We recently invested in Adviva Media, which runs an online ad network from its London HQ. What got us really excited about Adviva is that its founders are focusing on the next wave of advertising spend to come onto the Internet. The next wave? Think of it this way: the first wave -- which is making all those Googleheads rich at the moment -- are the direct-response advertising dollars. This is where financial services sites pay Google $20 for every click on a search for "mortgage", or $0.69 for "flowers". This phenomenal model of pay-per-performance advertising has allowed millions of businesses -- large and small -- to calibrate precisely customer acquisition costs and margins.
But even these billions of dollars in online advertising spend only represent 6% or so of the overall advertising market (and in Europe it's probably only 3-4%). So why is everyone still spending money on TV, print and radio where we know--famously--that half of ad spend is wasted, "we just don't know which half"?
Well, by far the largest piece of offline advertising is brand advertising, eg companies trying to make you feel warm and cuddly about Volvo, or Head & Shoulders, or Intel Inside. These ads are meant to be purely brand-enhancing and not to generate an instant purchasing decision at all. And so far, these types of ads have been slow to migrate onto the Web. And this is in spite of the fact that we can better target, track and measure ads shown to web browsers than we can in most of the offline media!
One of the big reasons for the slow acceptance by brand advertisers of the Web as a medium is that they fear the potential damage to their brand if ads appear close to objectionable or controversial content. But this concern is rapidly dissipating, as new targeting technologies (contextual, behavioural and other buzzwords) make it easy to control ad delivery, even on blind networks like Adviva's. Unlike in the direct-response advertising market, where click-volume is the only thing that really matters, in the brand advertising market it's all about quality. Advertisers will look for very high-end creative content, tight control over placement, and real demographic targeting that maps onto their traditional target market classifications.