Why advertisers aren't lagging behind digital readers

Cheers to the ever-reliable Nate Elliott, research director at Jupiter Research, who has picked apart the old saw that advertisers need to invest a lot more money in digital advertising in order to catch up with consumer behaviour.

The logic that underpins this argument is based on the notion (accurate enough) that European web users spend 17% of their media time online.

So shouldn’t advertisers be spending a similar proportion of their budgets in digital advertising? Well, they don’t. In fact, across Europe, advertisers only spend a measly 7% of their ad budgets on digital.

The argument that proceeds from this apparent mismatch will be drearily familiar. “Just wait,” say the carriers of conventional wisdom, “until advertisers catch up with consumer behaviour.”

As Elliott points out, this is a flawed argument. Why? Because only 53% of Europeans are online. The rest are refuseniks and late adopters.

When Elliott adds non-digital media consumers into the equation, it emerges that just 9% of Europeans’ media time is spent online.

So, actually, advertisers aren’t far off the pace.

Elliott’s research paper takes another interesting twist. Here’s how he lays it out:

Every minute spent watching TV or reading a newspaper is a minute spent consuming media. But the internet isn’t just a media channel, it’s a blend of media and communication.

According to a Microsoft Digital Advertising Solutions study, just 43% of users’ online activities involve surfing, entertainment or information collection — what we classify as media activities. The rest includes communication, content creation and transaction.

This is a point I’ve made often, and it’s heartening to see someone like Elliott making it, too.

His point is that the advertising opportunities that surround all of that “communication, content creation and communication” are fairly low-grade. The CPMs achieved by webmail sites and social networks support this.

So how should we think about all of this low-grade media usage? What Elliot does next is to take that 9% figure for Europeans’ web usage and revise it downward on this basis.

If we assume non-media inventory is only worth half as much as inventory within media content, then the internet’s fair share of ad spending in 2006 was 7% — exactly the share of spending it received that year.

So there you have it: on this (only slightly speculative) basis, Europeans allocate 7% of their media time to digital media, and advertisers are allocating a similar proportion to putting messages in front of their eyeballs.

The next time you hear someone ranting on about advertisers’ tardiness in the digital sphere, remember Nate Elliott’s research. It underlines the fundamental truth that markets aren’t stupid.

NB: You’ll need a subscription to MAD to read New Media Age’s version of this exercise in shibboleth-bashing.

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