Internet advertising spending is expected to reach $9 billion by year-end, and credit card marketers are helping to fuel that trend by boosting interactive budgets and making bolder moves online.
  According to New York City-based Internet media research firm eMarketer Inc., the new online advertising peak will exceed by $1 billion the previous high set in 2000, when the dot-com boom's initial bubble burst. By the end of next year it will hit $11 billion. Major credit card marketers are part of online advertising's recent resurgence, including J.P. Morgan Chase & Co.'s Chase Card Services, Citigroup Inc., American Express Co., MBNA Corp. and Capital One Financial Corp.
  Industry experts say credit card advertisers are spending more each year for online advertising. In July, Nielsen//NetRatings reported in its monthly online ad relevancy survey that among the top 25 financial-services advertisers, Citigroup's Citibank ranked No. 10, MBNA was No. 13 and Bank One Corp. was No. 14. Dollar figures were not available, but issuers' presence is seen as part of a rising trend in which major credit card brands are appearing frequently among the top advertisers in the financial category, and also occasionally among the top 25 online advertisers overall.
  Still, some observers say card marketers lag other key business sectors in tapping the power of the fast-evolving online advertising environment.
  "Many financial-services companies, including credit card marketers, still view online advertising mainly as a direct-response tool," says Cory Treffiletti, senior vice president of Carat Interactive, San Francisco, one of the nation's leading media agencies in advising Fortune 500 clients about online advertising. "The new direction of online advertising involves dimensions of branding and targeting that are very different from a few years ago, yet we don't see many examples so far of credit card marketers harnessing the full potential of these new tools."
  One credit card advertiser bucking that trend is Chase Card Services, the card division of J.P. Morgan Chase and Bank One Corp., which merged July 1. Most of Chase's high-profile cards came from Bank One, the No. 1 issuer of Visa cards whose cobranded offerings included cards for Disney and Starbucks. Chase's many cobranded cards are being marketed in a variety of ways on the Internet through diverse technologies and tactics.
  Understanding Customers
  "We've worked with all manner of online advertising tools, from traditional buttons and banners, to richer media options," says Tom O'Donnell, senior vice president of Chase Card Services, Wilmington, Del. "Now we're starting to move into areas that are even more innovative, getting us closer to understanding what the customer is doing online, and how we can connect with them there."
  Three top examples include:
  * The Starbucks Duetto Visa card, which Chase markets across general-interest Web sites and cross-markets on the coffee company's own site. Registered users of the Starbucks.com site also receive e-mail communications with special offers, including rewards for purchases on the Visa card.
  * The Amazon.com Visa card. Chase has integrated instant credit card account approval into the process of shopping on Amazon.com, with good results, according to O'Donnell.
  * At Disneystore.com, online shoppers also can instantly apply for Chase's Disney Visa card while finalizing purchases. And in a promotion this fall, Chase is offering Disney Visa cardholders its first-ever online auction (powered by eBay.com) of unique Disney merchandise.
  "Online advertising is an ideal vehicle for promoting rewards-based and cobranded cards, including the opportunity to cross-market to and with our cobranding partners' Web sites," says O'Donnell.
  Chase has developed a corps of in-house online advertising experts, but it also seeks specialized Internet advertising help from various consulting firms and agencies on occasion, O'Donnell says. He adds that Chase has not decreased any other category of ad spending to accommodate its increased activity online.
  The majority of card advertisers, however, lack in-house online advertising resources, and they are often reluctant to seek outside help due to their long legacy of doing things themselves, say online advertising experts.
  "Decades of heavy reliance on telemarketing and direct mail have contributed to the credit card industry's habit of seeking an immediate consumer response from a high-impact offer," says Carat Interactive's Treffiletti. But the Internet's capacity for measuring actions and reactions has revealed that consumers rarely make an instantaneous decision for a considered product like a credit card.
  "Our research shows that consumers spend a lot of time-as much as two weeks-considering and digesting information before adopting a new financial-services brand or a product like a credit card," he says. "Ideally, a credit card marketer should build its online advertising around that decision-making process."
  Separate Tactics
  DoubleClick Inc., a leading provider of online marketing platforms and measurement options, conducted a survey of 2,000 consumers this year that revealed that Web advertising has become a significant factor for people shopping for a new credit card.
  "But many credit card companies never get past the first part of the online selling process, getting the consumer's attention," says Kathryn Koegel, director of research and industry development for New York-based DoubleClick. "The second stage is perhaps the most important, when the consumer learns more about the product, and the third stage is when a decision is made. Each stage requires separate online tactics."
  While that may sound complicated, the good news is that technology has delivered a range of new options to make it easier to execute online campaigns with more sophisticated goals, Koegel says.
  Rich media-online ads that do more than simply appear as a banner urging people to click for more information-are on a big upswing, she says. A rich-media ad often provides audio, video, fill-in forms, pull-down menus and other expandable elements. In contrast, a standard banner ad merely directs a viewer to a marketer's Web site when a user clicks on the ad. To develop rich media, sponsors usually need more sophisticated software. Web users, meanwhile, usually must have higher bandwidth, such as high-speed Internet access, to experience rich media.
  "The newest rich-media innovations hold great promise for credit card advertisers in differentiating their online offers and targeting consumers at each stage of the decision process," Koegel says.
  The forecast from eMarketer says that although rich media are poised to grow next year, 40% of all online advertising continues to be comprised of basic "paid search," or ads that appear alongside related information when a person is searching for information about a specific topic. Search-based advertising-also called contextual advertising-will continue to have an important place in online advertising because it usually offers a good value with decent effectiveness, says Treffiletti.
  Targeted online ads, also called behavioral advertising, are another important element in the mix. These are defined as ads delivered to groups of people who have indicated by their online behavior interest in a certain topic or product. The cost of targeted advertising varies, depending on the level of complexity involved.
  New Factors
  Two new factors could have a big effect on the type of advertising and messages that credit card marketers deploy online in the next two years. One is the fact that senior citizens are the fastest-growing group of Internet users and must be addressed now, despite being largely ignored in the last dot-com frenzy, says Ken Cassar, director of strategic analysis for Nielsen//NetRatings.
  Also, the U.S. population's access to high-speed or broadband media is nearing critical mass, which will allow for wider use of more sophisticated types of online advertising such as rich media, Cassar adds.
  In an ideal future, contextual and behavioral online advertising tools will merge to deliver rich-media ads that are both entertaining and relevant to each individual Web surfer, he says.
  Purveyors of such leading edge rich-media services include New York-based Eyeblaster Inc. and New York-based Unicast Communications Corp., among many others. Each offers various expandable online ad technologies with unique sound and graphics features. More expensive than paid-search ads, rich-media prices vary depending on the scope of a campaign and the publishers' sites involved.
  Frustrated Consumers
  Fort Washington, Pa.-based rich-media specialist PointRoll Inc. offers an online ad option designed to "roll over" to provide more information about a product if the Web surfer clicks on it. Unlike many traditional banner ads, the viewer can get more information from the ad without leaving the site being viewed. A PointRoll ad also can be formatted to provide different information each time a consumer clicks on it, addressing the need for catering to the different stages in the consumer's "consideration" cycle when deciding on a new product.
  "A lot of online ads invite consumers to click on them, but as soon as they do so, their computer screen is immediately switched to the marketer's Web site, and that's often frustrating to consumers," says Andrew Ellenthal, PointRoll's senior vice president of global sales. "We only provide more information about an advertised product if the consumer clicks on the ad, allowing them to control what they're doing online."
  A recent PointRoll survey showed that for all financial-services advertisers using PointRoll's services, 7% of consumers interacted with ads in the category, and the average time spent with the ad was 23 seconds.
  The colors, the creativity and the message of online ads are as crucial as ever in engaging a particular consumer's interest, says Ellenthal.
  "The appeal of the offer made by the credit card company, and the creative elements of the ad, make all the difference," he says. "A compelling offer with animation, video and incredible streaming technology gets attention. But if the Web user feels disrespected, or is forced onto a marketer's Web site against his will, it's not working. The old days of screaming for attention with unwanted pop-up ads, and constantly striving to drive people to marketers' Web sites regardless of the situation, are ending."
  PointRoll has several major credit card marketers among its clients that it won't disclose for competitive reasons, but the response rates for its card ads recently have been as high as 20%, says Ellenthal.
  Dotomi, an Israel-based company that recently opened for business in the U.S., markets another rich-media option it calls "personalized" banners. Dotomi's ads offer a range of customized information to Web surfers based on their previously declared preferences to an Internet portal such as Yahoo! Through arrangements with a long list of Web-page publishers, Dotomi claims to reach 75% of the Internet population and aims to deliver customized ads to consumers based on their interests.
  "The whole concept of bombarding people with ads for things they're not interested in is going away, replaced by relevant forms of rich media," says John Federman, Dotomi's president and chief executive. "Our premise is based on the idea that if you give consumers information about something they have already said they are interested in, they will be receptive to those ads."
  In Israel, Dotomi has been running such a program with that country's largest bank, Bank Hapoalim Ltd., a licensee of American Express, whose credit card brand it promotes there.
  "In a test of Dotomi with the American Express Co. brand in Israel in the first half of this year, we saw response rates of 11% versus 0.2% for the typical banner ad," says Federman, defining response as a click on an ad. "Consumers respond when an ad is delivered to them about something they're interested in, at a point when they're receptive to that information."
  Most Internet publishers are eager to cooperate with marketers to produce ads that are more focused in order to reduce clutter and make their own online ad inventory more valuable.
  The New York Times is such an example, and claims to be the largest Internet publisher (at 14 million subscribers worldwide) requiring users to register in order to read its pages online. The registration generates information about Web surfers, which is then used by online marketers and their agencies to target ads more effectively.
  "We don't identify individual consumers online, but we put people into groups and segments of behavior, and that gives us a lot of information for marketing purposes," says Jason Krebs, vice president of sales and marketing for NYT.com.
  'Behind the Curve'
  Currently, NYT.com has several credit card companies among its clients, but Krebs says he believes financial-services marketers are still "behind the curve" in utilizing the Internet's full potential.
  "As the marketing world is moving toward more contextual and behavioral online advertising, we are supplying them with readers, such as people who typically gravitate toward financial news, have a certain income and have read the business section within a week," says Krebs.
  Despite increased spending in online media by card advertisers, the Web still accounts for only a small part of overall credit card marketing budgets, say industry observers.
  When the federal government's do-not-call rule went into effect late last year, "it reduced credit card companies' ability to do outbound telemarketing, and now they're looking to move some of that activity online, but it's not a replacement for telemarketing," says William Murphy, senior vice president of Schaumburg, Ill.-based Experian Marketing Services, which provides a variety of database marketing services.
  "Credit card marketers are now trying to turn the Internet into a more productive marketing environment by learning who is online and what they're doing out there," he says.
 

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