I recently sat down with Emma Weisberg of the Google Retail Team to discuss Nielsen Online’s findings on the role of the Internet in consumer research and offline purchasing. In my years doing commerce market research, what I’ve been asked most consistently about is the effect of Web site visitation on offline sales. This question is also one of the most difficult to answer. We pursued this holy grail of online research earlier this year through a combination of online surveys and our Online HomeScan panel. Watch my discussion of the results with Emma below:
I found myself at our client meetings last week in San Francisco, Seattle and LA, repeatedly making the point that CPGs had been increasing their online ad spend. This was based upon conversations that I’d been having with folks in the CPG space and the intense interest that we’ve been seeing lately from CPGs in online advertising. As I had a few spare minutes today, I checked AdRelevance to make sure that I was right about this. I was relieved to see that online ad impressions among Food and Drug and Personal Care categories had indeed increased by 32 percent over the past 12 months (Oct 06 - Sep 07 compared with Oct 07 - Sep 08). Interestingly, there is a big difference in the growth between the two big subcategories within CPG. In the most recent 12 months, impressions did not grow relative to the same period in the previous 12 months in the food and beverage category. In personal care, on the other hand, impressions grew by 87 percent.
What happened? Well, when we dig into the data, we see that it’s mostly a story about a few big advertisers significantly curtailing their online ad budgets with many others showing modest increases. During the two periods that we measured, Coca Cola’s ad impressions dropped from 276 million impressions to 50 million. Miller Brewing’s impressions dropped from 184 million to 52 million. On the personal care side, though, we saw the big advertisers generally keeping their impressions up.
Is this about personal care, or about food and beverage? I don’t think so. I think that it’s mostly about the immaturity of the media in tough economic times. As one big advertiser pulls back, we’ll see many others plodding along with modest increases in the online ad budgets, reflecting even greater increases in the allocation of ad dollars to the Internet. Given the tough economic climate that many advertisers are going to be operating in, I think that this is the story that we’re going to be seeing for another year or two. Some big advertisers will scale back significantly, a rare advertiser will dramatically shift dollars to the Web, and many others will continue to execute a modest shift of dollars from traditional vehicles to Internet.
Here’s some data that provides an interesting perspective on the Google/Yahoo deal announced last week.
While this deal does seem to be a pretty clear win for both parties, the audience overlap data below suggests the possibility that we should be wary of the most optimistic incremental revenue scenarios. Given the fact that 77% of Yahoo searchers also search on Google, it is possible that there may be a material number of instances in which a person searches on Yahoo and does not click on a sponsored link, and then searches on Google and clicks on a sponsored link.
With the Yahoo/Google deal in place, this person would not need to execute the second search on Google. This would simplify the experience of the searcher, but would not generate incremental revenue for Google. Yahoo, however, would get a cut of search revenue that it would have otherwise lost. The scope of this behavior in the future may ultimately be what determines whether Yahoo or Google got the better end of the bargain.
At the risk of stealing my own thunder, here is the most interesting slide from a presentation that I’ll be giving this week at the Internet Retailer conference. This is based on a survey that we ran during May, where we looked at cross channel (online/offline) usage among 659 people (US only) that had purchased consumer electronics (either online or offline) within the past 60 days. We found that a surprisingly large percent had utilized multiple channels in the course of researching and purchasing. 64% of those that visited local stores (to either see/touch/evaluate the product or to talk to a salesperson) also used the Web to research the purchase. 50% of those that used the Web to research the purchase also visited the store. The data points below, though, really blew me away.
More than half of brick and mortar buyers that used the Web to research the purchase said that they wound up buying from the retailer whose site they spent the most time researching. Equally interesting, 80% said that they had purchased from a retailer whose site they had visited first. I’ve seen a lot of multi-channel impact stats out there over the years, but I don’t know that I’ve seen a data point that so clearly makes the case for the importance of a solid Web site and strong multi-channel integration.
Yeah, yeah, this just looks at consumer electronics, which may be an extreme example, but take a look at the data below, looking at guys that you wouldn’t think of as multi-channel bellwethers…This is Homescan Online data (really old Homescan Online data, 2005) that looks at spending levels among multi-channel shoppers. You can see that multi-channel shoppers spend a LOT more than the average shopper. People that both shop at CVS’ brick and mortar stores and that visit its site spend, on average, 57% more than the average CVS shopper. 61% for Walgreen and Costco, 37% more for Sam’s and 38% for Wal-Mart.
Many of you are asking yourselves whether this is a simple reflection of loyalty, or whether multi-channel behavior causes higher spending, and it is a fair question. However, either way you slice it, these guys are valuable. Whether strong multi-channel integration rewards your most loyal shoppers or compels higher levels of spending, it seems pretty clear that it’s a good thing for retailers.
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