The New Media

FASTER, FASTER, CLICK
The New Media in the Context of the Old

Dick Cheney lives at ground zero. The Vice Presidential home is located at the Naval Observatory in Washington D.C., which also houses the world's Master Atomic Clock. There are roughly fifty clocks like this ringing the globe for confirmation, but by common consent, this one tells "THE REAL TIME". to the nanosecond. For those of you who care to count, that's less than one eighty-six trillionth of a day. Now if you are sending a mission into space to intercept an orbiting satellite this might be very important. But, why would just anyone want to know the time to the billionth of a second? Well, every day, millions around the world dial into these clocks on the internet to synch up with the big brother, so much for the analog computer. Ironically, if your computer is sleeping you can dial up the Observatory on the telephone and a voice will tell you exactly what time it is, ostensibly and impossibly with the same accuracy.

The 32 Hour Day

Some recent surveys found that we stuff at least 32 hours of dominant activity into a 24 hour day. Eight and a half hours for sleeping and eating, ten for work and the commute, ten with the media and another three and a half for chores, shopping family, friends, hobbies and ourselves. No wonder type A behavior reigns. To get through the day, people have to multi-task everything. The computer and internet made it easier to speed things up, but they also perpetrated so much choice, we can't deal with everything anymore. And we've only just begun.

Bigger than 5 or 45%

Of the ten media hours only five percent is spent on the internet (10% in interet homes, since only half are wired). That is precisely the amount of advertising money marketers place behind the medium. But this is a very influential 5 or 10%. The medium now reaches 50 million people with regularity and more infrequently and it only took five years for that to happen. It took more than twice as long for cable to reach that many people and much more for other media. Advertisers are betting this will continue. Last year, their support of the internet grew 67%.. But, growth is not the only story. Intrinsically, the new media fits well with recency planning.

Recency holds that people are most susceptible to advertising when they are in the market and ready to buy. This predisposition prompts them to stop screening out commercials in traditional media. Of course, it also compels them to seek out product information on the internet. While other major media reach between 80-98% of the public in a month, the internet reaches only 45%. It is however a very focused 45%. More than any other major medium, the user becomes engaged with the advertising on an immediate and voluntary basis.

Planting the Flag in Fertile Soil

Banners placed on run of internet are generally priced at an efficiency comparable with other media. At roughly a $5 cost per thousand, it is well in the range of daytime tv, radio, mass magazines and outdoor. However, if a marketer wants to become very selective they can pinpoint the banner message by having it triggered only by a key search word entered by a user. However, the premium paid for this targeting is enormous. CPMs shoot up to $75, fifteen times as high. With disparities this large, clearly pricing hasn't settled yet.

A Payout Model

It is relatively easy to do a payout formula for internet advertising, compared to most other major media forms. Actual numbers will change for different situations, but the model will remain substantially unchanged. Let's take a hypothetical circumstance of a mutual fund marketer who wants to advertise on the internet. Assume they have $750,000 to spend. If they use the key search word mutual funds as a prompt for their banner, they will pay in the range of $75 a thousand. This will generate ten million hits. Assume a click through rate of 1% for this selective audience and the ten million hits gets reduced to 100,000 click-throughs. Assume only 1% of click-throughs actually buy funds from the advertiser, that's 1,000 buyers. With an average portfolio of $33,000, that's $33,000,000 in portfolio money. At a 3% commission, the payout is one million dollars. $1,000,000 divided by $750,000 invested in advertising on the internet is a return on investment of 33%. Since this is a demonstrable result, unlike many other forms of advertising, no wonder the internet is so seductive to marketers.