2/27/2020 Technology is Changing the Advertising Business - Knowledge@Wharton

MARKETING

Technology is Changing the Advertising

Business
Jan 31, 2001  North America

It is sometimes difficult to grasp the vastness of the Internet as it links

country with country, culture with culture, buzzing metropolis with distant
one-horse town. Even more amazing is the fact that something so seemingly
endless could become the vehicle through which an entire industry is
transformed to become more personalized.

Such is the case with the advertising industry. With access to consumer
information that is, in some ways, easier to collect over the Internet, and
more sophisticated technology, companies are customizing their ads toward specific audiences, and
even zapping ads to cell phones and Palm pilots. Web surfers can interact with ads in greater depth,
and they can benefit directly from an ad’s personalized message.

For example, Excite@Home’s Enliven business unit, which provides interactive online advertising, has
launched an updated version of its popular rich-media technology in the past two years. The technology
ties multimedia banners to a database to create constantly fresh banner ads on the Web. The updated
product can customize ads to match a user’s PC setting. So on one level, for example, Procter &
Gamble can use Folgers Coffee banners tailored to the time of day, while on a more intimate level,
customers who are known to frequently buy Rich French Roast might be sent e-mails or see ads
promoting that particular product.

These technological changes, which only promise to become more advanced as bandwidth increases
and provides more richly-textured opportunities for advertisers to tell their stories, are fundamentally
changing the way advertisers relate to their customers. Customization has serious implications for the
marketing business and the greater objective of brand development.

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“The Internet has become more and more a part of the communications community in the past seven
to eight years, more dramatically in the last three or four,” remarks Richard Gillespie, president of
Gillespie Advertising in Princeton, N.J. “The delivery of the message has been made easier. Rather than
sending out junk mail and trying to gain a 1% to 2% response rate, the more I know about the person
I’m communicating with, the more valuable I can make that information. Rather than my invading your
space with generic messages, I can send you communications that have value to you. The power has
moved from the deliverer of the message to its recipient.”

These empowered recipients, the consumers, are reportedly responding well to the targeted approach.
“People give you a lot of credit for advertising that goes out and finds them in their lives,” says Evy
Nabers, director of fusion marketing at Brand Buzz, a division of advertising agency Young & Rubicam
that started a year ago. Brand Buzz’s objective is to combine a number of disciplines including database
marketing and Web marketing, in order to find the best way to get a message to a consumer, whether
on line or in person. “The more targeted you can get, the better,” says Nabers.

All media have seen a greater ability to send disparate messages to disparate people, says David
Schmittlein, deputy dean of the Wharton School and a professor of marketing. The second part of this
equation, he says, is knowing the appropriate messages to send. That is derived from the collection
and retention of information about a consumer, which Schmittlein says the Internet world has learned
to do successfully from the field of direct marketing. “Customized direct marketing and direct mail led
the way in demonstrating the value that exists in retaining customer information,” he says. “The most
valuable pieces of information with respect to purchase propensities and what matters to customers
turn out to be – did they buy something before, when did they buy it, how much did they spend on it
and what were the particular product attributes that characterize what they bought. If you know those
things, you’ve got a great basis for customizing ads.”

Schmittlein says a great experimentation is going on with respect to a customer’s willingness to be

contacted, the results of which have yet to be seen. Good marketers, says Gillespie, will know “when
not to cross a line.”

While firms like Gillespie and other large advertising agencies are waving their interactive banners
furiously, Leonard Lodish, a Wharton professor of marketing, says that customization is “an uphill
battle” in the advertising business. “The advertising fraternity has not been very rational,” Lodish says.
“Advertisers still believe old wives’ tales like you need to advertise during the Super Bowl to be
successful. Advertising agencies are not taking the necessary risks. They need to be more
entrepreneurial and experiment more. The Web is the perfect application to do that.” Lodish also points
to traditional direct-response marketers, like L.L. Bean, as being the most savvy when it comes to
reaching out to Web-based customers.

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Advertisers will have to nurture their entrepreneurial spirit and put it to good use over the Internet,
especially with the arrival of technologies like personal video recorders, which could drop TV ad
viewership by as much as 50% by the end of the next decade, according to Forrester Research. As
customization software and similar technologies become even more sophisticated and advertisers tap
into the vastness of the Internet, they will learn to capitalize on the vastness of its possibilities for
directly reaching consumers.

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