Co-op Advertising: Digital's Lost Opportunity
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Co-op Advertising: Digital's Lost Opportunity

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Co-op programs subsidize advertisers to the tune of over $50 billion annually. Why doesn't digital marketing have a place at the table?

Co-op programs subsidize advertisers to the tune of over $50 billion annually. Why doesn't digital marketing have a place at the table?

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  • GroupMestimates total 2012nUS ad spend will be $153B
  • Co-op sector of digital advertising is generally overlooked, underdeveloped, and ignored
  • 684 co-op advertising programs are maintained in a Local Search Association database.
  • Most permit display or search advertising onlyVery few permit other digital channels (email, social media, online coupons, or mobile)
  • Desktop local search revenues will grow from $5.7B to $10.2B, mobile from $400M to $3.2B
  • In May 2011, William Blair and Company estimated the number of consumers using group-buying sites like Groupon and other daily deals sites will reach $53 million this year. By 2015, that number is expected to more than double to $114 million.Estimates of the value of this burgeoning market, whose players include companies such as Groupon, Living Social, Google Offers, and Amazon Local, range from $1.61 billion (William Blair and Company) to $2.67 billion (Local Offer Network). According to comScore and the Local Search Association, Groupon had 11.5 million unique monthly U.S. visitors in March 2011, while LivingSocial had 7.1 million
  • U.S. email marketing spend for 2011 will be around $1,510 million, and will grow to $2,468 million in 2016, according to Forrester Research’s Email Marketing Forecast, 2011 to 2016 (US).
  • Technology vendors: Email marketing, ad serving, targeting, retargeting, SEM servicesAgencies: Creative, mediaPublishers and media: Newspaper sites, local sites, directories (e.g. Yellow Pages), social and local networks (e.g. Facebook, Foursquare)Online coupon/Daily deal providers: Groupon, LivingSocial, Gilt, etc.Search: Search engines and search marketing providers (see vendors above)Mobile: Display, Social-Local-Mobile (SoLoMo), search, etc.Additionally, the core co-op advertising players—manufacturers, retailers and, now, their e-tailer brethren—stand to gain from increased branding and advertising in the digital channels in which their target consumers spend increasing amounts of time.
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Resistance to changeManufacturers and merchantsCampaign pre-approval requirementsUp to half of all available co-op funds are un-used annually due to this burdenInnovation and creativityDifficulty in finding online corollaries for offline co-op advertising products E-tailCo-op is inherently local, and manufacturers are unable to support e-tailer programs that are not limited by location
  • Complexity & multiplicity of digital channelsThe sheer amount of knowledge required to advertise in digital channelsLack of infrastructure in co-op ad industryCo-op often tasked to either sales or the finance department, areas unlikely to be versed in digital marketing
  • Complexity & multiplicity of digital channelsThe sheer amount of knowledge required to advertise in digital channelsLack of infrastructure in co-op ad industryCo-op often tasked to either sales or the finance department, areas unlikely to be versed in digital marketing
  • Complexity & multiplicity of digital channelsThe sheer amount of knowledge required to advertise in digital channelsLack of infrastructure in co-op ad industryCo-op often tasked to either sales or the finance department, areas unlikely to be versed in digital marketing
  • Complexity & multiplicity of digital channelsThe sheer amount of knowledge required to advertise in digital channelsLack of infrastructure in co-op ad industryCo-op often tasked to either sales or the finance department, areas unlikely to be versed in digital marketing
  • Awareness: Just as manufacturers and retailers are unaware of the potential benefits of online advertising, not to mention the actual tactics and techniques for executing digital campaigns, so too is the digital ecosystem largely blind to the potential and the workings of co-op advertising. Creating awareness among all constituencies is an obvious first step toward addressing this imbalance.Education: Once the digital advertising ecosystem is aware of co-op’s untapped revenues, the motivation to self-educate will be strong. It will be a greater challenge to teach manufacturers and retailers about online. Channels, metrics, targeting, and the like are close to a foreign language for, say, a mom ‘n’ pop retailer unversed in SEM.Standards and best practices: Small, online co-op advertising does exist, particularly in automotive and durable goods. Closer examination of how successful programs in these verticals function can lead to case studies and ultimately help create templates on which broader co-op programs in different industries can be based.
  • Technology: Development of platforms that enable workflow automation would go far to make the co-op advertising process easier for manufacturers and the often over-burdened merchants who run co-op campaigns. Desirable features include: mechanisms to facilitate the creative approval, verification, metrics, and communications between retailer and manufacturer. Also useful would be a database of co-op programs and digital asset management for logos, creative executions, and brand elements. 
  • Publisher initiatives: According to the Boston Globe’s Candice Geers, publishers are eliminating co-op ad specialists on the print side as traditional ad revenues shrink. It may be time to consider re-establishing the co-op ad manager role, this time with a view toward online display advertising. Previously cited Borrell study recommends “a consultative sales approach that probes into each advertisers’ co-op program.” Cooperation with co-op ad management companies: Many legacy co-op program management companies have expanded into the digital, yet are unconnected with mainstream publishers and industry trade groups. The online ad industry would benefit and learn from association with organizations such as Owner IQ, Ansira, ACB Coop, MultiAd, Balihoo.com, and the TPMA.

Transcript

  • 1. 1 Co-op Advertising: Digital’s Lost Opportunity?For the Internet Advertising Bureau (IAB)DRAFT: August 28, 2012Rebecca Lieb @lieblinkAnalystDigital Advertising and Media
  • 2. 2 Digital advertising hits a record high in 2011: $31 billion Sources: IAB/PwC; Co-op Advertising Programs Sourcebook; NRP;© 2012 Altimeter Group and Trade Promotion Management Associates
  • 3. 3 Estimates for annual co-op spend in the U.S. range from $50-$520 billion, worldwide … NRP and Trade Promotion $520 Management Associates Co-op Advertising Programs $50 Sourcebook $0 $100 $200 $300 $400 $500 $600 Estimated Spend, in Billions© 2012 Altimeter Group
  • 4. … but an estimated >1% of that projected co-op spend flows into digital channels Traditional Channels Digital Channels Sources: IAB/PwC; Co-op Advertising Programs Sourcebook; NRP; and Trade Promotion Management Associates© 2012 Altimeter Group
  • 5. 5 Co-op Advertising An agreement between a manufacturer and a retailer to share advertising costs, while at the same time create brand name awareness.© 2012 Altimeter Group
  • 6. Manufacturers typically underwrite from 30- 50% of retailer advertising costs Manufacturers: Increased exposure at a Co-Op lower cost Advertising Benefits Retailers: Brand name product associations and lower cost advertising Agencies and Media Companies: Increased billings and ability to fill ad inventory© 2012 Altimeter Group
  • 7. Image by iandavid used with Attribution as directed by Creative Commons http://www.flickr.com/photos/iandavid/3532086917 The Missed Digital Opportunity© 2012 Altimeter Group
  • 8. Online share of U.S. local ad spending forecast for 2012 at less than 20% Source: eMarketer© 2012 Altimeter Group
  • 9. Fewer than 33% of manufacturers factor Internet advertising into co-op ad policies  35 of 684 co-op advertising programs forbid using co-op dollars in online advertising Co-op Policy Excerpt: “Internet Advertising and/or website setup fees and costs are not eligible for co-op except for the official Yamaha/Boattrader.com program.” Sources: Advertising Checking Bureau (ACB) “Online Co-op Advertising Study,” Sept. 2011; Local Search Association database© 2012 Altimeter Group
  • 10. Only 181 companies allow some form of Internet ads in their policies, most are limited Permitted Digital Not Permitted Channels Digital Channels • Display • Email advertising • Social media • Search • Online coupons advertising • Mobile advertising Source: Local Search Association database© 2012 Altimeter Group
  • 11. Image by StreetFly_JZ used with Attribution as directed by Creative Commons http://www.flickr.com/photos/streetfly_jz/2760882758 The Growth of Online Local Advertising© 2012 Altimeter Group
  • 12. Experts predict local advertising as single most robust sector in 2012 U.S. ad market Source: eMarketer© 2012 Altimeter Group
  • 13. Digital segment of local advertising will grow stronger through 2016  Audiences for local print and broadcast media follow steady decline  Local continues to be one of the hottest sectors for growth in digital channels Source: BIA/Kelsey© 2012 Altimeter Group
  • 14. U.S. local digital advertising revenues forecast in 2016 to rise $17B from 2011 $45.0 $40.0 $35.0 $38.5 $30.0 $25.0 Forecasted Digital $20.0 $21.2 Advertising Revenue, in Billions $15.0 $10.0 $5.0 $0.0 2011 2016 Source: BIA/Kelsey© 2012 Altimeter Group
  • 15. Search and Coupons© 2012 Altimeter Group
  • 16. 16 In 2011, Google announces that 20% of all its desktop searches are local. On mobile devices, that percentage jumps to 40%. Source: Google’s former VP of Location and Local Services Marissa Mayer© 2012 Altimeter Group
  • 17. BIA/Kelsey predicts desktop local and mobile local search queries and ad revenues to rise Source: BIA/Kelsey© 2012 Altimeter Group
  • 18. As print coupons decline, daily deal and group buying sites surge in popularity Source: eMarketer© 2012 Altimeter Group
  • 19. More than half of U.S. internet users have used a daily deals site  Market value estimated between $1.61 billion and $2.67 billion  Groupon receives 11.5 million unique monthly visitors in March 2011 Sources: Zoomerang, William Blair & Company, and Local Offer Network© 2012 Altimeter Group
  • 20. Email helps drive local retail and e-commerce Email is particularly attractive to retailers as a low CPM channel.© 2012 Altimeter Group
  • 21. Image by lwr used with Attribution as directed by Creative Commons http://www.flickr.com/photos/lwr/839359065 The Value of Digital Co-op© 2012 Altimeter Group
  • 22. 22 The online co-op market is estimated at $1.7 billion available, but with $450 million left on the table “for lack of participation.” Borrell Associates, Online Co-Op Advertising, May 2012© 2012 Altimeter Group
  • 23. Online co-op advertising beneficiaries • Technology vendors • Agencies • Publishers and media • Online coupon/daily deal providers • Search • Mobile • Other core players: manufacturers, retailers, and e-tailers© 2012 Altimeter Group
  • 24. Image by coreburn used with Attribution as directed by Creative Commons http://www.flickr.com/photos/coreburn/487357814 Stumbling Blocks© 2012 Altimeter Group
  • 25. “Twenty years ago, I was running into, „they didn‟t know how to do radio,‟ from retailers. [It was] too bad if research proved radio ads were more effective for that product category. They‟d done newspaper for 40 years, and that was what they were going to keep doing.” Bob Houk, Executive Director, Trade Promotion Management Associates© 2012 Altimeter Group
  • 26. 26 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements© 2012 Altimeter Group
  • 27. 27 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements Manufacturers and merchants© 2012 Altimeter Group
  • 28. 28 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements Up to half of all available co-op Manufacturers funds are un- and merchants used annually due to this burden© 2012 Altimeter Group
  • 29. 29 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements Up to half of all Difficulty in available co-op finding online Manufacturers funds are un- corollaries for and merchants used annually offline co-op due to this advertising burden products© 2012 Altimeter Group
  • 30. 30 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements Manufacturers Up to half of all Difficulty in are unable to available co-op finding online support e-tailer Manufacturers funds are un- corollaries for programs and merchants used annually offline co-op that are due to this advertising not limited by burden products location© 2012 Altimeter Group
  • 31. 31 Perceived barriers to online co-op advertising Campaign Resistance Innovation Attribution/ve pre-approval E-tail to change and creativity rification requirements Manufacturers Up to half of all Difficulty in are unable to available co-op finding online support e-tailer Manufacturers funds are un- corollaries for programs and merchants used annually offline co-op that are due to this advertising not limited by burden products location© 2012 Altimeter Group
  • 32. 32 Attribution/verification: Certified proof that each campaign was actually executed  The most common documentation requirements for dealer-paid search (according to ACB) are: • Co-op Advertising Claim form • Prior Approval form • Screenshot of banner ad or PPC ad • Website URL or keyword listing • Invoice: costs, run dates, click-throughs and number of impressions© 2012 Altimeter Group
  • 33. 33 Key questions to answer  What are manufacturers’ objections to expanding co-op advertising programs into digital channels?  Where are the disconnects?  What are the barriers to programs that permit paid search and display advertising from moving into channels such as email and social media?© 2012 Altimeter Group
  • 34. 34 Actual barriers to online co-op advertising Complexity and Lack of infrastructure Lack of guidelines and multiplicity of digital in co-op ad industry requirements channels© 2012 Altimeter Group
  • 35. 35 Actual barriers to online co-op advertising Complexity and Lack of infrastructure in Lack of guidelines and multiplicity of digital co-op ad industry requirements channels The sheer amount of knowledge required to advertise in digital channels© 2012 Altimeter Group
  • 36. 36 Actual barriers to online co-op advertising Complexity and Lack of infrastructure in Lack of guidelines and multiplicity of digital co-op ad industry requirements channels Co-op often tasked to The sheer amount of either sales or the knowledge required to finance advertise in digital department, areas channels unlikely to be versed in digital marketing© 2012 Altimeter Group
  • 37. 37 Actual barriers to online co-op advertising Complexity and Lack of infrastructure in Lack of guidelines and multiplicity of digital co-op ad industry requirements channels Co-op often tasked to The sheer amount of either sales or the knowledge required to finance advertise in digital department, areas channels unlikely to be versed in digital marketing© 2012 Altimeter Group
  • 38. 38 Lack of Guidelines and Requirements  New challenges that didn’t exist in traditional co-op (e.g. keyword bidding for trademarked terms in search marketing) “We‟re driving each other‟s bidding up. … HP‟s perspective [is] we don‟t think co-op is that positive if we‟re all going after the same term.” Florence Su, Senior Manager of Search Engine & Mobile Marketing, HP© 2012 Altimeter Group
  • 39. Recommendations© 2012 Altimeter Group
  • 40. 40 Encourage More Co-Op Spend in the Online Advertising Ecosystem 1. Increase awareness. Manufacturers and retailers are unaware of the potential benefits of online advertising and its related tactics for executing digital campaigns. 2. Provide education. Once the digital advertising ecosystem is aware of co-op’s untapped revenues, motivation to self-educate will be strong. 3. Set standards and best practices. Closer examination of how successful programs function can lead to case studies and help create templates on which broader co- op programs can be based.© 2012 Altimeter Group
  • 41. 41 Encourage More Co-op Spend in the Online Advertising Ecosystem 4. Develop technology. Development of platforms that enable workflow automation would make the co-op advertising process easier for manufacturers and over- burdened merchants who run co-op campaigns. Desirable features include mechanisms to facilitate: • Creative approval • Verification • Metrics • Communications between retailer and manufacturer. • Database of co-op programs and digital asset management for logos, creative executions, and brand elements© 2012 Altimeter Group
  • 42. 42 Encourage More Co-Op Spend in the Online Advertising Ecosystem 5. Revamp publisher initiatives. Publishers are eliminating co-op ad specialists on the print side as traditional ad revenues shrink. It may be time to consider re-establishing the co-op ad manager role with an online display advertising focus. 6. Cooperate with co-op ad management companies. Many legacy co-op program management companies have expanded into the digital, yet remain unconnected to mainstream publishers and industry trade groups.© 2012 Altimeter Group
  • 43. 43 Questions?© 2012 Altimeter Group
  • 44. 44 THANK YOU Rebecca Lieb rebecca@altimetergroup.com rebeccalieb.com/blog Twitter: lieblink Disclaimer: Although the information and data used in this report have been produced and processed from sources believed to be reliable, no warranty expressed or implied is made regarding the completeness, accuracy, adequacy or use of the information. The authors and contributors of the information and data shall have no liability for errors or omissions contained herein or for interpretations thereof. Reference herein to any specific product or vendor by trade name, trademark or otherwise does not constitute or imply its endorsement, recommendation or favoring by the authors or contributors and shall not be used for advertising or product endorsement purposes. The opinions expressed herein are subject to change without notice.© 2012 Altimeter Group