Penetrating the Major Online Markets in Europe

By Jeff O'Connor

For those who wish to enter the European market via Internet marketing and retailing, Livemercial's Jeff O'Connor answers a few commonly asked questions that may help you plan out your business strategy.

Q: Which of the big three online markets--the U.K., Germany and France--has the biggest potential for direct response marketers online?

A: Germany will prove to be the largest market online for direct response in the next couple of years. There are several factors that make Germany a great player, including: largest number of online users, very immature online market, EU's largest economy, mature retail market, and the least amount of ad revenue as a percentage going to online of the big three countries.

The value of the German media market online in comparison to the U.K. and France lies directly in the online ad investment per Internet user in each market and creative impressions served. France has the fewest Internet users at 27 million, yet spends the most on ads per user ¬31.26. The U.K. has 36 million users and spends ¬26.25 per user. Germany with the largest online population of 47 million, spends only ¬11.8 per user. Germany, however, serves the greatest number of impressions at 114.1 billion, followed by France at 47.9 billion, with the U.K. having the least amount of impressions at 37.9 billion.

So how do these numbers equate to Germany, as being the best market for growth for direct response marketers? The answer lies in the media metric of average cost per thousand media (CPM) rate per country. This can be derived by taking what the individual countries spend at 1,000/impressions. The U.K has the highest eCPM at ¬24.93, then France at ¬17.62 and the least expensive Germany at ¬4.86. Germany offers the most attractive rates for media buyers in comparison to the U.K. and France, which leads to numerous opportunities to buy media that will perform as a positive ROI to your campaign. For those who may be worried that the German online market maybe diluted because its impression-per-user ratio is higher than the U.K. or France, there is no reason to believe that this is a significant issue since, at most, the Germans receive two ads for every one ad a U.K. user is served. Even if the frequency ratio--which is only going down in Germany as broadband grows--does dilute the inventory by half, we are still picking up 39-percent savings on the backend effective CPM wise. Germany is simply an undervalued media marketplace and a great space for direct response companies to take advantage of.

Q: How are online users responding to making Internet purchases in Germany?

A: According to ENIGMA Gfk's Online Shopping Survey, the number of online buyers in Germany rose 7 percent to reach 26.9 million consumers. For retailers, the Internet is proving crucial in providing information for consumers to become educated on their products before going into retail to make a purchase. Three out of four people stated that price comparison was the number-one reason for going online for research, but simple product information was a close second. This is a big opportunity for direct marketers who are in retail to add the Internet as another dimension in its multichannel market and consumers are demanding it. Google is the king of search engines in Germany, as Google accounts for 66 percent of the market share at its portal site google.de. For price comparison sites that are important to retailers, guenstiger.de, billiger.de and preisvergleich have proven to be valuable assets to drive sales directly and to influence retail purchases.

Q: What are some of the challenges to running a direct response campaign online in Europe?

A: Europe doesn't conform to the Internet Advertising Bureau (IAB) standard of ad units as in the United States, for the most part. Roughly only 20 percent of all ads conform to standard sizes, which means for each publisher site new creative needs to be made for the media run. European publishers, in general, allow a great deal more in terms of creativity to the ad unit being present, which if done correctly, can help direct marketers improve their click-through rates, but the preparation time for campaigns is longer than their U.S. counterparts at this time. Commercial e-mail laws and privacy issues are much stricter also in the EU than the U.S. I encourage every marketer entering the EU online space to visit www.spamlaws.com/eu.shtml and read the various legislative pieces that are in effect. Language barriers, of course, are nothing new to direct marketers in the EU who are trying to roll out product continent wide. However, I believe the somewhat segregated market allows great opportunities, as savvy media planners will recognize the individual pricing dynamics, especially while they move back and forth between being a buyer's market and to the advantage of the ad inventory holders in each country. The fluctuation is due to the rate of EU Internet user population growth and whether or not each individual country is producing more or less new ad inventory in relation to the percentage of online user growth. Finding the countries with excess inventory--because publishers are growing faster than new users--can lead to a direct response gold mine, as those countries rates will drop or remain constant.

Media Rate by Country

CPM = Cost of ad *1,000/impressions   United Kingdom France Germany Impressions 37,900,000,000 47,900,000,000 114,100,000,000 Spent ¬945,000,000 ¬844,000,000 ¬555,000,000 Users 36,000,000 27,000,000 47,000,000 eCPM ¬24.93 ¬17.62 ¬4.86 Spent per user ¬26.25 ¬31.26 ¬11.81

Jeff O'Connor is vice president, sales and media for Livemercial in Valparaiso, Indiana (U.S.). He can be reached at joconnor@livemercial.com.