When Richard Kimber was running HSBC's online bank First Direct in the UK, he chopped his traditional media budget and went for more online spending to boost new business. It wasn't just a cost issue but the transparency of online that really appealed - and delivered results. "From an advertiser's view it works, and it worked really well," he says. "I moved a lot of media budget to online at first direct. The UK went through a credit squeeze a while ago and we were using the internet to attract deposit account holders. We changed the marketing investment away from direct mail to the internet. In financial services, the reason it worked well is it was interfaced with CRM [customer relationship management]; it became the most measurable of our marketing channels."
Kimber's enthusiasm for digital marketing explains why he has ended up back in his home country as Google's regional managing director for Australia, New Zealand, Korea and South East Asia. His Sydney base now accommodates more than 200 staff, a dramatic increase from a mere handful of people 18 months ago. The headquarters may not have the kudos of the famous Googleplex in the US but it's buzzing and will shortly move to new premises, reflecting the level of growth expected.
When he was in Sydney recently, Google's global CEO, Eric Schmidt, reiterated the Google strategy coda - search, ads and apps. The current weighting gives about 80 per cent of activity to search, 20 per cent to advertising and 10 per cent to applications.
"Search remains the largest, ads is where we make all the money, and the extension into apps is about leveraging to enable users to have access anywhere - and where we see enormous potential,'' Kimber says.
And plenty of room for growth is exactly why he joined the company in July 2006: "The main reason was to be involved in a rapidly growing company and take it to the next level. Google was looking for someone who had expertise in Asia and knew business from a user's point of view. I was keen to get into the fast lane of business."
There is certainly lots to do in this region, with pockets of sophistication and, Google hopes, plenty more potential revenue as consumers and advertisers latch onto the marketing promise of digital.
Financial services organisations are among the more internet-savvy sectors in Australia as well as the UK, Kimber points out, closely followed by travel. "Financial services is the most scientific around customer segmentation and trying to forecast future customer value," he says. "For example, [at First Direct] we could track back to the Google adword they clicked on. That's the example of the type of insights we were looking for."
There is still a gap between the time spent online by Australians and the amount of proportional advertising dollars online attracts, Kimber says. "Ad growth is not happening at the same pace as people are changing viewing and reading habits. People are spending more time at the computer."
There's no doubt about that. And just how this trend will change marketing approaches is slowly becoming apparent.
"In terms of basic advertising strategy, more businesses are turning to the internet first rather than as an afterthought," Kimber says. "It used to be everything else was done then it was 'let's turn to the internet'. So that is quite an important tipping point. Small and medium advertisers will start to think about that first; it hasn't happened but it is going to happen.
Once that leap of faith occurs, says Kimber, there's another concept to embrace: the "always on" factor. Traditional marketing revolved around big campaigns that advertisers simply couldn't afford to have running constantly. Today's consumers are using the internet day and night so continual promotions have to be part of the service you offer, Kimber adds. From a marketing point of view that's very dfferent and involves shedding the "campaign mentality".
"Once you get past the idea it's always on then you get to measuring it, and the tools are sophisticated," says Kimber. "You can start with cost of acquisition by channel, and online is cheaper. Also, online and offline work together and there's convergence now. If you run a TV campaign you then see a difference in online behaviour. Today you get people looking to have measurable and transparent marketing. There's a much higher level of engagement with marketing and engaging with the brand."
But for all its generic advantages, there's resistance from FMCG (fast-moving consumer goods) marketers, with their considerable clout, who remain reluctant to use the net. FMCG holds great promise, Kimber says, but there's still a way to go.
The goal for now is to boost that advertising revenue, and while Google is firm about not stating its financial results or objectives, industry estimates show the company attracting $429 million of Australian ad spending through its search-based AdWord product, out of an estimated online advertising spend of $1.4 billion. That includes revenue from a form of advertising known as affiliate marketing, where advertisers only pay according to the number of responses to their online ad. It's an area dominated by Google, and although it accounts for just $50 million of the total online spend last year, it is growing rapidly.
"We are looking to grow that online marketing category more broadly and we want to be one of the players," Kimber says. "Display and video and all aspects: we see ourselves being one of the key catalysts in Australia and I am very bullish about the outlook."
Competitors may have a less rosy view of the future. According to Bala Iyer and Thomas Davenport ("Reverse Engineering: Google's innovation machine'', Harvard Business Review, April 2008), "the deals Google is doing suggest that its ambitions are far broader than just online advertising. Google hopes to use its platform, with applications relevant to ad buying, to help media companies track the effectiveness of campaigns and help advertisers allocate their marketing dollars effectively across print newspapers and magazines, radio, television, mobile devices and the web."
The authors say that the information Google gleans from this role could turn it into a direct competitor of the media companies it works with now, despite claims to the contrary by Google executives. In fact, Kimber identifies his competitors in this country as all the portals, the online directories, and to a degree, Fairfax and News Ltd. But he claims there's plenty of room for everyone.
"It's not so narrow - there's a nice breadth of diversity and it's healthy for all of us. We have good dialogue with the industry and lots of activity around it ... With a new government, we are pushing the digital agenda too."
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