By Eric Picard, The ClickZ Network, Aug 25, 2008
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The purpose of advertising is to create demand for a product or service. Advertisers want get people to give them money. And they want to forge a lasting relationship with those people, so they can continue to get paid. Every dollar spent by an advertiser is an investment in the creation or maintenance of a financial relationship with a person.

If advertisers could know that every dollar spent would come back to them as a revenue-positive event, they would spend an almost infinite amount of money. That obviously isn't the case, as some types of advertising are more effective than others. And generally those effective forms of advertising are a scarce commodity. Generally there isn't enough ad inventory available in these high-demand media to cover any one advertiser's entire marketing need. Said another way: even if an advertiser bought all the inventory that made sense for his needs, it wouldn't drive enough sales to meet the goals. So advertisers must spend in multiple media.

Over the history of advertising, a general consensus has been achieved on what types of media work well for specific goals. The process a person goes through as she makes her way from unknown to paying customer has been carefully studied and codified as the purchase funnel:

• Category awareness: I want an HD radio.
  
  
• Brand awareness: Sony makes an HD radio.
  
  
• Brand consideration: Philips also makes an HD radio. Which should I choose?
  
  
• Brand preference: Sony means quality and prestige.
  
  
• Purchase intent: I need a Sony HD Radio now!
  
  
• Purchase: Who has the best price on Sony HD radios?
  
  
• Customer retention: I love my Sony HD radio; I want other Sony products.
  
  
• Customer advocacy: You should also buy a Sony HD radio.

In general, the more effective a media vehicle is, the closer the person is to purchasing a product, the more desirable that media is. The confounding issue is scale. If the media vehicle doesn't reach a large enough audience, it doesn't have as much value to the advertiser:

click to enlarge

The media with the greatest audience reach and highest impression volumes -- TV, radio, newspapers, billboards, and magazines -- are considered very effective media for driving consumers down the purchase funnel. But They aren't as good at driving a purchase, retaining customers, or creating customer advocacy. But the media that are great at driving purchases have much less inventory.

Search advertising is an example of a very effective media type that simply doesn't have enough inventory to effectively drive enough sales for any one advertiser to replace the rest of the media spend. Direct mail is the only other media type as effective as search advertising at driving purchases, and only the most targeted of mailing lists fall into that full-circle category.

So while search is a very important media type, it's important mostly for the search engine provider with the largest audience and not nearly as important to any one advertiser or any one other search engine provider. There are, of course, a few exceptions to this rule. A few major advertisers, like eBay and Amazon, have such a broad number of products that they can cast a much broader net than most companies. And the automated marketing management systems and advertising platforms they've built internally enable them to take the best practices in their approach to the medium.

To advertisers, scale matters. Advertisers need to be able to create demand for their products or services with minimal effort and maximum return on investment. And search simply doesn't have enough inventory to matter, compared to other media. If one were to ask the largest advertisers in the world to shift $1 billion of their budget into search, they simply couldn't. There isn't enough inventory to buy.

For most advertisers, the media that reach the largest appropriate audience and drive potential customers down the sales funnel become the important ones. And it's incredibly important to understand that search advertising rules don't necessarily apply to other media. This is mainly because the majority of people who are exposed during other stages of the sales funnel are much less likely to become purchasers quickly, if ever. So while there's more waste in other media, they still have their place and still meet advertiser goals.

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Biography
Eric Picard is the director of advertising strategy and emerging media planning at Microsoft Digital Advertising Solutions. In his role, he helps set corporate-level strategy for how Microsoft approaches advertising from a business and technology standpoint. His team manages long-term advertising platform and product strategy, emerging media strategy, and planning for incubation and research teams, and designs next generation advertising products. Formerly, Eric was founder and director of product management at Bluestreak, where he oversaw advertising products, such as third-party ad serving, ad analytics, and rich media and led development of many company technologies. He helped pioneer rich media advertising in the late '90s and has been active in most of the critical industry conversations related to technology, including the IAB's Measurement Committee and Rich Media Task Force. Prior to Bluestreak, Eric founded 9th Square Inc. and Waterworks Interactive Inc.

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Article Archives by Eric Picard:
» Why Search Doesn't Really Matter - August 25, 2008
» Supply and Demand in Online Advertising - July 28, 2008
» Counting the Streams in a New Media Age - June 30, 2008
» Is an Impression a Commodity? - June 2, 2008
» Media Agencies vs. Ad Networks - May 5, 2008
» The Future of Advertising: A Conversation With Jeff Einstein, Part 2 - April 7, 2008
» More Articles by Eric Picard

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