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Online Ad War
Pizza chains are battling it out with web ads to promote online ordering to consumers.
Papa John's pizza ad

Now that all of the "big three" pizza chains—Papa John's, Pizza Hut, and Domino's—have made online ordering available, the battle is on to see who can attract the most customers to their site. Their weapon of choice: online ads.

Since Papa John's became the first pizza chain to offer customers online ordering in 2001, pie purveyors have turned increasingly to the Web to bring in customers.

"We've been working with the big three pizza companies over the last three to four years to develop online ordering, and it has become a significant sales engine for them," says Sam Sebastian, director of local and business-to-business markets at search engine giant Google. "It's such a competitive space."

Online ordering typically accounts for anywhere from five to 20 percent of a national pizza chain's business, Sebastian says. To entice customers to use their service over that of the competition, chains are turning to online search advertising, banner and click-through ads placed on Web sites, and social media sites such as YouTube, Facebook, and MySpace.

So far, online search advertising, whereby a company buys ad space that will appear when a user types a keyword or phrase ("New York City pizza", for example) into a search engine, has made up the largest portion of media spending online.

To purchase online search advertising on Google, companies compete in online auctions to determine the placement of their ads. The player that bids the highest on a selected keyword or phrase, say "pizza", will see their advertisement appear at the top of a list of "Sponsored Links" on the top or right side of the screen when the search results appear. Users can then click on the ad link to be directed to that company's site.

"It's a direct connection, direct response," Sebastian says.

With online search advertising, there are no exclusive buys, so small chains have just as much opportunity to purchase one of the eight to 10 advertising spots per page as larger chains, though those with more money are likely to win the auctions and secure top placement.

But being No. 1 isn't always important, Sebastian says.

"What they typically do is they don't worry about where they are, just where it converts to a decent [cost] per order," he says.

While keyword search advertising provides a direct link for customers seeking to order pizza, banner or click-through ads placed on other web sites are a more passive way to reach customers.

Web sites across Google's content network partner with the company to syndicate advertisements, and Google works with individual web sites and companies to broker advertising.

"If I know my customers are on … any web site where in the content there is a discussion about pizza, I can place my advertising there so it's available contextually," Sebastian says.

Papa John's recently launched its first foray into advertising on the Google Content Network with a one-day blitz of display ads on various sites including MySpace, and restaurant and menu guide site MenuPages.com.

The flash display ads promoted an offer of one free medium cheese pizza with any online pizza purchase for customers who signed up to receive e-mail offers.

"The intent was to boost Papa John's presence for online ordering," explains Papa John's spokeswoman Tish Muldoon.

According to the numbers, that's exactly what happened. Sales for the weekend beginning December 5, 2008, when the ads ran, were up between 15 and 20 percent above normal, according to a story on MediaPost.com.

In October, Pizza Hut became the first pizza chain to add an application allowing users of social networking site Facebook to order food directly through the site with its Pizza Hut Interface.

To promote the application, the company entered Facebook users who became "fans" of the site into weekly drawings for $50 gift certificates.

In mid-November, Papa John's answered with a buy one, get one free offer available to customers who became "fans" of the company on Facebook's site. After the promotion, Muldoon says the Papa John's Facebook page experienced a surge in fans from 10,000 that morning to over 188,000 just before Christmas. Domino's also has a Facebook page.

It’s a direct connection, direct response”

"We are moving fast to put our online customers in charge—any way they want to order from us, we'll be there for them," said Bob Kraut, vice president of marketing communications for Pizza Hut, in a press release announcing the Pizza Hut Facebook application launch. "Facebook is the next logical step for Pizza Hut. As Facebook's popularity grows among younger, socially connected consumers we have the opportunity to provide a pizza experience they will love—our convenient ordering combined with Facebook's relevance."

But advertising online doesn't just attract the youth demographic.

"Everyone's online as much as they would use the yellow pages offline," Sebastian says. While he admits that some social networking sites, such as MySpace and YouTube, do skew to a younger crowd, others are more universal.

"A site like YouTube pretty much approximates the U.S. Census," Sebastian says.

Other fast feeders are funneling more ad dollars to the web, but Sebastian says the pizza segment has thus far been the industry leader when it comes to online advertising.

"The other segments are coming online slowly, with more of a promotion and branding play," he says. "It's going to be fun to see some more traditional advertisers really start to use the online platform in a larger way."

Jamie Hartford is a regular contributor to QSRmagazine.com.