Promotions Could Overtake Display and Search Says Report

  |  April 29, 2008   |  Comments

Spending on online promotions could reach $22.8 billion over the next five years, predicts a new Borrell Associates report.

Display and search advertising are losing ground to spending on online promotions and sponsorships, according to a new report. Web research firm Borrell Associates claims Internet marketing dollars have shifted "away from classic online spending" in favor of non-advertising marketing expenditures, or what it calls the "nebulous category of 'promotions'."

"This is one of the most fascinating phenomena we've seen, and it's a bit of a sleeper. It's been a bit understated so far," said Borrell Associates CEO Gordon Borrell. "But we think the overall trend is going to make advertising look considerably different in the next 10 years than it has in the last 100 years."

Spending on display ads, including banners and pop-ups, has been flat for the past two years, and will peak this year at $12.6 billion before beginning a "precipitous decline to less than half that amount over the next four years," according to the "Online Promotions: The Big Shift" report. The same can be said for search advertising, which Borrell predicts will peak next year at $16.9 billion, then decline more gradually.

Meanwhile, online promotions accounted for $8 billion last year, a number that will nearly triple over the next five years, eventually reaching $22.8 billion and eclipsing all other categories of online marketing, the report said.

"What's driving it is an overall dissatisfaction or nagging feeling on the part of advertisers that their advertising isn't working, or that they're overspending on it," said Borrell. "With the Internet, they can go straight to consumers. If they're having a sale, they can put it up on their Web site and consumers will come to them, and if their Web site is good enough, consumers will keep coming back."

This shift brings with it a host of challenges and opportunities for media companies, which will need to offer greater inventory for non-traditional media plays. Those include giveaways, coupons and online contests. If publishers adjust, they stand to reap vastly greater advertising revenues than they would from selling standard display advertising alone.

"I think there's a lot of complacency among a lot of traditional media that companies will always have to advertise, so they're not adjusting fast enough," said Borrell. "These traditional and legacy media companies are going to have to start being much more creative and less order-takers."

While no particular category of advertiser is driving the shift toward promotions, Borrell added it is national marketers, rather than local ones, who are doing the most experimenting in the area. "They have the size to understand it and experiment and do different things," he said. Nonetheless, local advertisers are following, he said.

ClickZ Live Toronto Twitter Canada MD Kirstine Stewart to Keynote Toronto
ClickZ Live Toronto (May 14-16) is a new event addressing the rapidly changing landscape that digital marketers face. The agenda focuses on customer engagement and attaining maximum ROI through online marketing efforts across paid, owned & earned media. Register now and save!

ABOUT THE AUTHOR

Douglas Quenqua is a journalist based in Brooklyn, NY who writes about culture and technology. His work has appeared in The New York Times, Wired, The New York Observer, and Fortune.

COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.

COMMENTS

UPCOMING EVENTS

Featured White Papers

ion Interactive 9 Strategies to Engage Your Consumers White Paper

9 Strategies to Engage Your Consumers
Online marketing apps are highly engaging - taking visitors on short, but effective, conversion-focused journeys. This white paper illustrates 9 strategies to engaging consumers through app-like experiences.

eMarketer: Redefining Mobile-Only Users: Millions Selectively Avoid the Desktop

Redefining 'Mobile-Only' Users: Millions Selectively Avoid the Desktop
A new breed of selective mobile-only consumers has emerged. What are the demos of these users and how and where can marketers reach them?

Resources

Jobs

    • Sr. Paid Search Manager
      Sr. Paid Search Manager (Bisk Education) - TampaCurrently seeking a Sr. Paid Search Manager in Tampa, FL for Bisk Education! Bisk Education is a...
    • Contact Center Professional
      Contact Center Professional (TCC: The Contact Center) - Hunt ValleyLooking to join a workforce that prides themselves on being routine and keeping...
    • Recruitment and Team Building Ambassador
      Recruitment and Team Building Ambassador (Agora Inc.) - BaltimoreAgora, www.agora-inc.com, continues to expand! In order to meet the needs of our...