When Will CMO Heads Roll?

Before we delve into my column, I want to welcome my new co-columnist in the Paid Search Strategies category, Andrew Goodman, who has been doing paid search almost as long as I have and is also a fellow author, having written “Winning Results with Google AdWords.” Those of you that get the ClickZ e-mail newsletters on search marketing will get columns from each of us on alternate weeks.

Now, on to the topic at hand: CMOs and their crazy, often unscientific marketing budgeting process, particularly as it relates to online marketing and SEM (define). Marketing budget allocations between media channels are totally screwy at nearly every company I’ve had an opportunity to talk with. There’s little or no science or math applied to the task of determining where to spend the first, last, or next dollar. I’ve been waiting for this to change ever since getting into traditional advertising out of grad school in 1992. I’m still waiting, but at least there’s been some movement in allocating budgets more effectively between online options. But that’s a discussion for another column. The bigger problem is that the large offline budgets in traditional media (television, radio, print, outdoor, etc.) for the most part have not migrated online to follow the consumer’s attention.

What’s the “right” online ad budget as a percentage of overall media and within online, and what percentage should be search advertising? It’s a question I’ve heard expressed a dozen ways in the last month or two. Sometimes the question is more along the lines of: “Why haven’t marketing budgets followed the consumers online given time spent consuming online vs. offline media?” I’ll talk about some of the reasons that budgets haven’t followed the eyeballs and ears online below.

What’s truly interesting is that no CMOs have been fired for not moving high percentages of the media plan budget online. CMOs have a short tenure on average as it is and so most don’t have the strength of will to simultaneously shake up the vendor landscape (CMOs are notorious for firing agencies or at least conducting agency reviews), and also make seismic shifts to media allocations. Once CMOs can get fired for not pumping sufficient media dollars into online marketing (and SEM for that matter) we’ll see a much more pronounced shift of budgets online.

The inertia of advertising budget allocation by channel is amazingly strong and it takes a strong CMO or a major event or change to create the imperative to change allocations between media types. It’s often the case that even making major shifts within a specific channel can take intestinal fortitude at the agency or client-side. So, I thought I’d look at instances where dramatic budget shifts have actually taken place. These instances were derived from discussions with my client base, prospects I’ve had the honor of chatting with on an in-depth basis, or large advertisers that have publically explained these shifts.

Certain patterns do emerge prior to large budget shifts into search, including the following:

• Competitor’s spend level is revealed: I’ve seen instances where a competitor’s current SEM spend level was mentioned in an article, in a major news story, or at a conference, resulting in a wake-up call to the CMO or VP of marketing of the low-spending competitor. Of course, the search engines have been trying to use this pitch for years to increase spending by creating competitive benchmarks and baselines. But when this data comes from a reputable third-party source, it means much more.
• Competitor starts stealing market share: Nothing speaks louder than success. Online marketing and, in particular, paid search marketing is a mechanism that allows for rapid gains in market share (dollar market share or unit market share). With the ability to use online competitive intelligence gathering services, one can often draw a direct correlation between a huge shift in market share and a large shift of budget into paid search.
• CEO gets religion: An existing CEO or a new CEO can sometimes get involved in major marketing strategy shifts. This is particularly true when the CEO’s background is in sales and marketing.
• Landing pages and sites start getting considered as part of the “ad experience”: In the instance of PPC (define) search, text links in SERPS (define) are not exciting, and much of marketing is about the emotional impact of advertising, both for the consumer and the advertiser. Once you look at the Web experience as extending beyond the SERP, the opportunities to be creative and influential (beyond just getting the lead or making the sale) increase dramatically.
• Video search ads take hold: Video search has sizzle. Marketers and agencies love sizzle.
• Retargeting takes off: Display media and search media intersect with search retargeting.

There’s no way we’ll see a doubling of interactive budgets this year. But I’ve seen some signs that marketers can’t ignore SEM and online media any longer and therefore budgets are shifting.