How to Determine the Online Ad Budget

Compared with offline media, online ad spending is on the rise. A study by TNS Media Intelligence/CMR shows online advertising enjoyed a 25.9 percent growth rate in the first half of 2004 over the same period last year. Though cable and syndicated TV, newspaper, and magazine advertising also saw increases, online is easily the strongest growth category.

If it’s been a while since you heard the question: “How much of my overall marketing budget should I spend online?” you will again soon. For an online marketer pitching a potential client, it’s one of the hardest to field. Years of progress have produced a much deeper understanding of how the Web fits into the media mix. Yet marketers still come back with answers like, “Well, it depends on your objectives,” and, “Unfortunately, there’s no steadfast rule.” Agencies not as well versed in Internet media are often forced to guess.

Most would argue there’s really no steadfast rule. How could there be? New local targeting capabilities aside, would it make sense for an independent lingerie boutique to spend the same percentage of its marketing budget online as Victoria’s Secret? Probably not.

Countless factors influence an advertiser’s media budget. Let’s take a look at some of the ones you should use to determine your client’s online spend.

Industry, Site Selection, Ad Rates

Determining how much of your client’s budget should be allocated to online isn’t only about ensuring the advertiser gets the most out of the medium. Make certain you, the media buyer, can actually spend that budget.

The degree to which your client’s industry has adopted the Web and the ease with which his product or service can be promoted online are factors to take into consideration. If the selection of niche content sites is limited, you may want to reconsider assuring that client you can spend big bucks on industry properties within a limited time.

In this respect, research is essential. It’s easier to pull a number out of a hat, of course, but why not look up ad rates for a few potential sites to have something more tangible to go on? The extra effort may uncover issues, like a minimum spend on your favorite portal for the campaign, which could suddenly have you increasing the budget to ensure there’s enough cash left over for paid search.

Target Audience, Web Use, Sales

Spending the recommended online budget is also at issue when it comes to target audience. I once assured a client I could effectively spend $8,000 on a short paid-search campaign targeted only to Canadians interested in home improvement. A serious lack of traffic turned a three-month campaign into a six-month scramble to unload a measly eight grand.

The extent to which a client’s audience uses the Web should factor in to how much he spends. Internet media consumption compared with other advertising media is also of great importance. If online audience penetration is high, doesn’t it make sense to recommend your client spend more there than on outdoor or print?

The same rule applies if you learn 50 percent of your client’s sales come from the Web. If the Internet generates the most sales, why seek consumers with a newspaper campaign? Boost your client’s online investment and presence to further boost sales.

Competition

As important as it is to differentiate oneself from the competition, it’s also essential to keep up with rivals. If the client’s biggest competitor shifted his focus from TV to build a strong Web presence, perhaps an equally robust budget is in order.

All these factors aside, it remains common for marketers simply to recommend clients spend the standard 10 to 15 percent of their overall budget online. This is the minimum a client should spend on the Web, so a good place to start. If you agree and recommend a higher budget, be prepared to defend that decision. A breakdown of reasoning based on the above factors may not only serve to convince, it could change your client’s attitude toward online spending for good.

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