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Online Advertising: Is It Still Relevant?

After the dramatic fall of Internet stock prices in April, online companies and investors alike began to rethink the direction of business on the Internet. One area in which declines were beginning to emerge was online advertising.

New Research from the AdRelevance division of Media Metrix may have e-tailers reconsidering such decisions. The study, released by the Seattle firm yesterday, indicates a strong, positive correlation between online retail advertising and the number of engaged visitors to online-only retailers.

"The key finding in this report is that if you compare advertising campaigns to the ensuing increases or decreases in traffic to those sites that advertise that there's a relatively high correlation," says Charlie Buchwatler, AdRelevance's most senior online advertising analyst and author of the report.

The report indicated a positive correlation of 0.83 between advertising impressions and engaged visitors (-1 would indicate a perfect negative correlation and 0 would indicate no correlation, while +1 would indicate a perfect positive correlation).

This data, he believes, is especially important considering recent trends in the market.

"In the wake of the Nasdaq decline in April there's been a lot written about how many dotcoms and retail dotcoms in particular are biting the dust. They're spending less on advertising as a way of trimming their expenses," says Buchwatler. "The message more than anything is, if indeed your investors and management team are taking a much more cautious approach on all expenditures, think twice before you cut back on the online advertising side."

Online advertising, Buchwatler believes, plays a critical role in running a successful online retail outlet. He warns, however, that one still needs to be smart about it.

"Needless to say online advertising is not the only thing," says Bushwatler. "However the fact remains that there is a high correlation, meaning that online advertising is playing a role in bringing people to sites."

Using online advertising effectively is key. One of online advertising's greatest attributes is the ability to bring people directly to the site.

"Everyone wants to see profits out of these online retailers, but you're not going to get profits if you don't first get traffic," says the AdRelevance analyst. "The evidence increasingly appears to indicate that an aggressive and intelligent online campaign has a good chance of translating into increased traffic."

Furthermore, using online advertising effectively requires a solid strategy. According to Buchwatler, more and more companies are figuring out effective ways to manage such strategies.

"Online advertising has truly come into its own. Many of the more successful advertisers that have aggressively tried many things have learned a number of things that have worked very well for them and things that have worked less well."

As for what works, Buchwatler believes establishing consistent strategies and effectively marketing specific segments are of utmost importance.

"Everyone has to try and experiment but that can't go on forever, you need to very quickly find out what's working and not working, and then significantly invest in those that are."



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