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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?

Published in: Business, News & Politics
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Co-op Advertising: Digital's Lost Opportunity

  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

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