$13 Billion Spent on Web Promotion

Businesses will spend more than $13 billion to promote their Web businesses in the year 2000, according to a report by ActivMedia Research, that found business-to-business (B2B) and business-to-consumer (B2C) sites will easily outspend those in the media/portal/information space.

According to ActivMedia’s “Real Numbers Behind Web Site Promotion,” online marketers that target consumers have budgeted $5.8 billion for promotion in the year 2000, while B2B sites have allocated $5.4 billion, and media/portal/information/publishing sites have put aside $1.5 billion. Of this, 30 percent of the funds are allocated to online promotion. The remainder of the budget is allocated for promoting Web sites through more traditional media outlets such as print, television, and radio.

The report also found that methods for attracting Web traffic are migrating toward traditional communication strategies as the Web has grown to become a platform for traditional commerce. Although free methods for site promotion are broadly acknowledged as an excellent or very good method to drive sales, high-volume e-commerce Web sites find that reliance on search engines and directories is not sufficient for rapid growth.

Only 36 percent of sites with more than 500 online sales per month rate search engine/directory listings as “excellent/very good” promotional vehicles, compared with 67 percent of mid-level transactional Web sites (between 100 and 500 online sales per month), and just 54 percent of lower-level transactional sites (fewer than 100 online sales per month). Instead, high-volume sites place their primary emphasis on traditional offline methods — print and broadcast — to attract new customers, and on email communications to maintain customer relationships and build loyalty.

Online Methods to Promote Sites
Rated Excellent or Very Good
Search engines/directories 48.4%
Buttons & links 22.5%
Online PR/press releases 17.3%
Reciprocal ads & links 16.2%
Affiliate programs 9.9%
Paid banner ads 6.2%
Source: ActivMedia Research

Not surprisingly, ActivMedia’s report also found that profitable sites are more likely to promote their own success than those that anticipate profits down the road. Despite much improved online promotion methods and measurement, not all merchants take part in Web site promotion. Only 25 percent of Web businesses have formal site promotional budgets.

“The business of Web site promotion is acted out quite differently depending on the nature of the Web site business, the size and experience level of the business and the communication goals of the online business,” said Harry Wolhandler, VP of Market Research at ActivMedia Research. “As traditional advertisers and marketers have recognized for years, the key to success is to clearly identify the promotional goal for the program and to address it in a way that is both efficient and suitable to the task at hand. Today’s sophisticated marketers integrate online and offline promotional techniques for optimal promotional mix.”

According to The eCommerce Almanac by Intermarket Group, the leading Internet commerce companies spent an average of $29.8 million during the first three months of 2000 to build their online brands and drive additional traffic to their Web sites.

Top Sales and Marketing Budgets
Among Internet commerce companies (Q1 2000)
E*Trade Group $177.5 million
Amazon.com $140.1 million
Charles Schwab & Co. $100.9 million
Ameritrade Holding $54.8 million
Priceline.com $40.4 million
Source: Intermarket Group

The median first quarter sales and marketing budget was $21 million — for an annual run rate of $84 million — compared to $34 million for all of 1999 and only $6 million the previous year. Although the dot-com ad war pushed total spending to new highs among the companies tracked, the share of top-line revenue allocated to sales and marketing actually declined during the quarter by 36 percent from FY 1999.

Offline advertising now accounts for a substantial share of sales and marketing expenditures at the leading Internet commerce companies. The most popular offline media are television, which is used by 75 percent of companies, followed by radio (68 percent), consumer periodicals (53 percent), newspapers (52 percent), and direct mail (52 percent).

America Online is the most common online marketing partner; more than one-half of the companies tracked by The eCommerce Almanac have inked marketing deals with one or more AOL properties. Other popular portal partners include Yahoo and Microsoft’s MSN portal. The most popular marketing partners among leading Web destinations and services are Netcentives’ ClickRewards, Amazon.com, and Giftcertificates.com.

The median customer acquisition cost among companies tracked by the report is $78. The largest proportion of companies invest between $10 and $49 to acquire each new customer; a slim majority of the companies (51 percent) invest $100 or less per new customer while approximately one-in-twelve invest $500 or more.

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