Is Advertising Worth It?

Only 50 percent of marketing is effective, according to the old aphorism, but nobody knows which half, so everybody keeps their spending at 100 percent. But what happens if marketers believe only 35 percent of their spending had no discernable effect on consumers in 2007 and that it was even worse on the Internet – on which 70 percent of spending probably goes down the drain?

The London-based Fournaise Marketing Group seems to think that’s what is happening. In two surveys of 3,000 global marketers in January and March, they were told that the effectiveness of marketing has fallen to an all-time low and that increasingly sophisticated consumers turn off advertising. In North America, 78 percent of marketers and 75 percent in the UK told Fournaise that they didn’t know if they could trust the visitor and traffic profiles claimed by online media owners and publishers.

The reasons are relatively simple to find. In the UK in the 1960s and 1970s, according to Scott Lee, the CEO of the Hong Kong arm of the global marketing firm Synovate, viewers had access to one television channel, the venerable BBC. Today there are hundreds of channels. Beyond that, advertising has proliferated so far that flat-panel screens appear above urinals in men’s rooms, on buses, inside lifts in buildings. The Internet, with its infinite carrying capacity, fragments advertising even further. Google and Yahoo in particular are revolutionizing advertising on the Internet, with delivery to millions, perhaps billions of consumers.

The current environment leaves advertisers groping for new ways to remain relevant. Publicis Groupe chairman and CEO Maurice Levy said in Paris recently that the digital revolution has made the old ad model passé.

"The very model of our industry is being called into question. The model today is no longer valid, no longer relevant," Levy told reporters. But that doesn’t mean either he or anybody else is going to stop. It is a strange anomaly.

Lee of Synovate said that nobody knows how effective advertising is, but getting off the merry-go-round is a bigger problem. Synovate recently launched a market tracking tool in Asia designed to enable marketers to analyze the barriers they face to getting their products to market effectively. “What we find is that if you look at brand equity, advertising doesn’t increase it, but it plays a role in maintaining the relationship (with the consumer). You have to do it or you lose it. Where brands stop advertising, people do drift away.”

Certainly, marketers are doing their best in a region where consumer spending and GDP have been rising for decades. The Asia-Pacific region contributed 21 percent of all global advertising spending in 2007, a total of US$96.2 billion according to the online business management research company, InfoEdge. That figure earlier was projected to grow to 21.4 percent in 2009, or US$109.4 billion although with the slowing economies of North America, now at 41.6 percent, and the Eurozone, 23 percent, Asia’s percentage could rise. InfoEdge projects that North America’s share will erode to 40.3 percent and 22.4 percent for the Eurozone as Asia gains momentum.

“One of the things we have been doing is to work out the impact that physical market barriers are having on distribution, visibility, pricing availability and other issues,” Lee said. “I have seen cases where we have pre-tested advertisements and they looked great, but they had a questionable impact because of marketing barriers, particularly physical barriers and particularly on smaller brands.”

Coca-Cola, Lee says, invented the refrigerated cooler for stores “because somebody figured out that if a Coke was cold and a Pepsi wasn’t, that is as much a physical barrier as anything. We increasingly have to take account of these things, particularly service brands.”

And of course everybody is trying to figure out how to deal with the Internet, which has created the whole new genre of viral marketing, what used to be called word-of-mouth when it was passed on from one person to another somewhat slowly. Now a quirky reference on Facebook or a hot YouTube video can bring millions of viewers almost instantly. One of the most effective examples virtually rejuvenated the Cadbury’s chocolate brand. A gorilla – or at least a drummer in a gorilla suit – pounds away at a drum set which reproduces the drum solo in a 1981 hit by Phil Collins. As the drumming becomes more enthusiastic, the gorilla closes his eyes and looks at the sky. The ad ends by fading away to a picture of a Dairy Milk chocolate bar. Sometime after its first run on television, it was uploaded onto YouTube where 500,000 people tuned into it in the first week. By last November, 6 million people had seen it as it spread across the internet. Sales of Dairy Milk bars increased by 9 percent annually and Cadbury’s favourability rating jumped by 20 percent among the general public.

But viral marketing, Lee says, “is out of your control.” It can hit, as the Cadbury ad did, but it is very difficult to find the right pitch.

“You have to be careful about saying marketing isn’t having an impact,” Lee says. “But I think the jury is definitely out on how to measure its effectiveness.”

One thing is certain. The old media is taking a beating. According to a study by the US-based Online Publishers Association, television continues to win the battle for daily reach, with up to 90 percent of Americans watching up to more than four hours per user daily. About 60 percent averaged about two hours per day on the Web. But only 40percent of Americans looked at a newspaper for an average of about half an hour a day. Magazines were even worse off, with about 30 percent looking at them for well under half an hour.

So, given its rising use, where does the internet stand with marketers? Despite the promise, marketers, according to Fournaise, don’t know if they actually get what they pay for and whether they can trust visitor or traffic profiles, They have the feeling there is a lot of click fraud, they don’t know if their ads end up where they are supposed to end up, and they don’t trust the reports that digital media owners give them.

Lynn Grebstad, director of one of Hong Kong’s leading public relations firms, couldn’t agree more. “We hardly monitor online,” she says. “We go into some sites and they can’t give you figures, they can’t quantify the exposure or the actual circulation.”

So where does that leave the industry? Despite technology, nobody can yet figure out which of that 50 percent, or 35 percent, or 30 percent, of advertising and marketing is effective. As Scott Lee says, it is difficult to get an idea of what advertising adds to the mix. But you can tell what happens when you stop, and nobody wants to do that, which keeps marketers in business.