Bullish on Net Advertising: Q&A With AOL SVP Mike Peralta
Jan 8, 2009 4:00 AM PT
A year ago, AOL decided to consolidate its various advertising platforms -- Advertising.com, Tacoda and Quigo -- on one Web page. Platform-A was born, followed by a fully integrated sales force and, more recently, a newly designed home page.
Since the redesign, advertising click-through rates on the primary 300 x 250 ad banner rose 30 percent, according to AOL's internal metrics. Total unique visitors and average daily visitors each are up 13 percent, compared to a year ago, based on the November 2008 comScore Media Metrix Report.
In other words, Platform A may have had a shaky start in the digital advertising arena, but it appears to have found its sea legs -- which will come in especially handy as the economy continues to unravel.
Mike Peralta, senior vice president of North American advertiser services for AOL's Platform A, spoke exclusively with the E-Commerce Times about the state of the industry and what he expects to see in the coming months.
E-Commerce Times: Do you think the online advertising industry can survive this recession? It's getting ugly out there.
Mike Peralta: Yes it is. Online advertising, though, is performing relatively well, although not all of the categories are up. Retail, for instance, is down; so are autos. But what is happening, and why I am bullish as we go into 2009, is that there are a number of categories and clients out there that have been underrepresented online.
For instance, consumer packaged goods companies have spent between 3 percent and 4 percent of their overall ad budgets online. That trails by a third general ad spending online. As the economy gets tougher, a lot of folks will look online as a way to run a more effective campaign.
ECT: So you see a boost in CPGs' online spending in 2009?
ECT: The last time the economy was in recession, online advertising was in its infancy. Now that the industry is more mature, how do you think it will respond to this recession?
Peralta: Back in 2000, no one had any idea what the Internet was all about. Now, some players have a good idea of how to run a campaign online, and advertisers can clearly see the value and return on investment of these campaigns. This model is going to grow even stronger, I believe, in the coming months. That said, there are about 120 networks in the U.S., and in a recessionary environment, there won't be enough business to go around to support all of these networks.
ECT: Do you think the vertical networks will survive?
Peralta: Some will -- the ones that add value to the clients. Health, for instance, has a great chance of surviving. The question you have to ask is whether a site has the content and value that keeps people coming back to look at it. There is an awful lot of information on the Internet.
The problem has been that the barriers to entry to create a network have been so low. I can download a free ad server, string together a few good sites, and create a homegrown ad network. That model worked fine when times were good, but a lot of these niche sites -- and that is what many of these are -- will be in trouble.
ECT: What do you think the industry will look like in five years?
Peralta: I think we will see the large networks, which number between 20 and 25, cut by more than half, to between five and 10.
Big brand advertisers are going to continue to spend money online, but they won't be investing in experimental buys anymore. They will be looking for trusted partners that can provide custom integrated solutions that can reach a lot of people in a cost-effective way.
ECT: How does Platform A stand out from the other big networks?
Peralta: Don't forget, buying online advertising is still relatively new for a lot of companies. So, when the average media buyer goes out there, it can be daunting -- there are a lot of choices and funny names, and it can be difficult to choose. Our advantage is our huge inventory -- 90 to 100 sites -- of brand name properties in our network. We have the reach and the technology to put together a custom campaign.
ECT: I think I saw a statistic that 12 percent of all advertising spending is online now. Do you think that figure will grow, or has the industry hit a plateau with that ratio?
Peralta: No, I think it will go even higher. There is still a lot of upside. We are at the point where more companies -- again, the consumer packaged goods industry is a good example -- are realizing just how more much time their customers are spending online now, compared to even a few years ago. That is where a lot of the growth will come from in coming years, I believe.