Monday, January 3, 2011

Turning Online Advertising Into E-Commerce

Today JPMorgan predicted that global e-commerce will grow 19% in 2011 and is forecastingistock_avava-4-mom-and-daughter-looking-at-computer-screen-c that rate to continue through 2013.  What's more interesting is that 52% of people make an online purchase at least once per month, and only 12% didn’t shop online in 2010 (down from 20% in 2007).  This is according to JP Morgan senior analyst, Imran Khan.  Wow. Those are big numbers.  This is a swift and significant change in shopping behavior, even in a recession.
However, there is a bit of a disconnect pointed out as well.  Online advertising spending has grown significantly in the US – it reached 13.7% of total advertising, which far exceeded the percentage of online retail sales to total retail sales (3.9% of US retail).  This suggests some level of inefficiency.
 So what to make of this ecommerce to online advertising gap?   A couple of thoughts:
  1. We have not yet hit the tipping point of online advertising.  There is a barrier that must still be overcome that will take more years of advertising to close the gap.
  2. Online advertising may have little correlation to online sales.  This could be due to the fact that online advertising is a media, rather than retail, choice.  I can advertise soup on the internet, but I wouldn’t expect you to buy it there.  The same is true for restaurants, gasoline, etc.
  3. Or….advertising is not effectively convincing people that online shopping is a safe, quick, and viable alternative to putting your coat on and driving to the mall.

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