Why online brand spending will create new winners in online ad networks

One of Lightspeed’s consumer internet predictions for 2010 is that brand advertising dollars are going to start to flow online at scale. Two thirds of all ad spending in the US is for brand advertising, yet three quarters of online ad spending is direct response.

The recession of the last couple of years has provided a catalyst to drive more brand marketers online in an effort to seek greater efficiency in their media buys, and as they have tasted some success, they will continue to spend online as their marketing budgets recover.

Late last year the IAB put out a very interesting study about building brands online. I recommend that you read the whole thing if you are involved in the online advertising industry.

For those of you who won’t, here are some highlight charts:

Marketers believe that the internet can be a branding mechanism:

But the bulk of online advertising volume today is not considered effective for brand building:

This is because most online ad inventory has been optimized for direct response advertisers, whereas brand marketers want to see their traditional metrics (click image to see full detail):

Furthermore, brand advertisers want relationships with the media companies that they work with, not simply self service efficiency (again, click image to see full detail)

Most brand advertisers have primarily stuck with portals and big publishers who offer brand safety, reach/frequency control, reporting on the metrics that they care about and strong relationship, but often tied to higher priced media. As brand advertisers seek better efficiency from their online media budgets, they will turn increasingly to ad networks. Although there are over 300 ad networks today,  the vast majority of them have grown over the last 10-15 years by optimizing their offering for the direct response advertisers who have constituted the vast majority of online advertisers to date. I think we’ll see a new generation of ad networks emerge who are tuned to cater to the specific needs of brand advertisers, and I’m actively looking to invest in companies with this mindset.