This is my second post in a series about CPG marketing on the internet. 

My main argument is that we are going to see a major rise in online advertising from CPG’s (and brand marketers overall), which historically have not been as aggressive about moving their efforts online. 

I’ve argued before that part of the reason is that the internet is well suited to performance marketing, and that doesn’t tend to bode well for CPG’s vs. financial services or other similar categories.

But underneath that observation is a different problem – the ads themselves.  The internet primarily has three ad units.  Search ads, display ads, and video.  Search ads are the “new” ad unit of the internet.  They are relatively non-intrusive and are targeted based on very specific queries.  These units are very well suited to performance advertising, hence the boom in that segment. 

Display and video ads are not that different than traditional print advertising in that they are basically interruptions.  They appear in the middle of media we are consuming and keep us from getting at the content we were really looking for.  The are also not very interactive for the most part (and when they are interactive, it’s usually an annoyance vs. a brand-building experience). Now, the big innovation in this area has been better targeting of these ads to specific users in real time.  This is a big deal, but still doesn’t quite make display a great medium for CPG advertisers.

It’s easy to conclude then that CPG’s can’t really get good outcomes from the internet. But that’s only true because of the types of ads that exist today.  Advertising is much more than the ads themselves.  It’s a process to persuade and inform an audience about a particular brand or product.  As the internet has matured, I think we are seeing some very different mechanisms emerge for CPG’s to do this.  I don’t know if I would call these “ads” in the traditional sense, but I do think these are advertising opportunities for CPG marketers.  A few of note:

1. Virtual Goods.  Virtual goods appear in entertainment experiences and provide a natural way for brands to drive engagement from their target users.  As more and more internet users start interacting with virtual goods through gaming, social networks, mobile apps, etc, I think we’ll find more and more examples of successful CPG’s utilizing this medium. 

2. Content creation and syndication. As I’ve said before, I think brands should increasingly be getting into the content business. Creating entertaining content and distributing it widely is becoming increasingly cost efficient and operationally realistic. I know that some efforts bomb completely, but then again, some commercials and traditional ads are big failures too. 

3. Social interaction. In a way, #1 and #2 are already examples of ways that brands can socially engage their users.  But I think the opportunity for creativity here is only expanding.  As social and real-time content sites continue to create more and more mechanisms for companies to insert themselves into conversations, I think we’ll see some pretty interesting brand advertising opportunities emerge.