New research from mainspring Communications, Inc. makes a strong case for what it calls the Internet's "dual nature" as both an advertising medium for the creation of brand identity and a new channel for delivering branded products.
Given this paradigm, mutual fund families could be most susceptible to brand erosion by competitors based on their weak Web advertising commitments.
A new business impact study from the Cambridge, MA-based Internet advisory firm, called "The Channel is the Brand," examines the lack of Internet advertising by 12 of the top 35 mutual fund families in the United States-and how it could threaten their brands on-line. The 12 firms were randomly sampled and represent roughly 30 percent of the industry's total assets, according to the Investment Company Institute.
Among Mainspring Communication's key Web advertising findings:
Four load funds that the firm surveyed spent zero dollars on Internet advertising in 1998;
Five of the 12 surveyed fund families (load and no load) have spent less than $1 million on advertising;
Eight of the 12 funds surveyed-regardless of asset size or distribution strategy-were skeptical of the value of Internet advertising;
Only two fund families are currently actively cross-promoted by their parent companies;
12 fund parent firms fail to even mention their mutual fund affiliation in the top three levels of their Web sites;
Six of the eight funds that are advertising on the Internet spent less than 1.5 percent of their total ad budgets in that medium.
Internet advertising budgets for 1998 fell into five distinct ranges: zero dollars (four load funds); $100,000 to $150,000 (two families; one load/one no-load); $400,000 to $600,000 (three no-load families); $1.4 to $1.6 million (two families; one load/one no-load) and over $4 million (one family with load and no-load funds).
Of those that advertise, mutual fund families spend their Internet advertising budgets on very targeted banner ads, affinity group sponsorships and strategic partnerships, according to analysts.
Mainspring's research findings reveal a stark difference between mutual fund families and on-line brokerage firms when it comes to the Internet and its value as a branding vehicle. On-line discount brokerage firms have collectively spent tens of millions of dollars on Internet advertising-and forecast that they will spend even more next year.