Financial turmoil and digital advertising: What should we expect from the new wave?

Oleg Varlamov

Analysts predict a new wave of crisis. Oleg Varlamov, head of the marketing department of Nectarin advertising agency, tells what impact it could have on Internet advertising.

It is quite difficult to confidently forecast the behavior of the internet advertising market when a new round of financial turmoil begins. It depends on the factors of the exact turmoil which hasn’t started yet but will be real enough in the future. First of all, let’s recollect the turmoil in 2009, when large businesses had to severely cut their advertising budgets (experts say that the general volume of advertising services in Russia in the 1st half of 2009 decreased by 30%). But the managers of these companies really understood that they would have to inform clients about their products and services simply to survive in the future. Speaking simply, to decrease costs, but find advertising spaces. Internet has become such a space, relatively cheap but effective, able to easily reach an enormous audience. That’s why large businesses moved to the internet which became salvation for them. Even companies which had never paid attention to internet space and had never seen it as an effective advertising area had to make the move online. This was not a question of will, but a question of survival. Budgets for TV ads (minus 21%), radio ads (minus 36%), print media ads (minus 44%), outdoor ads and souvenirs (minus 35%) severely decreased. Unlike these traditional ways of advertising, internet showed an increase of 6% even in 2009.

Large businesses best of all managed to assess the possibilities of internet, because internet advertising is crystal clear, unlike the traditional ways of advertising. Not making a meal out of it, we can measure the efficiency of the campaign being held. Everything can be counted and traced: audience, conversion… not something that can be done easily with offline media.

Cost was another benefit of internet that year. Internet proved itself to be less costly and even a more efficient and reliable source. Naturally, when the turmoil was over, nobody from advertising accounts wanted to leave such an advantageous space for promoting their business. Large companies not only stayed online but realized its advantages and began to actively develop their business there .

What would happen if more financial turmoil comes?

If next more turmoil comes, it's crystal clear that companies would have to heavily decrease their advertising budgets. Since nobody would leave internet, the market of internet advertising would be forced to somehow further transform . 

Only financial analysts can forecast whether it would decrease or increase, because it would depend directly on the depth of the crisis. However, we can make a bold prediction for full-service internet agencies. Earlier companies could address almost any agency, which was a mere mediator between advertising space and clients who sold customary advertising formats. Now the strongest contenders would be agencies who don't only hold advertising campaigns, those that conduct campaigns with maximum efficiency and clarity. First of all, it relates to paid search. Everyone knows this tool, how it works, and what its goals are. Advertisement accounts have assessed its efficiency. Currently the market share of paid search (including radio and TV) is 10%, and the market size in Russia is more than $1 billion. Now we see the trend of creating instruments to increase the effectiveness of such advertising campaigns. Agencies are developing their own technologies for search engine optimization.

It's important to add that creating products for advertising campaign optimization is a costly process, and not every agency can afford it. If a new wave of turmoil comes, large businesses will begin organizing their own Internet marketing departments which could hold advertising campaigns by themselves. But this solution is not the most efficient, since such small departments can’t create their own optimization technologies. As of now, few agencies are making such developments, ourslves included. For instance, we have created a special technology called People Search which helps save from 20% to 80% of the advertising budget and is applied to the majority of campaigns that we conduct.

The same thing can be said about the traditional media advertising. If earlier it was easy for a client to launch banners on several popular spots, now the advertising accounts try to estimate the efficiency of such advertising by figuring out and predicting the conversion rate. New strategies are being developed which were simply impossible earlier. For example, launching complicated media campaigns on several spaces with a unified control center and payment per clicks. For this goal, the unique technology called Mediatron was created.

When talking about other internet advertisement formats, it is necessary to say that a lot of-attention now is paid to action payment strategies, CPA strategy or lead generation, instead of the click payment strategy. The client wants not only to hold a campaign, but to pay for the results of this campaign, submissions and clients. It is even more pertinent for the financial sector, insurance companies and large internet shops.

In summary, I’d like to say the internet advertising market is expecting a new wave of development, a wave of new technologies, formats and tools for conducting campaigns in case new financial turmoil is comes.

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