E*Trade: The Changing Face of Internet Advertising

E*Trade has announced it will curtail advertising spend to cut costs. The company is a big advertiser and is well known for its multi-million dollar ads on the Superbowl telecast. The baby trader ads are hugely successful and last year accounted for a 32% spike in new accounts in the days after the Superbowl. The online brokerage will go ahead with this year's Superbowl ad.

So why is E*Trade (ETFC) curtailing ad spend? For one thing, with Twitter and YouTube followings and viral ads, the company believes it just doesn't have to spend the money anymore.

How will the increasing focus on (currently free) social networking sites and viral networking impact Google (GOOG) and Yahoo! (YHOO)?

From E*Trade Financial Corp.’s Q408 conference call:

Our operating expenses increased by $26 million in the quarter as compared with last quarter. While the underlying trends were favorable, some specific items caused the quarter-over-quarter increase, including a $15 million increase in advertising spend.

We also intend to be cautious in discretionary expenditures this year... We will reduce our advertising spend. This advertising spend reduction is in line with projected market conditions and is aided by the broad-based decline in advertising rates.

Q: Could you discuss the marketing strategy with the upcoming Super Bowl? How do you look at it from a cost versus payback on the investment? We know last year you received a big lift in terms of open and funded accounts just in the week after the game, but how many accounts do you think are actually in play this year since you've already talked about cutting some of the advertising costs just for the general year?

A: Last year 107 million people watched the Super Bowl. So we made a decision to... go ahead with it.

But it's more than just a 30-second ad... Please judge us on the total marketing mix and marketing plan as opposed to a 30-second spot, because if it's looked in isolation, you might not fully comprehend the ROI.

If you go to our page in YouTube you will find a short series of outtakes of commercials that are not being run with the baby which have been getting successful reception. We put it out just last Friday night, and so we're starting to do some pre-marketing buzz in a viral manner.

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Comments

[SA Editor J...:]

interesting:
seekingalpha.com/artic...

Jan 28 11:13 AM

[SA Editor J...:]

And this...
www.inman.com/news/200...

Jan 28 01:30 PM

[xom-only:]

thanks

Jan 28 05:51 PM

[lucky lenny:]

Judy, all good points. I think E-trade is so overspending on advertising it borders on the obscene. Per Etrade’s latest release, they spent a staggering $175.3 mill on advertising & marketing in 2008. That’s even higher than the $138.7 mill they spent the year before. Granted, E-trade is experiencing record growth. However, E-trade is also recognized as having one of the best trading platforms; which doesn’t ever seem to go down when others - such as TD Ameritrade & Schwab - are having problems. In summary, I think E-trade can seriously ratchet down spending. Their product & word of mouth will more than bring customers to them.

Jan 31 03:23 AM