Why offline ad spending is like 'the war on drugs'

July 20, 2011: 5:19 PM ET

Customers have moved to the digital realm -- but big-brand advertisers are following reluctantly.

By Stacy Cowley, CNNMoney tech editor

FORTUNE -- There's a disconnect between big brands and their customers. People are spending more and more time online and on their gadgets, but advertisers remain wary about shifting their spending into the digital realm. Internet analyst turned venture capitalist Mary Meeker estimates that there's a $50 billion gap between where the money goes and where it should go.

"I think there's something analogous to the war on drugs," Saatchi & Saatchi S CEO Judah Schiller declared Wednesday at a Brainstorm Tech discussion on the state of the advertising industry. "We're spending tens of millions of dollars over the decades. We know it doesn't work, but at least we know what we're getting!"

A few companies are taking the plunge. Hewlett-Packard (HPQ) spends 40% of its ad budget on digital.  "A lot of our dollars that are spent, particular in social and mobile, are on the engagement front," said Chris Curtin, HP's vice president of corporate marketing digital strategy. "If we had to split it, we'd like to see more of our advertising dollars go to engagement."

That's a tricky sales pitch when companies are still struggling to quantify the success metrics for "engagement." Microsoft (MSFT) ran a promotion last year offering free "farm cash" -- the virtual currency of Zynga's hit FarmVille game -- to those who became Facebook fans of Bing.

"It was very polarizing," Bing Worldwide Marketing General Manager Wes Nichols said of the internal discussion running the promotion. It was an apparent runaway success: Bing immediately gained 500,000 new Facebook fans. But are they staying  engaged?

"We still have the debate," Nichols said. "Are those friends active and coming back, or did they just friend Bing to get the free pig on the farm?"

Posted in: , , ,
Join the Conversation
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.