountable as other media,” says Peter Storck, managing partner at K-Town Group, a research and consulting firm for interactive marketers. “But it’s still the most important battleground; it’s still a way to reach mainstream consumers in the most emotionally powerful way. People well up at an AT&T commercial where a guy calls his mom on Mother’s Day. That doesn’t happen when you see the ad on the Internet, while passing a billboard, or flipping through a newspaper or magazine.” Still another part of the appeal of commercial TV, an ad medium also used by big, long-established consumer brands, is that it can lend some of that same credibility to newer web-based companies, retail consultants say.
Yet there’s a key difference between the expensive dot-com Super Bowl advertising of three years ago and the current environment. The web-based companies experimenting with TV now already have some following, says Evans. “They are not trying to build their brand just through a lot of big-ticket spot purchases, which is what a lot of pure-plays tried to do,” she says. “They’ve already achieved a certain level, and now they are trying to establish themselves at another level. That’s why TV works for them now.”
A difference in three years
Its predecessors DealTime.com and Epinions.com spent millions on advertising in 2000-not always cost-effectively, admits says Sarah Leary, vice president of marketing at Shopping.com, which emerged in September from the combination of the two. Yet this fall the newly merged company launched with TV ad support. So what’s changed between 2000 and 2003?