In fact 56 percent are predicting the upswing to shift dollars from other advertising formats, though one in four (26 percent) are unsure.

The survey, completed by 62 agency people, found that the appeal of online video is in its is scope for interactivity and engagement, accessibility (for consumers and advertisers), measurability, cost effectiveness, opportunity to leverage TVCs, and increasing competitiveness vis-àvis traditional television.

Commenting on the findings, MSN business manager Liz Fraser says online video is well regarded for delivering results.

“The research shows that the decision to use online video advertising is largely a function of results, inasmuch as more than one-in-two (55 percent) believe ‘results’ are the most important consideration factor,” she says. Targeting (25 percent) comes next, followed by cost (20 percent) and reach (16 percent).

In fact cost plays a pretty big role in the decision making process with three-in-five (61 percent) considering it either most or somewhat important. On this basis it is just as important as targeting, says MSN.

So, there’s a big interest in online advertising, but what really needs to be done to enthusiastically convert agency players? Two-in-seven respondents (28 percent) would spend more if ROI were better. Meanwhile better proof of performance (33 percent) and cost per engagement modelling (39 percent) are also likely to attract more expenditure.

“Online video advertising is in its nascency, and the onus is on online media property owners to offer performance metrics applied to other forms of online advertising. It’s starting to happen, and I’d expect video’s natural advantages, particularly scope for engagement and interactivity, to capture bigger budgets, when all the hard numbers are available,” says Fraser.

Experienced users make these observations – the vast majority (95 percent) have used online video over the past 12 months. Most popular was pre-roll/ post roll (87 percent), followed by in-banner (74 percent), expandable banner (57 percent), and rich media overlay (46 percent). There is scant experience of mobile video advertising (3 percent), though over the next 12 months we should see an upswing (31 percent expect to use mobile video advertising).

According to the findings Ad Exchanges are very up and coming , with 31 percent saying that over the next 12 months they or their agency are likely to use an Ad Exchange to book online advertising. However, a similar number (30 percent) say they won’t, and even more (39 percent) don’t know.

Click here to view the embedded video.

Click here to view the embedded video.

As far as revenue goes, online advertising seemed to laugh in the face of the recession—and in the face of other media sectors—and that rise has only sped up, with the most recent April-June 2010 quarter showing that the cold, hard cash entrusted with publishers and search companies added up to $62.58m, an increase of $7.26m on the Q1, 2010 result.

The April-June 2010 quarter saw the highest increase in the last six months, at 19.23 percent year-on-year for the same quarter, proving solid growth in the total online advertising market. And the average total year-on-year increase for the last four quarters is 15 percent, which is well over what some were predicting.

Despite a few naysayers, display advertising overtook classifieds (by a sliver of $270k) for the first time ever with a massive 25.84 percent year-on-year increase and a rise of 38 percent from Q1 this year, a result that deviates from international trends, where paid search advertising, social media and mobile are the major growth sectors.

There was an interesting reversal of fortune in the display category, with two of the previously leading categories (travel and accommodation; and leisure, entertainment and media) both showing a decrease. However, sectors, like telecommunications bounced back showing a massive increase in proportion of spend to the display total compared to last quarter of 33 percent and government departments, services and communities taking the lead spot with 15 percent of the total Q2, 2010 display spend.

Michael Gregg, IAB chairman believes the overall ad spend figures are evidence, if any were needed, that the online sector has now transitioned from an emergent advertising choice to a mandatory mainstream medium.

“The industry has reached new maturity and is collectively focused on delivering strong traffic results, powerful branding opportunities and consistent measurement practices,” he says.

And Liz Fraser, IAB vice-chairman is obviously fairly happy with the positive results, which were better than expected, but did sound a note of caution.

“We are all smiling. You cannot complain about growth, particularly when other media have struggled. But, frankly, for digital, anything under double digits would have been disappointing, when you consider the upswing in business confidence this year, never mind the spending flurries that often precede June end-of-year close off. So there is a lot stacked in our favour.”

Alisa Higgins, IAB marketing manager says online ad spend growth is happening worldwide, with ZenithOptimedia revising its total ad spend forecast yet again and now saying online will rise 13.1 percent this year.

“We are certainly doing our bit to support the prediction,” she says.

Search & directories totalled $21.65m, up nine percent from Q1, 2010, while over the same period classifieds remained flat, though recording 19 percent year-on-year growth. Fraser says IABNZ expects to see an improvement next quarter, in line with the global macroeconomic recovery and renewed confidence in the employment market.

PricewaterhouseCoopers partner Chris Perree says: “Online advertising spend is steaming along, picking up momentum as each quarter progresses. We continue to report positive trends in the online advertising market in New Zealand. Contrasting total spend of each category to prior year reported figures highlights greater investment in the online advertising medium, in particular display advertising. We should keep an eye out on how the market spend in each category evolves to see if New Zealand trends towards similar proportions noted in more mature jurisdictions overseas.”

PricewaterhouseCoopers partner Chris Perree says: “The growth in spend is consistent with organisations focusing and recognising online advertising as a medium of choice. It also supports expectations of continued strong growth as businesses have generally been more cautiously optimistic about the future. This market trend is not only limited to New Zealand, but also to more mature markets, such as the United States and United Kingdom, where online advertising continues to command a greater portion of the advertising market.”

Search and Directories led the way with year on year growth of 31.64 percent in 2009. Display advertising grew 7.67 percent to $64.30m from $58.12m and accounted for 30 percent of all interactive spend in 2009. Classifieds decreased from $75.32m to $71.43m.

Alisa Higgins, IABNZ marketing manager, says the classifieds category really feels the effects of the economy, especially around employment and jobs advertised online.

“It’s great to see online job sites like Seek reporting an increase in the number of jobs being posted in 2010,” she says.

Internationally, ZenithOptimedia reports that the internet will continue to outgrow other ad media, increasing “its share of expenditure from 12.4 percent in 2009 to 16.2 percent in 2012.” A reassuring thought when elsewhere they have called the 10.2 percent global drop in 2009 “the worst decline in ad expenditures in modern times.”

However, they have added that the world’s ad market has now stabilised and will grow 0.9 percent in 2010, improving steadily to reach five percent growth in 2012.

All screen shots taken in Australia

Confused? So were we. Put it this way: If you’re living in Australia and you log onto the MSN New Zealand website, what would you expect to see? Australian ads, targeted to you because you are living in Australia, or New Zealand ads, which although they are on a New Zealand website, may not be of much use to you, seeing as you are living in Australia?

Large publishing companies are, “… masquerading total eyeballs as New Zealand eyeballs,” says our source. “It drives down the response rates (which we’re all being measured on) and more importantly creates an ongoing issue with transparency and honesty in the industry. People trust their online media agency to get their ads in the right places. Any publisher with morals will only deliver ads to the right people.”

Simply put, media agencies should be targeting ads to specific localities, based on a user’s IP (Internet Protocol) address. IPs are handy things because they identify where in the world an online user is. So, if you are a New Zealand business seeking to attract New Zealand, your online ad campaign should only be accessible to those surfing the net with New Zealand IPs.

Michael Gregg, chairman for the Interactive Advertising Bureau (IAB), does not see much of an issue. He says that when it comes to IP targeted advertising, it is actually quite accurate.

“IP targeting works 90 percent of the time and there may be 10 percent wastage.”

At the end of the day he says it is up to the clients to do their research if they have any concerns about where their advertising is being viewed. It seems though that IP is only a small piece of this puzzling internet picture. According to Michael Carney, veteran marketer and current author/editor of MarketingWeek.co.nz, it really depends on how the ads are sold.

Some clients will pay a flat rate to have an ad displayed for a set period of time. In cases like this, where in the world people are seeing the ad does not matter so much, and so neither does their IP.

He says it only becomes an issue if, as a client, you paying on a cost per click basis.

Like Gregg, Carney says it is about being a smart client and knowing what to ask for. For example, if you are going to pay for ads on a per click basis, you can actually specify to only be charged for ads clicked on by a domestic audience.

He is quick to downplay the significance of the issue in New Zealand.

“It is not necessarily a big issue for New Zealand-based websites because the number of international traffic to these sites is low.”

He estimates that international views to New Zealand websites could be as low as one percent (although, according to Nielsen Market Intelligence from January, unique browsers originating outside of New Zealand for stuff.co.nz is 50.5 percent and 39 percent for nzherald.co.nz).

Yahoo.com.au as seen from NZ

We did a little digging of our own to see what we could garner when we logged onto yahoo.com.au. Sure enough, even though we’re logging on from New Zealand, the ads that appear include ‘Rexona, Australia’s greatest athlete’, ‘Medibank’ and ‘Target’.

At the end of the day it seems what it boils down to is how you are paying for your advertising — per click or a flat rate.

We would be keen to hear your thoughts. Whether you are a client, an online media agency, an internet surfer, or just a general online geek, what’s your verdict? Are some online media agencies taking their clients for a cyber ride or is the whole thing legit?

The Saatchi team will woop it up at a $1500 lunch. Round two entries close November 23. All quarterly round winners will have the chance to win a trip for two to the Cannes Lions International Advertising Festival 2010.

If you think you’ve done better than this, get the submission form at the MSN website.

View the full campaign on the pdf. Westpac banner ‘Fred’ by Saatchi DGS