Online advertising by Internet-only retailers has a positive impact when it comes
to increasing quality visits to shopping sites, according to report by
AdRelevance.
The research found a strong positive correlation between online
advertising and engaged visitors (those who spend at least three minutes a day
viewing content at an online entity) at online retail sites.
The AdRelevance research look at online advertising impressions and traffic
patterns for online retail sites between January and May 2000. An analysis of
the top three visited online retail segments in the month of April — books/music/
movies, flowers/gifts/greeting cards and computer hardware and software —
uncovered a strong and very 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).
Of the top three categories, flowers/gifts/greeting
cards had the lowest correlation at 0.78, while the more competitive sectors of
books/music/movies and computer hardware and software both show high
correlations of 0.82 and 0.87, respectively.
Retail ad impressions
declined significantly with
NASDAQ’s April
downturn, falling from 19
percent growth in February
to a negative 9 percent loss
in April, according to
AdRelevance, but they
rebounded in May, showing
6 percent growth.
“Given the strong connection
between online advertising
and engaged users and
considering the market’s
need to see increasing
profits, online retailers
should think twice before
deciding to decrease
Internet ad budgets in
response to NASDAQ’s
fallout,” said Charlie
Buchwalter, vice president of media
research for AdRelevance.
“Despite the trying efforts of many dot-coms to build their brands with
big-budget television ad campaigns, the latest AdRelevance figures for the
online retail sector suggest that money spent online advertising is growing their
businesses.”
According to the report, successful online-only retailers such as Amazon.com
and eBay, have created a brand name by running regular online ad campaigns
consisting of 168 million average monthly impressions. On the other hand, less
successful companies, which often struggle with brand identity and
differentiation issues, often have little to no online advertising and tend to
operate in highly saturated or fragmented categories (see table below).
“Many of the more successful online retailers appear committed to online
advertising, which they use to both drive traf
fic and build awareness for their
brand,” Buchwalter said. “Online retailers that don’t quite have the same level of
brand recognition, however, can still be competitive using online advertising. In
fact, the AdRelevance Report shows that some companies, like Reel.com and
PlanetRx, build good traffic using direct marketing impressions. It’s a challenge
to find the right balance between online branding advertising and online direct
marketing, and it will be those businesses that do that will survive the predicted
shakeout.”
