Rich media spending

Impetus: The US Internet quietly passed an important milestone late last year, as the number of broadband userssurpassed dial-up users for the first time. More than one-third of all US households will be broadband-enabled by theend of 2005. Spurred by the wide availability of broadband, the use of rich media in advertising will grow sharply overthe next five years.The wider prominence of rich media and the strong response rate to rich media ads will stimulatenew creative activity—and that creativity could well lead to even more interest in rich media ads among advertisersand ad agencies.

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OverviewThe mass broadband audience has arrived.The shift to fastconnection in the home and the office has created a substantialaudience for marketers employing rich media advertising. Richmedia advertising totaled roughly $800 million in 2004,accounting for less than 10% of all online advertising. eMarketerexpects the category to register gains of more than 25% through2007, and spending as a whole will reach $2.2 billion by 2008.Growth will come not only in absolute numbers but also as ashare of the overall market, as traditional advertisers look to richmedia for branding opportunities. But there are obstacles toovercome. Click-through rates are strong, but Internet userscould become disaffected if they are bombarded with boring,irrelevant or repetitive ads.Targeting and frequency capping willbe critical for both direct and brand marketing efforts, and,perhaps more so with rich media than with other types of onlineadvertising, strong creative work will be crucial.

Issues & Questions� What rich media standards are emerging?

� What are the best ways to measure rich media results?

� Which formats work best—and when?

� Which strategies are capturing consumer attention?

Rich Media:At The Tipping Point

May 2005 White Paper

The First Place to Look

US Rich Media Ad Spending, 2000-2008 (in millions)

2000 $161

2001 $177

2002 $301

2003 $581

2004* $808

2005 $1,093

2006 $1,407

2007 $1,794

2008 $2,200

Note: eMarketer benchmarks its US online ad spending projections againstthe Interactive Advertising Bureau (IAB) - PricewaterhouseCoopers (PwC)data, for which the last quarter measured was Q4 2004; *as of 2004,interstitial ads included in rich mediaSource: eMarketer, March 2005

063872 ©2005 eMarketer, Inc. www.eMarketer.com

Sponsored by

Rich Media: At The Tipping Point 2

Advertising.com Welcome Letter

Dear Marketer,It moves, it speaks, it engages and captures the attention of anaudience like virtually no other online advertising format. It’scalled rich media advertising - and with the approaching demiseof dialup, it’s here to stay.

Sponsored by Advertising.com, this report explores theincreasingly influential role rich media advertising is playing in thenew broadband-dominant world of Internet advertising. Usingmotion (animated or video), sound and interactivity, rich mediaadvertising offers important advantages for advertisers withdiverse goals. For brand marketers, it allows advertisements toengage audiences at an emotional level once reserved fortelevision. For direct response marketers, it offers click-throughrates as much as five times higher than static display ads.Thesefactors, the new predominance of high-speed Internet access,and the simple fact that sixty percent of American households arenow online are all contributing to double-digit growth in rich mediaad spending.

This report is critical reading for virtually anyone with a stake in thefuture of online advertising.The data captured here are fascinatingand sometimes staggering, and although technological andfinancial hurdles will make the road ahead rocky for some in ourindustry, the statistics clearly support one conclusion. In thecoming months and years, rich media advertising will increasinglyinfluence how advertisers and agencies approach onlinemarketing, how publishers compete for advertising revenue, andhow we all experience the Internet.

Sincerely,

Scott FerberCEOAdvertising.com

The eMarketer Outlook

The use of audio, video, animation, and

interactivity has been a siren song for advertisers

since the emergence of the Internet.The first

generation of animated ads showed both the

promise and peril of the new medium – “Look! It

moves!” followed by “Oh, no! It crashed my

browser!” Then came abuse and overuse—the

ubiquitous “blink,” the endless loop, the audio file

that played without permission.Web publishers

moved to clamp down on these early forms of

rich media, and for years many publishers viewed

rich media ads with suspicion.

The landscape has changed, and widespread broadband Internetaccess has been a key.Web sites, once dubious about the format,now welcome rich media advertising. Indeed, DoubleClick saysthat some 43% of the ads it serves are rich media. But the growthphase is far from over: Mike Henry, director of advertising sales forThe Wall Street Journal Online, estimates that rich media ads onWSJ.com jumped by 60% in 2004, with more increases expectedthis year.

The increased use of rich media for advertising will likewise increaseattention on measurement.Brand marketers can’t spend significantdollars without getting clear usage reports.But eMarketer expectsmeasurement to become more accurate as the category grows, inpart because control-group benchmarks will be more reliable.Similarly,measurement should become easier because reporting willbecome built into the buy, rather than added as an afterthought.

An eMarketer White Paper


Implications for Your Business

For Brand MarketersThe growth of broadband, the expanding universe of Internetusers, and the widening array of available rich media formats andtechnologies mean that brand marketers can no longer overlookonline advertising. Brand marketers not advertising on the Internettoday are like their counterparts 10 years ago who failed toembrace cable television: “No thanks—we find the big networksgive us all the market reach we’ll ever need!” Rich media ads allowmarketers to engage audiences at an emotional level that oncewas the hallmark of television ads alone.The emotional impact ofrich media combined with the power of targeting gives marketerstools not available in any other medium.

For Direct Response MarketersFor direct response marketers, the superior click-through rates ofrich media are impossible to ignore. But rich media is a bit like arich dessert—at least as far as the consumer is concerned.Studies suggest that overexposure to a single ad reduceseffectiveness.The creative possibilities of rich media are many, butuse of the ads still requires attention to nuts and bolts issues liketargeted placement and frequency capping.

For Web PublishersRich media poses new challenges for many publishers.Advertising.com’s survey of interactive publishers, released inFebruary 2005, found that publishers expect rich media to havethe greatest impact on revenues this year, citing the ads ability todeliver the advertiser’s message. Nonetheless, publishers areconcerned about the resources required to support the ads—andstreaming content in particular. Still, publishers who can offer richmedia placement and detailed audience data will be in a verystrong position.

For Ad AgenciesInteractive ads with audio and video components offer anopportunity to flex creative muscles in ways that simply aren’tpossible when working with flat image files. Setting aside themeasurable benefits—both branding and direct response—of rich media ads, interactive campaigns are a chance to shine.“Rich media brings back some of the pizzazz to the creative side of Internet advertising,” says Scott Ferber, the co-founder and CEOof Advertising.com.

A. Defining Rich Media

Before looking at the rich media marketplace,

it’s important to understand what “rich media”

means. Some define rich media by technology,

some by content.

But eMarketer defines it more by its purpose: rich mediaadvertising uses motion (animated or video), sound and/orinteractivity to engage its audience.That engagement may simplybe a better way to capture an individual’s attention for directresponse goals, or it may be a brand’s attempt to build mindshareor weave its way into the consumer’s heart.

That’s a broad definition, but it’s one that reflects general marketperceptions. Some purists insist that simple Flash animations arenot rich media, but if that measure were used, the majority of adsnow identified as rich media would no longer be identified thatway. Most publishers and advertising firms still count Flash ads asrich media.

Like any new medium, the nature of rich media is frequentlydebated by industry executives and observers.And while theindustry is far from general agreement about what is or isn’t richmedia, a common thread emerges: interactivity.

� Rich media ads are “interactive in nature,” says onlineadvertising firm DoubleClick.

� “It’s the interactivity,” says Advertising.com’s Mr. Ferber.

� Ads that “allow users to view and interact with products andservices,” says the Interactive Advertising Bureau,

� Rich media ads are “all about interactivity,”according to apresentation by Zedo,a San Francisco Internet ad serving company,and LearningCraft,a Massachusetts online ad consultant.

The term “rich media” dates back to the early days of Webadvertising, when motion and sound were rare. Perhaps some daythe industry will no longer refer to “rich media” but simply to“advertising.” For now, however, “rich media” is the commonlyaccepted term.



B. Broadband & the Rich Media Audience

The single most important factor supporting the

growth of rich media is the audience—more

people are going online; they spend considerable

time online and do more things there. More than

60% of US households are now online.

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And just as important, more households are accessing theInternet using high-speed connections that make rich media adspalatable (even if not always welcome). Not even taking intoaccount the near-universal penetration of broadband at work(94% among those with Internet access at their desks according tocomScore), there will be 60.4 million households with high-speedconnections by 2007—nearly half of all households in the US,whether online or not.

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What makes the broadband audience attractive is not the highspeed alone. First off, those individuals who connect viabroadband make up a sweet spot for marketers. Compared todial-up users, “people in broadband households earn 27% more,are online 52% more time, and spend more money when shoppingonline ($80 more than dial-up users during the past threemonths),” as a Forrester Research analyst told MediaPost inAugust 2004.

And while broadband’s greater bandwidth opens up an avenue forlarger (and therefore more complex) rich media ads, the pervasivequality of broadband connections might be even more important.Always-on encourages individuals to dip in and out at will, muchas they do with television or radio, making the Internet a muchmore integral part of their overall media experience.

Besides broadband itself, the ready availability among consumersof desktop technology required for much of rich media advancesthe playing field. More than 98% of Internet-enabled computershave a Flash player, according to NPD Research data for 2004, andmore than 87% can handle Java.

The main players for streaming video and audio are not as widelyavailable, but still represent significant chunks of the market.

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Online Households in the US, 2003-2008 (in millionsand as a % of total households*)

2003 64.1 (56.9%)

2004 68.8 (60.0%)

2005 71.5 (61.2%)

2006 74.1 (62.3%)

2007 78.0 (64.4%)

2008 82.2 (66.7%)

Note: *The Department of Commerce reported 112.6 million households inthe US in September 2003. eMarketer has based its total householdprojections on this figureSource: eMarketer, February 2005


Broadband Households in the US, 2003-2008 (inmillions and as a % of total households*)

2003 26.0 (23.1%)

2004 34.3 (29.9%)

2005 42.3 (36.2%)

2006 51.1 (42.9%)

2007 60.4 (49.8%)

2008 69.4 (56.3%)

Note: eMarketer uses the Federal Communications Commission (FCC) asits benchmark source for broadband households for 2003; *theDepartment of Commerce reported 112.6 million households in the US inSeptember 2003. eMarketer has based its total household projections onthis figureSource: eMarketer, February 2005


Rich Media Player Penetration in the US, 2004 (as a %of Internet-enabled computers)

Macromedia Flash Player

98.2%

Java

87.1%

Adobe Acrobat Reader

78.2%

Apple QuickTime Player

59.6%

RealOne Player

58.5%

Macromedia Shockwave Player

52.7%

ViewPoint Media Player

49.6%

Microsoft Windows Media Player

42.0%

SVG

11.9%

Source: NPD Group, December 2004; Macromedia, Inc., 2005



C. Rich Media Ad Spending

To put rich media spending into greater

perspective, a quick look at the total US online ad

spending trends shows an overall increase of

30.7% in 2004. eMarketer projects growth of more

than 20% this year, with healthy double-digit

increases through 2008.

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Building from a small base in 2002, rich media advertisingexpanded by a record 93.5% in 2003, according to the IAB/PwCresearch that eMarketer uses to benchmark its projections.Growth was nearly 40% in 2004, and eMarketer projects thatspending on rich media will continue to grow by well more than20% annually through 2008.

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In absolute dollars, the overall US online ad growth translates to arecord $9.5 billion in spending this year, according to eMarketer,rising rapidly to $17.6 billion by the end of 2008.

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Meanwhile, advertisers spent $808 million for rich media in 2004.Rich media spending in the US will surpass $1 billion this year, andthen reach more than $2.2 billion by 2008. (See chart on the firstpage of this report.)

In fact, these estimates may be seen as conservative, since richmedia usage has not yet hit any tipping point among traditionalbrand marketers. Should that occur sooner than later, eMarketerwould need to increase these projections by at least 50%.

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Online Ad Spending Growth in the US, 2001-2008 (as a% increase/decrease vs. prior year)

2001-11.8%

2002-15.8%

2003 20.9%

2004 30.7%

2005 21.1%

2006 16.5%

2007 16.4%

2008 12.8%

Note: eMarketer benchmarks its US online ad spending projections againstthe Interactive Advertising Bureau (IAB) - PricewaterhouseCoopers (PwC)data, for which the last full year measured was 2003Source: eMarketer, January 2005


US Rich Media Ad Spending Growth, 2001-2008 (as a %increase vs. prior year)

2001 10.1%

2002 69.9%

2003 93.5%

2004* 38.9%

2005 35.3%

2006 28.8%

2007 27.5%

2008 22.6%



US Online Ad Spending, 2000-2008 (in billions)

2000 $8.1

2001 $7.1

2002 $6.0

2003 $7.3

2004 $9.5

2005 $11.5

2006 $13.4

2007 $15.6

2008 $17.6

Note: eMarketer benchmarks its US online ad spending projections againstthe Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC)data, for which the last full year measured was 2003Source: eMarketer, January 2005


Rich Media Ads as a Percent of Total Online AdImpressions Served Worldwide, Q1 2002-Q3 2004

Q1 2002 17.3%

Q2 2002 19.3%

Q3 2002 23.2%

Q4 2002 24.9%

Q1 2003 27.8%

Q2 2003 31.7%

Q3 2003 36.6%

Q4 2003 39.7%

Q1 2004 42.8%

Q2 2004 42.7%

Q3 2004 42.7%

Source: DoubleClick, November 2004




Using the IAB/PwC’s overall data as a benchmark, eMarketerestimates 8.5% of 2004’s online ad spending went to rich media,and expects that figure to increase to a 12.5% share by 2008.

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Branding and Direct ResponseTake away paid search,classifieds and e-mail from the US totals (andnegligible non-format spending of slotting fees and referrals) andyou’re left with the three core brand-oriented online ad formats:display advertising (which includes banners), rich media (whichincludes interstitials) and sponsorships (which includes both).

These three formats make up the majority of ads on content sitesand portals and represent the advertising that brand marketers doonline.And by breaking out rich media, display ads andsponsorships from the US totals—which are increasingly skewedby the large sums spent on paid search—you get a clearer view ofrich media’s place in online brand advertising.

Looking at 2004 alone, rich media is not a mere 8.5% of total onlinead spending, but 24.3% of online brand advertising spending.Andwhen you consider that an uncalculated portion of sponsorshipsis devoted to rich media ads, it’s likely that 2004’s true rich mediashare edges up to the 30% range.

The current rich media spending share of about 25% appearscloser to the estimates from companies like Unicast, Starcom IPand Eyeblaster.And by 2008, eMarketer projects that rich mediaalone will make up over 34% of online brand advertising; againfactoring in sponsorships would make that figure higher.

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US Online Ad Spending for Branding, by Format,2000-2008 (as a % of total)

Display ads Rich media* Sponsorships Total** (in millions)

2000 57.9% 7.1% 35.1% $6,539

2001 52.6% 8.1% 39.3% $4,807

2002 51.9% 15.9% 32.2% $3,398

2003 51.2% 24.4% 24.4% $2,979

2004 51.4% 24.3% 24.3% $3,276

2005 50.0% 25.7% 24.3% $3,955

2006 46.5% 28.2% 25.4% $4,722

2007 42.7% 30.7% 26.7% $5,813

2008 39.5% 34.2% 26.3% $6,650

Note: *rich media includes interstitials; **total refers to spending on justthe three formats shownSource: eMarketer, October 2004


Rich Media's Share of Total Online Ad Spending in theUS, 2000-2008

2000 2.0%

2001 2.5%

2002 5.0%

2003 8.0%

2004* 8.5%

2005 9.5%

2006 10.5%

2007 11.5%

2008 12.5%





Branding Challenges

Rich media projections by eMarketer raise some keyquestions about the nature and use of rich mediaadvertising—is it fundamentally a tool for brand building,or one for direct response?

Advertising.com CEO Scott Ferber says the answer maybe in the eye of the beholder. “Right now, it’s seen as abranding medium,” he says. And that makes a certainamount of sense, given the visceral impact of animationand other special effects. “Movement conveys ‘essence,’so it helps branding.”

But the reality, says Mr.Ferber, is that rich media is a valuabletool both for branding and direct response campaigns.“Theability to capture information in an interactive environmentis an incredible tool for direct response.”

With that broad utility, Mr. Ferber is looking for a new waveof advertisers to adopt rich media. Currently, use of richmedia tends to be focused on a handful of industries, hesays.“Broadly speaking—on the branding side, most richmedia ads are in the entertainment and automotive sectors,while on the direct response side the focus is on retail,financial services, telecom and travel.”

Widespread broadband should change that.“I would hopeto see the CPG companies coming more to the Internet toraise brand awareness,” he says. But that’s just a start. Hepoints to major marketers like restaurant chains andtechnology companies, to name just two, that could benefitfrom increased use of rich media to build brand online.

Use of rich media is still new enough that not all of thewrinkles have been ironed out, he says. Advertising.com’snetwork has a reach of roughly 125 million unique users,but the entire network is not yet rich media enabled.“Right now the figure stands at about 70%,” he says.

Meanwhile, the process can still be sticky. “There’s notone standard, no common language, for rich media.Thereach is there but some of the process is still beingworked out.”

The challenges, though, are easily outweighed by thepotential benefits—in particular the chance to interactwith customers. “The big issue is responsible marketing,”he says. “You can overdo it with obnoxiously loud volumeor offensive graphics. But if we’re responsible asmarketers, there’s not much downside risk.”

D. Measuring Rich MediaEffectiveness

The cost of creating and running rich media ads

make results measurement all the more

important.The basics begin with clicks.This is a

primitive user response, and limited in its

meaning for the marketer, but the click does

illustrate the greater engagement rich media

creates over static ads.

Click-Through RatesRich media click-through rates have outperformed non-rich mediaCTRs in every quarter. Click rates fell in 2003 but the declineshalted in 2004.The decline in click rates in 2003 suggests that asnew ad formats grew more familiar to users, the ads were easierto ignore. Stabilizing rates in more recent quarters suggest thatnew formats have proven compelling and that marketers have abetter understanding of the need to cap ad frequency and to useappropriate targeting.

The key in all of this is that rich media ads have stabilized and aredelivering a CTR five times higher than static display ads.

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Click-Through Rates for Rich Media, Non-Rich Mediaand Total Ads, Q1 2002-Q3 2004

Rich media Non-rich media Total

Q1 2002 2.50% 0.41% 0.72%

Q2 2002 2.48% 0.33% 0.69%

Q3 2002 2.47% 0.27% 0.69%

Q4 2002 2.44% 0.27% 0.72%

Q1 2003 2.15% 0.28% 0.70%

Q2 2003 1.87% 0.34% 0.61%

Q3 2003 1.57% 0.29% 0.76%

Q4 2003 1.24% 0.27% 0.44%

Q1 2004 0.98% 0.25% –

Q2 2004 1.17% 0.23% –

Q3 2004 1.17% 0.20% –

Source: DoubleClick, November 2004



D. Measuring Rich Media Effectiveness

Frequency CappingAd frequency makes a difference in the click rate. Data fromEyeblaster for the 14 months from January 2002 through February2003 indicate that while the average CTR was 5.99%, it peaked at6.36% among users who had seen an ad two times, dropping offto 5.33% when users were exposed to an ad six or more times.

Logical enough—familiarity breeds, if not contempt, disinterest inclicking.Therefore, if part of a marketer’s goals with a rich media-based ad campaign is the direct response of a click, make certainto limit the frequency of ads that run on any single site.

048856

Ad FormatsAd format makes a difference for CTRs, according to DynamicLogic’s study of Eyeblaster-branded interstitials. The floating ad—where the creative is not bound by a rectangular banner shapeand moves on top of the page content—had a 4.39% CTRcompared to 1.56% for a commercial break ad (a full-page unitthat plays on site entry or before a site page).

050030

DoubleClick also measures “interaction” rates, referring to user-initiated events such as “a mouse-over, a pull-down, game playing,clicking to another layer of information, or closing the window inwhich the ad appears.”

Again, the specific rich media format influences response rates.While 28.8% of users interacted with floating ads during the firstquarter of 2004, only about half that number interacted with richmedia banners or expandable ads. Note, too, that DoubleClickcounts even the act of closing the ad window as a viable metric,since user perception of the ad takes place during that brief time.Not every marketer might feel that way, however.

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Interaction* Rates with Rich Media Ads onDoubleClick Network Worldwide, by Type of Ad, Q12004

Rich media banner 15.5%

Rich media expandable 14.0%

Rich media floating 28.8%

Average 18.4%

Note: *DoubleClick defines interaction as including "a mouse-over, apull-down, game playing, clicking to another layer of information, or closingthe window in which the ad appears"Source: DoubleClick, May 2004


Click-Through Rate for Rich Media Ads Run on theEyeblaster Platform, by Ad Frequency, January 2002 -February 2003

1x 6.00%

2x 6.36%

3x 6.03%

4x 5.93%

5x 5.84%

6x+ 5.33%

Note: Average click-through rate=5.99%; seven rich media ad formatsSource: Eyeblaster, April 2003


Click-Through Rate for Rich Media Interstitial Ads* forSnuggle Botanical Bliss, by Creative Format, 2003

Floating ad 4.39%

Commercial break 1.56%

GIF banner 0.11%

Note: *the two types of Eyeblaster-branded rich media interstitials usedwere a commercial break (a full-page ad that plays on site entry or beforeany other site page) and a floating ad (moves within transparent layer overWeb page and plays within area up to 500x500 pixels)Source: Eyeblaster/Dynamic Logic, April 2003




Playing With the Ads

Perhaps it goes without saying that the creative side ofany rich media ad plays a huge role in generating clicksand interaction. A recent campaign that generated strongresponse was Moxie Interactive’s work for VerizonWireless’s new VCAST service offering streaming media towireless phones. Moxie developed floating ads withstreaming video that allowed users to get a sense of theVCAST service.

“We wanted banners that people could play with,” saysMoxie Vice President Joel Lunenfeld. “Our goal was toclearly shout that Verizon has this new service, and tomatch the innovative service by putting it in people’shands online and letting them play with it.”

The campaign was not easy to pull off, Mr. Lunenfeld says,because it needed clearance from the sites where the adswere to run. “We needed permission to run streamingvideo uninitiated,” he says. (He suggests reaching out tomedia partners to reach agreements early in the process.)

But the campaign delivered significant results of interestto both brand and direct marketers. “Click-through rateswere phenomenal,” he says, at over 3% during the firstweek. Interaction times, meanwhile, were roughly 13seconds. (Moxie worked with Advertising.com usingPointRoll Technology on the campaign. See chart belowfor statistics from PointRoll on interaction times.)

But beyond the interaction, Moxie saw gratifying messageresults as well. “We started off the campaign by doingroadblocks, geo-targeted, frequency capping at one peruser per day,” he says. “We saw 39.5% messageassociation from the roadblocks alone.”

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Indirect ResponseBeyond click-through and interaction time, indirect response isanother key measure.DoubleClick found that consumers were morelikely to visit an advertiser’s Web site or purchase the company’sproduct after viewing a rich-media ad than a non-rich media one.

Post-impression activity per impression was 1.11% for rich mediain Q4 2003 versus 0.54% for non-rich media.And when tracked,each rich media activity created greater conversion to sales thandid static display ads.

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User Interaction Rates* and Average BrandInteraction Times** for Rich Media Ads UsingPointRoll Technology, by Industry, August2004-October 2004

Interaction rate Average brand interaction time

(in seconds)

Automotive 17.9% 9.9

Pharmaceutical 12.0% 12.8

Consumer goods 9.0% 12.4

Finance 8.8% 8.7

Retail 8.6% 11.7

Technology 8.6% 15.2

Travel 8.6% 9.4

Entertainment 8.2% 11.2

Telecommunications 7.6% 11.7

Total 9.5% 11.3

Note: interaction defined as "any time a unique user rolls over the ad unitto expand a panel"; *interaction rate defined as total interactions dividedby total impressions; **average brand interaction time defined as"weighted average of total seconds that panels were displayed within anindividual impression"Source: PointRoll, November 2004


Consumer Post-Impression Reactions to Rich Mediavs. Non-Rich Media Online Ads, Q4 2003

Post-impression activity* per impression

1.11%

0.54%

Post-impression sales** per activity

2.30%

1.47%

Rich media Non-rich media

Note: *any activity taken by a consumer subsequent to viewing an onlinead but not clicking on it; includes visiting advertiser's Web site,downloading document or filling in form for more information;**conversion data here represents only DART for Advertisers data in whichadvertisers tracked conversions through Spotlight tagsSource: DoubleClick, February 2004




Data from Advertising.com supports the DoubleClick post-impression activity results, showing rich media’s strength overdisplay advertising.

Take a recent week of activity on the Advertising.com network.While only 11.67% of the total impressions were for rich mediaads, fully 22.71% of “actions” took place in response to such ads. Inthis case, actions are defined as “any post-click event, such aslead acquisition or a user filling out a site registration.”

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Branding EffectivenessTo measure the branding effectiveness of online advertising,marketers typically employ the services of third-party companiessuch as Dynamic Logic. Basing its research primarily onexposed/control consumer panels, Dynamic Logic has developedits MarketNorms database, as a benchmark to compare anycurrent campaign.

Dynamic Logic has found that rich media ads generate increasedreadings for branding metrics when compared to control groupfigures.Message association showed the strongest lift. It is importantto note that these figures do not include audio or video ads.

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The Bottom LineFor many advertisers, click rates, interaction measurements, andbrand lift are secondary to the fundamental goal of customeracquisition.A poll of online retailers by the e-tailing group found thatcustomer acquisition was the most important marketing objective.

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Rich Media Ad's Share of Impressions, Clicks andActions* on Advertising.com Network, Week ofJanuary 1, 2005-Week of March 12, 2005

Impressions Clicks Actions

Week of January 1 14.25% 21.55% 30.15%

Week of January 8 13.64% 21.41% 23.67%

Week of January 15 15.45% 22.52% 24.11%

Week of January 22 16.34% 21.23% 24.38%

Week of January 29 14.65% 19.56% 18.97%

Week of February 5 13.36% 19.97% 15.80%

Week of February 12 12.32% 19.06% 15.68%

Week of February 19 12.96% 24.92% 17.70%

Week of February 26 13.69% 30.91% 18.74%

Week of March 5 13.12% 27.62% 18.66%

Week of March 12 11.67% 21.94% 22.71%

Note: *actions defined as any post-click event, such as lead acquisition oruser filling out a site registrationSource: Advertising.com, March 2003


Brand Metrics for Rich Media Ads vs. GIF/JPG/HTMLAds, Q2 2003 (as a % lift over unexposed group)

Brand awareness

7%

5%

Message association

31%

18%

Brand favorability

6%

4%

Purchase intent

5%

4%

Rich media GIF/JPG/HTML

Note: Dynamic Logic's MarketNorms database defines rich media as"including DHTML, Flash, rollover/expand, Superstitial, Eyeblaster, andPointroll, [but] does not include video and audio"Source: Dynamic Logic, 2004; DoubleClick, May 2004


US Online Retailers' Rankings of Their MarketingObjectives, 2004 (as a % of respondents)

Customer acquisition

Convert browsers tobuyers

Customer retention

Drive traffic to site

Minimize shoppingcart abandonment

Integrated multi-channel initiative

Reduce spam

Veryimpor-tant

72%

67%

67%

49%

33%

26%

10%

Impor-tant

21%

26%

25%

28%

34%

29%

18%

Some-what

impor-tant

7%

6%

7%

20%

22%

22%

30%

Notvery

impor-tant

0%

1%

1%

3%

7%

8%

17%

Notat all

impor-tant

0%

0%

0%

0%

2%

5%

8%

Not applicable

1%

1%

1%

0%

3%

10%

17%

Source: the e-tailing group, Exmplar, Inc., October 2004




That’s the goal for Internet phone service provider Vonage. “Weare focused on customer acquisition at a good CPA,” or cost peracquisition, says Caroline Finch, director of marketing.

Vonage judges rich media online ads, including streaming video,on that single goal. “We look at rich media as a way to increaseawareness, educate consumers, and provide an enjoyableexperience—but with the focus still on customer acquisition,”says Ms. Finch.

The success of an ad is simple, she says: track acquisitions basedon individual campaigns. “Some companies do look at othermetrics,” she says, “but we don’t. It’s primarily acquisitions at anacceptable CPA.”

E. Obstacles—and Solutions

Rich media is poised to become the dominant

form of Web site advertising, but obstacles remain.

A key issue is cost, from both the marketer’s and the publisher’sperspective.According to a JupiterResearch survey, more than aquarter of respondents cited cost as a reason for not buyingonline video advertising. (It should be noted that nearly as manycited unfamiliarity with the format.)

060959

On the publishing side,Web sites are nervous about the costsassociated with rich media, in particular streaming media.While70% of publishers support rich media ads, only 27% supportstreaming content.

062848


Reasons that US Marketers Give for Not BuyingOnline Video Advertising, 2004 (as a % ofrespondents)

Audience is too small

38%

Price is too high

27%

Too unfamiliar with the format

21%

Publisher offerings aren't attractive enough

19%

Poor picture quality

14%

Source: JupiterResearch, 2004; MediaPost, July 2004


Types of Advertising Capabilities Supported by USOnline Publishing Sites, December 2004 (as a % ofrespondents)

Web banners 87.2%

Rich media 69.2%

Pop-ups and pop-unders 60.3%

Contextual advertising 51.3%

Streaming content 26.9%

Behavioral targeting 24.4%

Other 3.8%

Source: Advertising.com, February 2005



E. Obstacles—and Solutions

The restrictions placed on certain formats by individual Web sitesmay pose inventory challenges for advertisers looking for broadreach.The promulgation of standards will help alleviate this issue.And the growth of rich media use will persuade more cautiouspublishers to support it. In the meantime, advertising networks areone option for advertisers seeking wider audiences.

Cost issues will not disappear, but as with any technology, they willdecline over time as the use of rich media becomes morecommon.And even now, on a cost per click basis rich mediaseems to be worth its price.

Certainly cost is an issue when considering streaming audio andvideo—tools that give marketers the ability to create theemotional impact of brand advertising on television and radio. Oneroute around this problem is repurposing content from othermedia—but this must be done with an eye toward thecharacteristics of the Internet.

“We can’t treat this like TV,” says Advertising.com’s Mr. Ferber. “Ifwe just repurpose, we’re not making the most of the medium.”

A campaign by Adidas made use of repurposed content—with atwist.An Adidas TV spot featuring Muhammad Ali “boxing” with hisdaughter was downloaded more than 2.5 million times.The twist:The knockout wasn’t included in the TV part of the campaign, andcould only be accessed online.

Meanwhile, interactive streaming media advertising is still, at thispoint, not very common. But the success stories, like the JerrySeinfeld-Superman Webisodes for American Express and BurgerKing’s Subservient Chicken site, point up the marketing possibilities.

Inventiveness like this is at the heart of successful rich mediaspots.At WSJ.com, the highest impact unit is a “sliding brandlaunch unit,” which briefly expands over editorial real estatebefore sliding back into its designated ad position.

As WSJ.com’s Mr. Henry puts it: “We think better advertising isbetter for everyone, from clients to readers.”

About this White Paper

Much of this white paper is based on research

that originally appeared in the eMarketer

spotlight report, “Rich Media:Techniques and

Trends,” by Senior Analyst David Hallerman.

Additional reporting and writing for this paper

was done by Ezra Palmer.

eMarketer Contact InformationeMarketer, Inc. Toll-Free: 800-405-084475 Broad Street Outside the US: 212-763-601032nd floor Fax: 212-763-6020New York, NY 10004 E-Mail: [email protected]

Advertising.com Contact InformationAdvertising.com Phone: 212-497-0085Lauren Weinberg HTTP://www.advertising.com625 Broadway, 5th Floor E-Mail:[email protected] York, NY 10012


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