The Pontiflex CPL Blog

An article in MediaPost today quotes a McKinsey study that examines why marketers are not investing online.

What’s especially surprising is that this study comes on the heels of an IDC report released yesterday that showed online advertising growing 25% YTY in 4Q 2007.

Which perspective is then the right one?

Perspectives are like mirrors in a fun house – you look into one and see God’s gift to humankind, and then you look into another and begin to see why extinction might not be such a bad thing after all.  So it would be premature to dismiss a report, even though it flies in the face of conventional wisdom.

According to the McKinsey study, marketers spent 7.5% of their budget on online marketing initiatives. One could point out that this might be because online media is cheaper. It would have been beneficial to examine this data through the lens of an index, such as one that measured spend on a medium against the relative cost of that medium in aggregating a thousand impressions.

Yet another point to consider is that a study of the rapidly growing SMB segment might have yielded different results.  Was the McKinsey study conducted among executives in the larger enterprises, dominated by decision makers who like their magazine spreads and Super Bowl spending ways?

That said, it would behoove marketers to understand the obstacles in the way of increased online spending.  The McKinsey study quoted the following criteria that came in the way of the same:  insufficient metrics to measure impact, insufficient in-house capabilities, difficulty of convincing upper management, limited reach of digital tools, and insufficient capabilities at agency.

What really jumps out and socks one in the eye is the fact that senior executives believe that online advertising yields insufficient metrics. This is really surprising, given that online advertising is the most measurable of all advertising channels – direct mail and DRTV included. In online advertising, leave alone click-throughs and conversions, its also possible to measure a host of other metrics such as opens, interactions, interaction times, message association and brand favorability with relatively greater ease.

But let’s not start patting ourselves on the back just yet. Maybe these senior executives have a point.

To give one example lead generation advertising is the fastest growing segment in online advertising – growing at over twice the rate of the online advertising market. In the lead generation segment, it’s quite difficult to co-relate leads to their sources. It’s quite the norm for third party brokers to conceal the source of the leads, as well as to sell one lead to multiple sources. Even in the fairly mature world of CPM world, there exist several networks that do not disclose their member sites making it virtually impossible to conduct a meaningful ROI analysis.

We always knew that cleaning up its act in this regard was a matter of the utmost urgency for the industry. And today’s study says, “I told you so.”