Eyeblaster Research Note Airline Advertising

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EyeblasterResearch Note

March 2010

Digital Advertising for AirlinesBook Every Seat – Even the Middle Ones!

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Highlights

Rich Media doubles airlines’ •traffic and conversions, as compared to Standard Banners.

For every conversion •generated after a click, 6.7 conversions are generated after an impression but without a click.

For Standard Banners, the •optimal direct response frequency for airlines is ~4 impressions, which makes 82% of users underexposed.

Homepages, news, travel •and finance are the most effective placements for direct response in terms of Conversion Rate.

News, travel, finance, and •instant messaging are the most effective placements for branding in terms of Dwell Rate.

Online marketing spend on •Travel will double by 2014.

Airline Advertising: Prepare Your Online Media for Takeoff

3 EyEBlASTER RESEARCH NOTE

Online Spending: Upwards Trajectory While the business of operating an airline has remained more or less the same in the last decade, the business of selling airline tickets and filling up the seats has changed dramatically. Of the many industries affected by the proliferation of the Internet, few industries have been as impacted as the travel industry – and airlines in particular.

In the past, travel agents typically acted as intermediaries between passengers and airlines. Nowadays, many ‘in the flesh’ travel agents have been replaced by browsers, online travel agents and airline websites. Furthermore, online competition for passengers has increased significantly, as information on flights and airfares became easily accessible. Prospective passengers have the perfect amount of information to commoditize the airline industry. With a combination of information about price, destinations, schedules, amenities and even remaining seats coming

Note: Includes online display advertising, search, e-mail, social media and mobile marketing.

Source: Forrester Research, Interactive Advertising Forecasts, October 2009. Cited from eMarketer.

Chart 1: US Online Marketing Spending – Travel

directly from airlines, or sitting side by side through metadata engines such as Kayak, passengers can make sure that they receive the best value. With this information overflow, airlines need to make sure that they have enough share of voice, in order not to be left behind.

In a survey by Ad-ology Research, 34% of US internet users indicated that they used the Internet to research airfares. According to the survey, this is the most popular travel related research done online1. PhoCusWright study indicates that 2007 was the first year in which online spending on travel in the US has exceeded offline spending2.

When travelers spend most of their dollars online, marketers follow suit. This explains the rapid growth in online marketing spending in the Travel vertical. Forrester Research projects that the spending on online marketing in the Travel vertical will more than double in the next five years.

1 Ad-ology Research. Travel & Vacation Services-Summer 2009. Cited from eMarketer. 2 PhoCusWright. Consumer Travel Trends Survey. Cited from eMarketer.



Sale of travel services and airline tickets in particular is a good fit for online, as it does not require any physical exchange of goods. Passengers can simply print an e-ticket at home. Online retail has also made it easier for airlines to control seat inventory. Airlines can use the internet for yield management by adjusting two important variables – ticket price and demand generation through advertising and promotion.

The dominance of online airline ticket sales has significantly increased price competition between airlines. In the past, agents chose which flight to solicit to their clients based on, among other things, the commission that they were earning. Comparing prices between agents required significant legwork. Today, comparing airfare between airlines is instantaneous. If the schedule and connection factors are largely the same, passengers are likely to opt for the cheapest option.

The industry is notorious for its brutal economics. Once a flight is scheduled to takeoff, the variable cost of filling a seat may be reduced to the cost of a soft drink and a bag of peanuts (for those airlines that still serve them). Thus, selling

Furthermore, Forrester expects the shape of the growth curve to be exponential, such that growth will actually accelerate from one year to the next. Based on this projection, Travel is expected to be the third largest vertical in terms of online marketing spending by 2014, outspent only by Retail and Wholesale Trade and Financial Services3. At Eyeblaster, the airline industry is the largest segment in the Travel vertical, accounting for 28% of impressions.

3 Forrester Research, Interactive Advertising Forecasts, October 2009. Cited from eMarketer.

an empty seat for a flight that is about to take off at nearly any price makes business sense. Many airlines responded by building space-age mathematical models for their yield management systems to adjust prices for each passenger according to supply and demand for seats. These models slash prices for empty flights and increase them for flights with only a few empty seats.

In addition to adjusting the price, airlines generate demand by soliciting as many prospective passengers as possible. As so many passengers start their journey by researching flights online, online display advertising plays a significant role in targeting these prospects. There are two major avenues that airlines follow to drive tickets sales:

Direct response:• These campaigns are typically designed to drive traffic and reservations to the airline’s website, or their loyalty programs. Many direct response campaigns note prices on the ad itself.

Branding:• Such campaigns have three main objectives. First, to promote new routes and service classes. Second, to position the airlines such that passengers will be willing to pay a premium for convenience or service. last, to elevate awareness of the airline and perhaps keep it top of mind when passengers are planning their next journey.

Direct response campaigns are particularly appealing for airlines, as they allow them to drive demand for flights where the supply of empty seats is high. Direct response display advertising has the advantage that ads can be changed with a short lead time to accommodate any changes in supply and demand.

Another reason for the popularity of direct response campaigns is that it is easy to measure their results. Conversion tags embedded on the airline’s website can indicate how many users have responded to the ad and have taken an action. Actions tracked by conversion tags may differ, but airlines can assign a monetary value to them and calculate overall campaign ROI.

Considering the economics of airlines, it makes a great deal of sense to use advertising to help demand meet supply on empty flights. Online advertising has the ability to change prices quickly and easily on the ad. Eyeblaster’s Smart Versioning is an easy-to-use tool for both media and creative pros to quickly produce the perfect ad creative to optimize and boost relevancy. Airlines can dynamically change ads to promote empty flights and generate demand instantly. Smart Versioning allows swapping assets on live ads without re-trafficking. It handles any image resource, audio, video, language, branded font, character set and other features.

Note: Share of Impressions.

Source: Eyeblaster Research. Data: Q4 2008 to Q3 2009, Worldwide.

Chart 2: Travel Segments

Tourism Boards Transport

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4 Conversions are attributed to an impression up to 30 days after serving.

Direct Response Campaign PerformanceThroughout this analysis, Eyeblaster Research uses two metrics to analyze the performance of direct response campaigns – Click Through Rate and Conversion Rate. Click Through Rate (CTR) measures how many impressions were clicked on out of total impressions served.

Conversion Rate measures the total number of conversions from the advertiser’s website, divided by the number of impressions served. Conversions are not necessarily a monetary transaction, but signify an action that the advertiser would like users to take, such as downloading brochures, submitting forms, as well as completing the purchase of an airline ticket. Conversion Rate may vary between advertisers based on the placement of the conversion tags on the airline’s website.

Conversion Rate can be further divided into two types of conversions. The first type is Post Click Conversion Rate, which measures the conversions following a click on the ad divided by total served impressions. The second is Post Impression Conversion Rate, which measures conversions after viewing the ad without a click, divided by total impressions. The sum of both is the Conversion Rate4.

Talking Business at Emirates Emirates were looking to promote their special business class fares and encourage bookings with an exclusive one week offer. The aim of the campaign was to raise awareness to its business class in an offer that would increase accessibility, but would not compromise the business class experience.

The main challenge was that the creative team had only eight days to execute the campaign, which included dozens of different options to promote reduced business class rates. Emirates needed a solution that would enable them the flexibility to change ads and promotions on the fly.

Enter Smart Versioning, Eyeblaster’s solution for rapid modification of ads, for increased relevance. Using an editable template, the agency could easily change the price, takeoff and destination cities to reflect the airfare specials. Without Smart Versioning, the agency would have had to build and upload dozens of different ads – a time-consuming, costly and painful process.

Want to know more? Click here for the full case study.

Sequencing, serving ads in a particular sequence to the same user, can also help usher users through the purchase funnel, by delivering messages as a story to the user, or just altering between messages, rather than repeating the same message again and again. Sequencing allows advertisers to serve different ads every time the campaign is served, and try different messages on users that have not responded to the first message – if you do not want to go to San Francisco, then how about Miami? The advantage is that advertisers can solicit different destinations and push a range of their offering to users, taking the maximum advantage of every exposure.

http://www.eyeblaster.com/Content.aspx?page=resource&id=84

http://creativezone.eyeblaster.com/?ItemName=BA%20Synchronized



Travel sites are looking beyond CTR

lifestyle, homepages, instant messaging, weather and travel have average or above average CTR performance. News and homepages also have higher than average Post Click Conversion Rate (see chart 4). However, CTR and Post Click Conversions provide only a partial picture of the effect of an ad. While many users do not click on an ad, they are browsing to the advertisers’ website by typing the URl, using search or methods other than clicking. In fact, for every conversion generated after a click, 6.7 conversions are generated by browsing to the advertiser’s website after viewing the ad without clicking.

Chart 4 demonstrates why CTR is only a partial indicator of performance. The travel placement, which includes both sites dedicated to travel and travel sections of general sites,


Chart 3: Click Through Rate by Placement – Airlines

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is a clear example where CTR and Post Click Conversion Rate is relatively low, while Post Impression Conversion Rate is relatively high. Thus, clicks and post click conversions underestimate the actual contribution of ads in travel to the actual success in terms of driving sales. Users are arriving at the airline’s website without clicking – just by browsing or after conducting additional research.

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Homepages and news placements are located in the upper right quartile of chart 4, and are high on both post click conversions and on post impression conversions. Finance has a Post Click Conversion Rate similar to the travel environment, but a higher Post Impression Conversion Rate. The travel environment does produce a high conversion rate when combining the effects of post click and post impression conversion, but the Post Click Conversion Rate component is lower than average.

Travel placements tend to draw a very high proportion of travel and airline related advertisements. Thus, the number of travel and airline related ads per page increases, and the relevant share of voice for each advertiser decreases. A best practice here would be to use synched ads – two or more ads on the same page with a synchronized creative that elevates the marketing message above the clutter. Synched ads have Dwell Rate of 9.33%, as compared to 6.05% for other Rich Media – an increase of 54%5.

Optimal Frequency: You Again?Beyond the richness of the creative and the environment in which it is placed, users are influenced by the average number of times that they see the creative. Theories in the field of marketing assert that individuals require multiple exposures to the marketing message in order to retain the message and act on it.

The optimal frequency of a campaign depends on many campaign specific variables. Such variables may include prior familiarity with the brand, exposure to off-line advertising, vertical, country, level of interest and many others. Therefore, any attempt to calculate an optimal frequency should be regarded as a rule of thumb rather than a silver bullet.

To analyze the optimal frequency of Standard Banners, we calculated the average CTR at every exposure for airline campaigns. A summary of this is presented in chart 5. For example, at the first exposure to an ad from a campaign, the CTR will be 0.18%, at the second exposure to an ad from the same campaign the CTR will be 0.20%.


Chart 4: Conversion Rate by Placement – Airlines

5 Eyeblaster Research. Data Q4 2008 to Q3 2009, all verticals, worldwide. Dwell Rate measure the proportion of impressions that were engaged with by touch, interaction or click.

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The aim of the model presented here is to find the optimal frequency that will increase the campaign’s overall CTR. In order to do that, the frequency should increase up to the point in which the expected CTR from adding one additional exposure is higher or equal to the average CTR.

In other words, as long as the expected benefit from adding another exposure is higher than the average CTR, it makes sense to add that exposure. Additional exposures should not be added when the expected CTR from those additional exposures is lower than the average CTR.

For campaigns with Standard Banners, the average CTR for airlines is 0.15%. The expected CTR from frequency 1, 2 and 3 is higher than the average CTR. However, the expected CTR from frequency 5 is 0.13%, which is lower than the average. Therefore, four exposures is the optimal frequency for campaigns with Standard Banners in the airline industry.

Although four is the average optimal frequency, 61% of users (as represented by cookies shown in Chart 6) receive only one exposure, and 82% receive three exposures or less. This analysis shows that airlines could benefit from increasing the size of their campaigns in order to elevate exposures towards the optimal frequency, or further limit their target demographics. Airline advertising campaigns are still just scratching the surface of the possible messaging potential to each user.

Source: Eyeblaster Research. Data: Q4 2008 to Q3 2009, Standard Banners, Worldwide.

Chart 5: Airline Click Through Rate by Frequency – Standard Banners

Optimal Frequency

Source: Eyeblaster Research. Data: Q4 2008 to Q3 2009, Standard Banners, Worldwide.

Chart 6: Average Frequency in Airline Campaigns by Cookie Data – Standard Banners

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Rich Media Doubles EffectivenessBoth Click Through Rate and Conversion Rate are higher for Rich Media as compared to Standard Banners. In particular, Click Through Rate is 2.7 times higher for Rich Media as compared to Standard Banners, and Conversion Rate for Rich Media is double that of Standard Banners.


Chart 7a & 7b: Performance of Rich Media vs. Standard Banner - Airlines

This finding makes it easy for advertisers to improve campaign performance. Switching from Standard Banners to Rich Media may double a campaign’s expected direct response performance. This elevated performance has a few explanations. Rich Media outperforms Standard Banners by alluring users’ eyes from the publishers’ content to the ad. Furthermore, by enabling users to interact with the marketing message, Rich Media also increases recall. Rich creative also has the ability to feed data dynamically and increase relevancy. When all of these effects are combined, the result is an increase in clicks and conversions, as compared to Standard Banners.

http://creativezone.eyeblaster.com/?ItemName=Virgin%20America



Geographic DifferencesThe Airline industry is an international business, and as such this research leveraged Eyeblaster’s international presence to conduct this analysis with worldwide data. However, there are striking differences between the regional markets.

North America has the lowest CTR, while Europe and Australia and New Zealand have the highest. Some of these differences may be explained by the lower tendency to click in some markets as compared to others, and by increased use of Rich Media ads with airlines, particularly in Europe.

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Chart 8: Click Through Rate by Market


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Branding and Campaign PerformanceA smaller portion of airline campaigns is not designed to generate immediate sales traffic, but for branding. These campaigns let passengers know about new routes, business classes, lounges, higher standards of service and in many cases are directed towards the most profitable passengers – business and first class.

To measure the effectiveness of branding we use two metrics: Dwell Rate and Average Dwell Time. Dwell Rate measures the proportion of impressions that were engaged with by touch, interaction or click. Average Dwell Time measures the duration of a Dwell. In both cases, unintentional Dwell lasting less than one second is excluded.

Data in chart 9 shows that online airline branding ads work particularly well in the news, finance, and lifestyle placements. The performance of ads in the travel placements is high in terms of Dwell Rate, but is slightly lower than average in terms of Dwell Time.

This works well for airlines that look for a more affluent crowd, and may find them on the news, and particularly on the finance, placements. News and finance tend to outperform generally in branding, as Eyeblaster Research have found in previous studies. In these placements, people


Chart 9: Dwell by Placement – Airlines

spend ample time on each webpage reading in-depth content, and thus also spend time engaging with display ads.

Travel placements have relatively high breakthrough, following their high Dwell Rate, but users spend a relatively low amount of time with ads. Travel placements tend to have a lot of travel related content and ads. Therefore, while users do engage with the ads, as evidenced by the higher Dwell Rate, they are drawn back to the content relatively quickly as evidenced by the lower than average Dwell Time.

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Future Trends: Prepare to be MobileAs presented in the beginning of this research, the transformation in the marketing practices of the airline industry in the last decade is staggering. Half of the travel spending in the US is done online, and airfare is the most popular travel related online research.

While traditional marketing avenues such as display and search advertising are about to grow, another fast runner is mobile. In a survey of airline IT executives worldwide, 8% indicated that they are already targeting passengers with promotions on their mobile, 10% are planning to do so by 2010, and 19% by 20126.

Mobile provides an additional opportunity for advertisers for yield management and reaching passengers. 78% of executives in the same survey indicated that they plan to optimize their website for mobile browsing by 2012. This opens the door for passengers to buy airline tickets directly from their mobile phones.

As the competition for passengers spreads to the mobile world, airlines will need to allocate more budgets to this channel as well. As mobile phones and particularly the iPhone are equipped with an enhanced browsing capability, users spend more of their time accessing the web by mobile. The enhanced browsing capabilities also mean enhanced advertising capabilities. Banners that not long ago were limited to static images are soon to transform to Rich Media.

SITA and Airline Business. The Airline IT Trends Survey 2009. Cited from eMarketer.

Chart 10: Airline Promotion by Mobile

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6 SITA and Airline Business. The Airline IT Trends Survey 2009. Cited from eMarketer.

http://creativezone.eyeblaster.com/?ItemName=United%20Airlines%20Business



SummaryThe economics and underlying industry factors of airlines make it an excellent fit for online advertising. Airlines are responding quickly and are expected to double their spending on online marketing from $2.5 billion to over $5.0 billion in five years. The majority of airline campaigns focus on direct response, while branding is less frequent.

Using Rich Media more than doubles the direct response effectiveness of airline campaigns, both in terms of CTR and in Conversion Rate. Homepage, travel, news and finance have the best performance in terms of conversion rate. When designing a direct response campaign, adjusting the frequency for four exposures per user is expected to increase CTR.

For branding campaigns, news, travel, finance, and instant messaging are the best performing environments in terms of Dwell Rate. This is good news for airlines, as news, finance and particularly travel tend to draw more affluent crowds.

Regardless of the aim of the campaigns or the formats and placements, online display advertising offers an indispensable strategic advantage for Airlines. Display advertising is a flexible tool to generate instant demand for yield management. It is easy to align ads and messaging with empty flights, even at the last minute. With the economics of airlines, occupying an empty seat in a flight that is about to take off contributes directly to the bottom line. With this in mind, online display advertising can bring ROI to new heights.


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© 2010 Eyeblaster Inc. All rights reserved l www.eyeblaster.com l Email: [email protected]

Airline Advertising Best Practices

Media

Use Rich Media to drive traffic and conversions.•

Adjust reach and frequency to activate underexposed users.•

Use both post click and post impression conversions to measure success.•

Expand media placements to non-travel sites with proven performance for airlines. •

Use synched ads to increase attention. •

Creative

Travel sites have high breakthrough, in terms of Dwell Rate.•

Integrate with the airline’s yield management systems, matching location, price, and •

inventory.

Use Smart Versioning to increase message relevancy and easily change rates and •

destinations.










Documents

Eyeblaster Research Note Airline Advertising