Who's Afraid of Online Advertising?

A new McKinsey & Co. report called “ How Companies Are Marketing Online” draws the astonishing conclusion that many advertisers are reluctant to shift dollars online — despite the massive shift of consumer attention online — because of the “absence of meaningful metrics and adequate capabilities.”

McKinsey polled 410 marketing executives in five sectors, and among those already advertising online, 52 percent said “insufficient metrics to measure impact” was the biggest barrier, followed by insufficient in-house capabilities (41 percent), the difficulty of convincing management (33 percent), limited reach of digital tools (24 percent) and insufficient capabilities at agency (18 percent).

Does that mean advertisers really believe metrics like cost per lead, cost per sale, or even cost per visit are inferior to traditional “bottom line” metrics like reach and frequency, gross rating points, and rate base? Does that mean advertisers believe mass media have better “capabilities” than online advertising platforms like keyword-targeted search advertising, behavioral targeting — or Google’s new Gadget Ads, announced today:

According to Christian Oestlien, Google business product manager, Gadget Ads are also backed by actionable metrics. “In addition to the combination of precision and scale, advertisers get a whole system for tracking interactions. They can specify particular behaviors like mouse-overs or clicking-throughs, and get an interaction report in the AdWords Report Center.”

Tracking the Gadget Ads ROI wasn’t difficult, according to Bladimiar Norman, head of interactive advertising for Paramount Vantage.

The division of Paramount Pictures was part of the search giant’s first gadget trial, promoting “A Mighty Heart” (a thriller based on journalist Daniel Pearl’s kidnapping and murder in Pakistan) through a widget that featured the movie trailer and a news ticker, as well as a clickable timeline that enabled users to relive the 16 months surrounding Pearl’s kidnapping.

“Of course, selling tickets is the bottom line,” said Norman, “but we were able to track which articles users clicked on, how long they watched the video and whether they shared it with others.”

Well, no. Suggesting that a platform like Google’s Gadget Ads lacks the “metrics” and “capabilities” of traditional media would be silly.

The reality is that the attitudes expressed in the McKinsey report are all a smoke screen, intended to protect vested interests and organizations adapted to static media models, which went unchanged for decades, and not the dynamic innovation of the web. But they can’t deny that the future of advertising and marketing is online.

Regardless of the mode, clients and agencies are all scrambling to keep pace with consumers whose desire to live and shop online is growing. By 2010, McKinsey’s survey respondents expect a majority of their customers to discover new products or services online and a third to purchase goods there.

What this report demonstrates is that the barriers to accelerating the growth of online advertising have nothing to do with questioning the web’s increasing dominance of media consumption or the huge innovations of online advertising — including those still to come.

No, billions of dollars still remain in traditional media because the advertising industry has to go through its own transition page views are a terrible currency for media buying — this buying model, a holdover from Web 1.0, mirrors the familiar traditional media modes of buying that have been used for decades.

Online media and advertising companies share some of the blame — there’s a lot of innovation, but not a lot of standardization. Traditional media adverting — like traditional media consumption — isn’t about to go away, so the inability of many online advertising platforms to map easily to traditional media remains a huge barrier.

Indeed, although a majority of the respondents to McKinsey’s survey find online vehicles to be more efficient than traditional advertising, the relative newness of the medium and its still developing benchmark data make it a hard sell internally to bosses who demand accountability, said client consultants. What’s more, the multiplicity of online channels can make it difficult to isolate what’s working and what’s not, digital agency chiefs said.

It’s not that traditional advertising is more “accountable,” but rather it’s more “comfortable,” more “familiar.” Just ask media companies how uncomfortable the transition to digital can be.

But as the media industry has painfully discovered, the advertising industry is now discovering that making the case NOT to change is no longer viable.