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Thursday, May 12, 2005

New advertising options needed to achieve good ROI

I was highly encouraged by General Motors' strategy to embrace embedded advertising in September of last year. I have been arguing for a while that traditional advertising is in serious danger but looks as if the message is still not getting through to the advertisers. I often wonder in what world they live! (Related article: Case study of embedded advertising)

What works is online advertising these days but despite the remarkable performance of online advertising, it constitutes just a drop in the bucket. According to Mary Meeker of Morgan Stanley, only 3 percent of the total ad spend is on Internet advertising.

So it was good to hear that General Motors, that is in serious financial trouble, is acting again to do something about its advertising strategy. The company announced today that it will consolidate responsibility for its media assignments in the United States at the Publicis Groupe. In a statement, GM said, "GM put its U.S. media buying assignment up for review this spring in order to create a more streamlined and efficient unit with greater focus on innovative, strategic media buying. We also are responding to changes in the media landscape and the dramatic growth in our dealer (Local Marketing Group) client base." I am interpreting "changes in media landscape" as meaning that it is no longer effective to advertise in conventional channels.

The decision to consolidate, which came after a two-month review, was intended to help "create a more streamlined and efficient unit with greater focus on innovative, strategic media buying," Betsy Lazar, general director for advertising and media operations at GM, said in a statement published by The New York Times. "The consolidation of the buying unit with the Planworks organization will achieve additional operational efficiencies." This is corporate speak for "We are cutting back since it was not working for us."

GM continues to lose market share and S&P has downgraded its investment grade rating into the ranks of junk bonds. While it is unlikely that such a move will have an immediate impact on its sales, I expect that a change in advertising strategy will definitely help it in the long run and give GM a better ROI on its advertising dollars.

What does it mean for you?

  1. As GM says, the media landscape is changing. It may be changing for you in ways different that for GM, but there is a lot of turbulence. Do some research to better understand how it is changing and try to come up with accurate ROI for your ad spend.
  2. Online advertising will continue to grow as consumers access online content through mobile devices. Rather that being afraid of this new technology, you must explore how you can be creative in exploiting it.
  3. Don't keep doing things just because you have always done so. The world of advertising is very dynamic. American Consumers are already quiet sick of advertising. Unless you can find interesting ways to reach them, the message will simply not get through.

Recommended article: Principles of Internet advertising