Better content, audience measurement needed to close gap
Whoever said that potential is a fancy word for "ain't done nothin yet," might have been thinking about the Canadian Internet advertising industry. Much of the hype has more to do with its possibilities than actual accomplishments.
The disproportionate attention is due to high growth rates and results being generated by advertisers south-of-the-border. Despite the fact that more Canadians than Americans have access to the Net at home, we continue to lag in terms of online ad spending.
The Internet Advertising Bureau (IAB) estimates Canadian 2000 disbursements will total $125.1 million, up 92.2 per cent from $65.1 million in 1999. Despite these impressive growth numbers, this totals only 1.29 per cent of spending on major media such as newspapers, television and radio
American companies will pour U.S. $5.3 billion into online ads this year. When comparing statistics about the two economies a good rule of thumb is to use a ten-to-one ratio. This year American advertisers will outspend Canadians to 65-to-one online.
There are several things holding back Canadian advertisers. Local Web-sites have lagged in providing good content, and published advertising rates are high. But more importantly, until recently, few companies were able to provide advertisers with reliable qualitative and quantitative data about people visiting their Web-sites.
"The Internet is a measurable medium," said Sherry Barmania, marketing director at Media Metrix Canada, a firm that tracks online usage, and measures high traffic Web-sites in major markets around the world. "In the newspaper industry there are companies that measure circulation and readership so (marketers) know who advertising will reach. We provide advertisers similar information about the Web."
Media Metrix does this by taking representative samples of Internet users from major markets around the world, and tracking which sites they visit. More than 100,000 people are being studied. Among the data the company provides customers are: number of unique visitors to major Web-sites, average minutes spent per person visiting each page and other demographic information such as age and gender composition.
Reports provided by independent companies such as Media Metrix are considered more useful to advertisers than information spplied by Web site operators themselves, since these may be tempted to inflate usage statistics to charge higher advertising rates.
Canadian business executives appear to be in a state of inertia when it comes to adopting many Internet technologies. The cheap dollar, which has lowered the price of exports, has given local companies a free ride when it comes to competing with their American rivals.
Rather than use this to their advantage, many have grown fat and lazy taking profits, when they should be using the breathing room to restructure. Internet advertising has not been the only casualty, Canadian companies are also behind in setting up e-commerce sites. This laxness will come at a stiff price if as many analysts expect the Canadian dollar bounces back again to a more natural level.
But the upside potential for Net advertising remains high. "The Internet is fast becoming a mainstream medium," said Barmania. "The number of users is increasing, and they are spending more time online as well as viewing more content."
The profile of the average Net user is also changing. Until recently men dominated, but in June, Media Metrix noted that in the U.S. the number of women online surged ahead for the first time. What's more, the growth rate among women continues to exceed that of the overall population so the gap should widen.
Worldwide, most Web users are from North America. But this dominance will decrease over the next few years. Although international brands such as Yahoo! and AOL continue to dominate, regional names like Sympatico and Toile du Québec are grabbing a bigger share of audiences.
The IAB estimates that 10.5 million Canadians or 35 per cent of the population had Internet access from home in 1999, a number that is expected to grow to 19.2 million or 64 per cent of the population by 2003. Ironically this total is higher than that in the U.S., where only 22 per cent of Americans had access from home in 1999.
But in order to profit, Canadian companies are going to have to take some initiative, or else competitors from our southern neighbor are going to grab the high ground.
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