One of the hottest markets in online advertising for the new millennium is business-to-business. Securities firm Volpe Brown Whelan estimates that BTB middlemen will recognize $9 billion in online advertising revenue by 2002, and Forrester Research predicts that BTB advertising will grow to $11 billion by 2004.
Before BTB online advertising, the only way to reach business customers was through print trade magazines. Now, the advent of online business-to-business marketplaces has created a new vehicle for reaching business customers – a medium that’s even more effective because it allows BTB marketers to reach their audience in an interactive, commerce-enabled space.
The rapid growth of BTB e-commerce has fueled the momentum of BTB advertising. Forrester Research predicts that BTB e-commerce will grow from $43 billion in 1998 to $1 trillion in 2003. With more and more businesses turning to the Web to research and buy their goods and services, marketers are realizing they must find a way to reach business customers online. But for online marketers to succeed in this new, burgeoning BTB market, they will need to understand the ways in which BTB online advertising will differ from business-to-consumer advertising.
The BTC online advertising industry has been around for several years, and has grown enormously with the help of advertising networks that work with Web publishers and advertisers to place ads across the Web. Traditionally, these ads are either bought to run on specific Web sites, generally as sponsorships on brand name properties, on channels or categories of sites with a common interest, or on a run-of-network basis, appearing on any Web site within a given network.
BTB online advertising will be quite different. Business Web sites have different properties than consumer sites. Advertising buys aiming at vertical industries will most likely be made by audience type within a BTB network. There may still be buys for specific Web sites, or across the entire network, targeted at a general business audience, but because each of the audiences in a BTB network is so focused, this will probably be the most effective way to buy media.
Some of the advertisers and media buyers will be familiar from the BTC market. These are traditional brand name advertisers that have both a consumer and business audience that they need to reach. These companies have had a way to reach their consumers online and have been eager to reach their business customers in the same fashion. Office supply companies, for instance, have long been targeting vertical industries such as education or legal with specific catalogs by mail. Now they will be able to reach these business customers online through online advertisements on specific real estate and legal Web sites.
The BTB pricing model will vary from the traditional BTC model, which is often based on a CPM structure. While BTB advertising will continue to use CPMs, the prices will be much higher for several reasons. The impressions on BTB sites are generally lower than on BTC sites, but traffic on these sites is much more valuable. The low number of impressions and highly targeted visitors combine to make the inventory extremely valuable, and, therefore, more expensive. CPMs on BTB sites may run more than double the traditional CPMs for BTC online advertising.
And the pricing model may vary from CPMs completely. Charging advertisers based on impressions for niche industries may not make sense because these impressions will be low. As with niche trade magazines that charge flat rate fees to their advertisers, BTB networks may turn to this model because the inventory is so valuable and leads that result from advertising are highly qualified.
E-mail advertising will be of even greater importance in a BTB advertising network. Companies that serve specific industries are increasingly using e-mail to communicate more effectively with their customers, and may be interested in generating revenue by placing advertisements on these e-mails.
BTB Web sites commonly publish newsletters directed at their specific audience – users who are deeply involved and passionate about a particular industry. This will give BTB advertisers additional targeted online customers to reach through newsletters and opted in vertical e-mail lists, and will give BTB sites additional inventory for running advertisements.
Marketers must approach BTB online advertising differently because of the unique properties of business Web sites and their focused audience groups. The high value of the inventory and the additional online marketing tactics, such as e-mail, that this model embraces, makes it a very profitable, viable industry. And it will benefit BTB marketers who until now have had no way to reach their business customers online as well as Web publishers who are eager to monetize their sites.