Trends in Digital Marketing and E-commerce

Linus Gregoriadis, Head of ResearchE-consultancy.comEmail: linus@e-consultancy.com Website: www.e-consultancy.com

*Presentation overviewOnline advertisingSearch engine marketingVertical searchE-commerce and affiliate marketingSocial media and social commerceAtomisationUser experience and Customer Engagement

Online advertising landscape

*Three big deals in 2007Googles proposed acquisition of DoubleClick for $3.1 billion.Microsoft buys aQuantive (owner of Atlas) for $6 billion.Microsoft pays $240 million for a 1.6% stake in Facebook.

*Online marketing landscapeOnline now accounts for 15% of the total UK advertising market and is likely to hit 2.75 billion this year (IAB).

*Trends in display advertising Increased importance of behavioural targeting for boosting conversion rates and providing a better online experience.Yahoo! bought online ad network BlueLithium for $300 million; AOL acquired Tacoda; Microsoft now owns DRIVEpm.

Leading publishers including The Guardian, News International, FT and Emap agree alliance to share information on reader behaviour.Talks with Revenue Science.

*Rise and rise of searchSource: E-consultancy Search Engine Marketing Buyers Guide 2007

*Search Engine Marketing - trends Search has become more strategic, and part of integrated marketing plans.SEO gains ground - PPC less cost effective than before.Introduction of Universal Search creates new challenges and opportunities. PPC is becoming more like SEO.

*Google dominates

Google is used for 70-80% of UK searches.

60% of companies surveyed by E-consultancy believe that Googles dominance represents some sort of risk though the vast majority (80%) rate it as the best search engine for ROI.

*Vertical Search

Could vertical search erode Googles dominance?More than half of E-consultancy users (54%) said they would be very likely to use a search engine that focused specifically on serving their specific business / work needs.*A further 40% said they would be quite likely.

* E-consultancy / Convera Vertical Search Survey 2007 (Preliminary results)

*Vertical Search BenefitsKeep users on-site 62%*Improve brand (by becoming authority website)62%Potential to monetise through advertising52%Reclaims online community from Google 42%

* Percentage of publishers citing as major benefit

*Vertical Search DisadvantagesPoint users to competitors 37%*Hassle (support/maintenance)29%Resource issues21%No clear business opportunity15%

* Percentage of publishers citing as major downside

Survey closes tomorrow night: http://tinyurl.com/25fqct

E-commerce and affiliate marketing

*E-commerce landscapeOnline sales in the UKwill amount to an estimated 42bn in 2007, up from 30.2bn last year, according to the IMRG.The average UK online shopper will spend 1,600 in 2007.Online sales will reach an estimated 78bn a year by 2010.

**% of internet sales by source of referral(Channel Advisor)

Online buying behaviour is changing ...

*Affiliate Marketing Affiliate Marketing is seen as most cost effective channel.It will drive in the region of 3 billion worth of sales in 2007. Move to Affiliate 2.0

* E-consultancy / buy.at Affiliate Marketing Merchants Survey

Social Media and Social Commerce

*Ratings and ReviewsWikisSocial NetworksTaggingUser-generated ContentBlogsPeer-2-peerFacebook

*Social Networks = sticky, high page views / session, high repeat visits, youth audiences, reach Blogs = PR, niches, search rankings UGC = cheap content, increased conversion rates, user loyalty / trust Tags = improved navigation, categorisation, conversion rate optimisation, SEO

*Social Media The profile of social media has risen dramatically in recent months because of sites such as Facebook and Twitter which are used by millions of people.

The challenge for companies is to find a natural way to start conversations about their products and services online.

*What is Social Commerce? Put simply, social commerce is about customers having the means to interact with one another in order to make better buying decisions.

*Importance of ratings and reviews, and user-generated contentCustomer ratings & reviews are being used by 28% of online sellers, with more than half (52%) saying that they were considering the use of this feature.* More than half of all online sellers (51%) consider UGC as either extremely important or very important to company strategy over the next year.

*E-consultancy / Bazaarvoice Social Commerce Report 2007

*Benefits of ratings and reviewsPercentage of respondents rating as major benefit (Social Commerce Report 2007)

Benefits of Ratings and Reviews

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

Higher conversion

rates

Improved retention

and loyalty

SEO benefit

Ideas for

product/services

development

Differentiation from

competitors

Lower costs to

serve customer

Reduced returns

rate

Atomisation

*SyndicationFeedsWidgetsAggregationMash-upsWeb as platformOpen APIs

*iRobot

*Fragmentation of contentPublishers should no longer think about their content just as something which appears on their destination website.

Growth in personalised home pages. Widgets, feeds and open APIs are an opportunity.

User experience and customer engagement

*User Experience is keyMore grasp of commercial benefits of user experience investment.Tiny increase in conversions = .Specialist agencies (user-centred design services, eye-tracking etc).

*What is Customer Engagement?Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand.*

Recency of visits, frequency of visits; propensity to give feedback, recommend and create user-generated content.

Digital environment offers unprecedented scope for interaction and measurement of that interaction.

* Richard Sedley of cScape, adapted from Ron Shevlin.

*Top strategies for online engagementE-consultancy / cScape Customer Engagement Report 2008

*Top tactics for online engagementE-consultancy / cScape Customer Engagement Report 2008

*ConclusionsImportant to think of online publication as more than just a destination website. In a world of atomisation, what is the most effective and appropriate way of getting the brand out there?

Engagement with audience is vital.How is that engagement being defined and measured, and how is it being deepened?

Questions?

Linus Gregoriadis, Head of ResearchE-consultancy.comEmail: linus@e-consultancy.com Website: www.e-consultancy.com

*We are a publisher too ..

BEST practice: research, training and events.

In association with PPA, weve launched a diploma in digital publishing commencing in early 2008.

Places still available.

Its hard to cover everything so Ive had to be reasonably selective .

Setting the scene whistle stop tour

Hopefully most of it is explicitly or implicitly relevant for publishers.*Research comes from various sources, including E-consultancy research and notes from events and roundtables.**DoubleClick deal needs to be approved by regulators because of complaints that Google will have too much power in the online space.

The Google-DoubleClick deal really concentrated digital minds on the potential dangers of the search giant having a monopoly of all things digital. There are questions that still need to be answered around the implications of one company having so much control and information relating to both search and display advertising.This acquisition, and similarly the Microsoft-aQuantive (AVENUE/A RAZORFISH) deal, also raise important questions about agencies, ad serving platforms and search engines all falling under the same ownership.But the bigger picture is around Microsoft and Google gobbling up those around them and arranging their tanks around the online landscape. Microsofts stake in Facebook is an important strategic milestone in a longer war for digital supremacy which will be fascinating to behold.

Microsoft pays to get rights to sell Facebook ads (50/50%) split.

the deal seems to be more about advertising than anything else. With 50 million users, a growth rate that's eclipsing MySpace (what's that - Ed) and an average time of 3.5 hours/month spent on the site, the real interest in this deal is that Microsoft extends its advertising monopoly on Facebook from the US to the 'rest of the world'. The deal as we understand it is that Microsoft will have the exclusive rights to sell ads into the right hand banner and ad slots, splitting the revenues with Facebook.The $240 million therefore is a straightforward 'payment for exclusivity' - a downpayment on the profits expected

* Things have changed massively in the last few years ago.

Not long ago it was 1% and then 3%

Digital agencies are now often being appointed the lead agency by brands.*Behavioural marketing is more tribal than demographic targeting. Its about what people are doing online.

Putting users into segments and then targetting them based on what they are doing online. Different to contextual or demographic.

So, if someone on your website was known to have visited car sites recently for the purpose of research-before-purchase, then why not serve them a car advert on a finance website?

Marketers are increasingly recognising the importance of behavioural targeting for boosting conversion rates and providing a better online experience.A study by JupiterResearch shows that internet users are more receptive to behavioural targeting than contextual advertising (see stats section below).Ad networks have sought to differentiate themselves by adopting more sophisticated targeting techniques. This applies to blind networks such as Blue Lithium and Drive PM, and transparent networks such as Tacoda and Revenue Science. Yahoo! and AOL have both recently bought behavioural networks, underscoring the importance of this technology in digital advertising. On-site targeting has also become a focus for companies looking to target their content more effectively. Touch Clarity has made good inroads into the UK market, particularly in the financial services sector. *70% of website traffic typically comes from search.

Around 70% of companies plan to increase budgets in next year: E-consultancy / Neutralize UK Search Marketing Report 2007

Googles UK ad revenues overtake ITV. Not long ago it was channel 4.SEO represents 11% of UK search spending but this is rising.

E-consultancy estimates that the value of paid search alone will near the 2bn mark this year, reaching around 1.97bn, up 56% from 2006. [Source: E-consultancys 2007 Search Engine Marketing Buyer's Guide, August 2007] Weforecast that UK spending on Search Engine Marketing will increase 58% this year to 2.22bn -and although that growth rate is down from 65% in 2006, the market still looks to have plenty of room for growth in the future. For the first time, spending on organic search will grow more quickly, increasing 68% to 252m. Our estimate includes payments to agencies, as well as investment in client-side staff to manage SEO and implement changes

*Companies spending more on SEO.Companies trying to cure their crack cocaine addictionNo longer shrouded in such mysterySearch is being seen as part of the bigger picture. Many people are using search as navigational tool because they cant be bothered to type in the url. This needs to be factored in to PPC ROI. Better and more measurable ROI.Managing search activity in the context of offline activity.

The introduction of Universal Search by Google could create major challenges and opportunities for search marketers. This will see Blog, Image, News and other types of search results included within the organic listings on Google.com and Google.co.uk, thus creating even more competition for high ranking spots. It is already happening in the case of News results.

As a result:Companies will need to look more closely at the different digital assets they own, such as videos and photos for travel agencies and hotels, and be prepared to invest in developing more.Optimisation of images and other media types will also become more important in achieving SEO results for example, how you archive a media gallery or how effective your XML product feed is to Google Base. *Yahoo and MSN struggling to close the gap in spite of launch of Panama and AdCentre platforms respectively.

Google is like crack cocaine for many companies.*Examples of successful vertical search sites include:

Examples of vertical search include www.globalspec.com for engineers and www.searchmedica.co.uk for UK doctors. There is an increasing trend for them to be integrated into B2B trade websites.

Vertical search, part of a larger subgrouping known as "specialized" search, is a relatively new tier in the Internet search industry consisting of search engines that focus on specific businesses. While Google, Yahoo!, and the like will continue to dominate the online consumer search market, research analysts say many specialized search engines are emerging to address the particular information needs of niche audiences and professions.*From advertiser point of view, more contextual, relevant and targeted advertising.People potentially closer to the buying decision.Bringing buyers and sellers closely toegether.*E-commerce director will one day disappear rather like the Chief Electricity Officer c.f. Ian Jindal* 5-10% of total retail sales.**Less direct traffic; more traffic coming from search and comparison shopping engines.

You need to be in the places where the customers / readers are.

E-consultancy gets vast majority of traffic from Google.

People using Search as navigational tool.

David Reilly will talk about ways of improving search rankings.

*Industry has made great progress. Very relevant for delegates affiliate marketing is about publishers .Driving close to 3 billion in sales in 2007 though at this stage this is still an unofficial estimate.This figure has increased six-fold since 2004 highly exponential growth. Still dont really see affiliate marketing talked about in national newspapers its still lumped in with online advertising.But this figure suggests it should be more talked about in the mainstream media hard to understand?Move away from perception of something grubby, c.f. Nick Robertson

There is scope for B2B affiliate marketing.

Lead generation becoming more important, particularly in the US.:

* Part of the Web 2.0 phenomenon.Opportunity for companies to harness the trends towards user-generated content, social networking etc.Presentee-ism.Facebook creatiing brand fans.

** *How do brands get involved? Should they get involved?

Online reputation monitoring. Difference between popularity and influence. *What about publishers these benefits apply to user generated content as well.*E-commerce director will one day disappear rather like the Chief Electricity Office c.f. Ian Jindal*Aggregation and syndication sites are very important. ***Information needs to be packaged and parcelled up.

A widget: a third party item that can be embedded in a web page *E-commerce director will one day disappear rather like the Chief Electricity Office c.f. Ian Jindal*Becoming increasingly important *Amid all the talk in recent months about the use of Web 2.0 and rich media to deepen customer relationships, it is a bump back down to earth to note that reliable customer services are still seen as the most important strategy for customer engagement.The next most essential strategy is a consistent online and offline customer experience something which 39% of companies see as essential and 47% see as very important. There is an increased recognition of the need for an integrated approach across different channels. Section 5.3.4 below shows that companies are getting more proficient at mapping customer experiences in order to identify different touch points.The joint-third most important strategies for engaging with an audience online are deemed to be building a sense of community around product / services / brand and compelling and persuasive copy, both said to be essential by 35% of company respondents.The concept of building a sense of community is perhaps the only one of these four top strategies which can be deemed to be a pure-blooded Web 2.0 form of engagement. The majority of respondents believe that soliciting user-generated content and participation on social networking sites are only a nice-to-have or not important. Some 43% of respondents say that UGC on their websites is essential or very important but that figure drops to only 21% for participation on networking sites [Figure 16b].It is surprising that less than half of company respondents view UGC as at least very important, given the well documented advantages of features such as ratings and reviews on a website[1]. It is something of a paradox that advocacy is the most widely perceived behavioural trait of an engaged customer, and yet the majority of companies have not prioritised the solicitation of UCG. [1] See also E-consultancys Social Commerce Report 2007http://www.e-consultancy.com/publications/social-commerce-report-2007/ *This section looks more specifically at Web 2.0-type tactics and technologies. The extent to which a variety of methods are being used to drive online customer engagement is shown in Figure 17a and Figure 17b, arranged in order of how commonly they are being employed. Blogging and video-sharing sites are the methods most frequently being used, with 21% of company respondents using each of these tactics. These are the five most commonly used tactics [Figure 17a]: Joint 1) Blogging sites21%*Joint 1) Video-sharing sites21% 3) Social networks19% 4) Web-based widgets / badges / gadgets18% 5) Social knowledge-sharing 17%* Percentage of company respondents using tacticThese are the tactics most commonly being planned by companies: 1) Web-based widgets / badges / gadgets39% 2) Blogging sites36% 3) Desktop-based applications / widgets/ gadgets35%Joint 4) Social networks32%Joint 4) Social news sites / bookmarking32%* Percentage of company respondents planning to use tacticIt can be seen that the tactic most likely to be on the radar is the use of web-based widgets, with just under 40% of companies saying they are planning this. Desktop-based applications or widgets are also being planned by more than a third of companies. Widgets are an increasingly popular vehicle for engagement because they can give visibility to brands, products and services in an increasingly fragmented online world. In the future, people will be less likely to visit websites proactively but more likely to customise their home pages to pull in relevant information (contained in feeds and widgets). The figures show that social networking sites are being used or considered by half of company respondents, a finding which is surprising because it was seen in the previous section that the vast majority of respondents regard a strategy of participation on social network sites as either not important or a nice-to-have. It seems that many organisations are engaging with social networks without really being convinced about the value. *Understand online ecosystem and stakeholders*