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Where Are You Spending Your Clients' Money?

  |  April 17, 2007   |  Comments

Online media buying budgets are growing. Where's all that money being spent?

I had the distinct pleasure of participating on a panel at Search Engine Strategies this week. The topic was "Where Are You Spending Your Clients' Money?" What really stood out was just how parallel the points of view were for all five panelists, representing agency media buyers from shops both large and small.

Panelists were charged with coming up with presentations about what's working and where they'll recommend their clients spend their media budgets. In the nick of time, I was blessed when William Blair and Company's "Interactive Marketing Survey" fell in my lap. I used it as the statistical portion of my presentation, then compared our spending plans with report findings.

The survey findings are worth sharing. In a nutshell, here's what the report said:

  • The state of the industry is very favorable, and marketers are very bullish on the future. Overall industry growth is expected to rise 19 percent in 2007, and that figure is up 7 percent from just six months ago! (Just imagine if radio or direct mail were growing at 19 percent annually.) Eighty-one percent of respondents say the industry is stronger now than it was six months ago.

  • Media and marketing professionals rated different forms of media by what works on a scale of 1 to 5 (1 is best). Unsurprisingly, search led the pack with a rating of 2, followed by house e-mail lists at 2.5. Display advertising (or banners) came in at a strong 2.7, and third-party e-mail came in at 3.8. Trailing online media are offline channels, including direct mail (3.9), newspaper (4), television (4), radio (4.1), and magazines (4.1).

  • Media pricing rose an average 7.5 percent, and over 30 percent of respondents say they see prices increasing 15 to 25 percent over the next 12 months.

  • Traditional advertisers are driving spending growth. Fifty-seven percent say traditional blue-chip brand advertisers are jumping into the game. This is at the expense of the online direct advertisers, whose margins are squeezed by the increased demand and rising prices.

  • Leading the traditional advertiser category is auto, electronics, finance, and travel. Trailing the pack with negative growth are apparel, home and garden, and professional services.

  • The above two bullets are what I believe are driving this next stat. Rich media (including video) has beat out search as the fastest growing form of online media. (Don't get me wrong, no one's saying it works better or companies will spend less on search, just that more rich media budget growth is expected.) Sixty-two percent of respondents (up from 27 percent just six months ago) say they expect to see their rich media budgets rise. Good news for all the banner servers out there who charge an arm and a leg to serve rich media.

  • As for search, only 22 percent say they see more growth in this category. The category has matured, and we've pretty much saturated and optimized the space. Basically, the channel is open and running. I do see more growth in search from new advertisers, but I don't see budgets rising for people already there. If you've been there for a year or more and have good PPC (define) managers, you've already incurred the discover cost of figuring out what works and where your spending threshold is.

  • One more interesting little stat: DoubleClick's DART is still used by 72 percent of the market.

So what does investment banking firm William Blair say in the back about investing in the leaders of our space? The same thing I tell my clients about online media: buy!

A PDF download of the full survey is available here.

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Harry Gold

As founder and CEO of Overdrive, Harry Gold is the architect and conductor behind the company's ROI-driven programs. His primary mission is to create innovative marketing programs based on real-world success and to ensure the marketing and technology practices that drive those successes are continually institutionalized into the culture and methods of the agency. What excites him is the knowledge that Overdrive's collaborative environment has created a company of online media, SEM, and online behavioral experts who drive success for the clients and companies they serve. Overdrive serves a diverse base of B2B and B2C clients that demand a high level of accountability and ROI from their online programs and campaigns.

Harry started his career in 1995 when he founded online marketing firm Interactive Promotions, serving such clients as Microsoft, "The Financial Times," the Hard Rock Cafe, and the City of Boston. Since then, he has been at the forefront of online branding and channel creation, developing successful Web and search engine-based marketing programs for various agencies and Fortune 500 companies.

Harry is a frequent lecturer on SEM and online media for The New England Direct Marketing Association; Ad Club; the University of Massachusetts, Boston; Harvard University; and Boston University.

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