After a few post-bubble years of minimal spending for Web site maintenance, more companies are now looking to spend money on major Web development projects.
This trend, noted by Piper Jaffray senior research analyst Safa Rashtchy in a research note this week, should benefit interactive agencies and Web development shops, as well as service providers like Web analytics vendors, he said.
“Many of the agencies we talked to indicated they are seeing an acceleration in the demand for Web development services with several agencies noting a significant up tick in RFPs over the previous month,” Rashtchy wrote in the latest Silk Road report. “Additionally, our discussions indicated that that billing rates and the size of Web builds/redesigns are increasing as clients are now willing to spend more on Web site development.”
One of the key factors driving upgrade plans is the demand for more interactive sites to serve the growing broadband-enabled population of Web users. Many companies are also looking to optimize their Web sites to get the most out of growing online ad costs, and to coordinate marketing messages across media, he said.
According to executives at aQuantive’s Avenue A/Razorfish and Digitas’ Modem Media, the trend began in earnest last year, and has continued to grow in the early months of 2006. Last year, more than three-quarters of Avenue A/Razorfish’s clients were involved in a “major overhaul,” instead of a “facelift,” Martin Reidy, president of Modem Media, told ClickZ News.
He calls this movement a “Marketing Renaissance,” a rebirth of the importance of marketing online and the recognition that the Web site is a powerful tool for a company’s brand.
“It’s a time to learn from the past and go forward with much more confidence,” Reidy said. “A Web site is no longer a place where people can go and read stuff. It’s now a 24×7 marketing engine where people can interact with your brand, and you can, in turn, see what’s important to your customers.”
Darin Brown, president of Avenue A/Razorfish’s West region, believes that after four years of internal development to eke out every available productivity gain with existing infrastructure, a bright economy, growing broadband penetration and explosion of “Web 2.0” business models has led many companies to invest in an overhaul of their Web infrastructure.
“For the past few years, much of the work being done was maintenance. Now, they’re realizing they need to offer richer experiences. Their Web site is now seen as part of their company’s brand, and customers seeking them out need to be engaged,” Brown told ClickZ News.
Companies are also trying to improve the user experience of their sites, which may not offer optimal navigation, site structure, or back-end infrastructure, he said. Many companies have outgrown the “spaghetti code” that was strung together over the years, and may lack an enterprise platform to support their current purpose, he said.
The objective should not be interactivity for the sake of interactivity, Reidy cautioned. “It has to be relevant. Interactivity has to be done to help customers engage with the brand more, or have fun.”
For client Kraft Foods, Modem created instructional cooking videos, but on its Nabisco site, Modem made a kid-friendly site that would let them interact with the company’s characters and brands. Reidy also points to the BeingIT mini-site that Modem created earlier this year for IT job board Dice.com as an example of relevant, immersive interactivity. On that site, IT job seekers are given the chance to virtually strike back at annoying business managers through a Flash-based game, complete with jelly donut bazooka, a head-shrinking gun, and a pizza launcher.
While almost all of Avenue A/Razorfish’s clients have significantly shifted money to online marketing, of which Web development is a subset, the size of the overall spend is still dwarfed by offline. According to Brown, a typical Fortune 500 company is putting just 4 to 6 percent of their total marketing budget into online.
The resurgence began in late 2004 and early 2005 with publishers looking to keep up with growing advertising demand, Brown said. Next came e-commerce players and others who use the Web as a business platform. Now, some of the final holdouts, consumer packaged goods and other indirect sellers, have decided the time is right to invest online.
“We’re getting more of the ‘brand dollars’ from the traditional TV advertisers. We’re seeing companies like Coors wanting to target an audience that’s moved online, and move money away from TV, which isn’t working as well for them,” Brown said. “Many marketers are recognizing where their audience lives, and turning to the Web purely as an advertising medium.”
The biggest difference between the pre-bubble urge to have an online presence for its own sake and today’s online spending is the integration of a company’s Web site into the business strategy, Reidy said.
“People are recognizing that for every step along the marketing plan, the Web site plays a more important role,” he said. “Clients are coming to us with more of an interest in devising a Web strategy that will help them grow the bottom line.”
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