Locked and Loaded: Sales and Business Planning Ammo for Web Marketers

    October 14, 2003

It’s that time of year again — time to get serious and make final decisions about 2004 online and offline marketing budgets, time to update the business plan, and time to dig up that allusive research that we all use to justify long-term decision making. Here are some figures and predicted trends from recent online-marketing studies, which are worth keeping in mind when developing 2004 proposals and internal marketing plans.

First and foremost, the online marketing industry is on the upswing. Ad revenues were up 7% in Quarter 1 of 2003 compared to Quarter 4 of 2002, according to the August 20, 2003 Ad Revenue Report from the Interactive Advertising Bureau (IAB), and PricewaterhouseCoopers (PwC). That’s an increase of 11% compared to Quarter 1 results from 2002.

These positive trends match up with prediction figures from IAB, PwC, and eMarketer. Robyn Greenspan at Internet.com compiled data from the research giants and relayed these figures in her July 15, 2003 article titled, “U.S. Online Ad Growth Underway.”

“Aggregated data from eMarketer reveals online ad spending to reach $6.3 billion by the end of 2003 for a 4.8% growth rate over 2002’s $6 billion, and slowly climbing to $6.8 billion in 2004 and $7.2 billion in 2005.”

So why are things back on track? Mainly because paid search continues to pay off. Those same studies from the IAB and PwC reveal that the paid search market doubled in 2002, bringing in $635 million. This represented a growth for paid search’s role in the overall ad revenue from 4% in 2001 to 15% in 2002. And, with the category carrying 21% of “total ad format revenues” in the Quarter 4 2002, statistics on paid search growth are expected to keep climbing.

In fact, after surveying marketing executives in April 2003, Jupiter Research also expects steady growth in paid search’s future. Brian Morrissey at Jupiter Media compiled research from that survey to publish, “Search Powers Online Ad Revival” on July 30, 2003 .

Morrissey summarizes, “Jupiter pegs the paid search market as worth $1.6 billion this year, after growing at a 48% clip. Over the next five years, the researcher expects spending on search to increase by a compound annual rate of more than 20%. In 2008, Jupiter forecasts companies will spend $4.3 billion on search, accounting for 29% of the $14.8 billion online advertising market.”

Jupiter is basing these projected numbers on information given by the marketing executives polled in that April study – 82% from large firms and 61% from smaller firms said they planned to spend more on search marketing in the future. Why are they planning to spend more? Because, relates Morrissey, 74% of executives with a “big budget” rated search marketing as “better” or “much better” than banner ads, even though banner advertising lead online ad spending in 2002 at 29%.

This all makes sense considering that search engines continue to grow as one of the best ways to reach a new audience. At least that’s what a March 6, 2003 , WebSideStory StatMarket study claimed. It said search engines generated 13.4% of site referrals on the day measured, up from 7.1% measured a year earlier. Although the data was collected on only one day, it was compared against data collected from other days, and vice president of product marketing for StatMarket, Geoff Johnston, said the March 6th data was consistent with overall trends. WebSideStory data also showed an over 15% yearly growth in direct navigation as a site referrer, but web links fell from 42.6% to 21%.

In general, web marketing is going to start whittling away at traditional marketing budget dollars in the coming years. GreenSpan’s July 15 article on IAB and PwC numbers states, ” U.S. online advertising spending is expected to account for $8.1 billion of the country’s $293 billion total media budget by 2006, marking a return to 2000’s Internet spending spree figures.”

While the exact numbers from the Jupiter study are different from PwC’s, Jupiter agrees with this optimism, stating that, by 2008, it expects online marketing will grab 6.1% of total advertising spending, up from 3.3% this year.

Finally, as some kind of giant but slow endorsement, a spring 2003 study from Nielsen/NetRatings reported that top 100 traditional advertisers (like AOL, Microsoft, Ford) have finally started to make online advertising a “noticeable part of the media mix.”

Brian Morrissey at Jupiter Media compiled data from Nielsen/NetRatings in a March 20, 2003 article that outlined the degree to which the Big Boys were coming around to online spending. When it came to ad impressions for 2002, the top 100 traditional advertisers’ share was 30% – doubling from two years ago when the top 100 made up just 15%. Morrissey also reported on a Nielsen/NetRatings Fortune 500 study. “In that study, it found more than half the group ran at least one online ad campaign during the year [2002], up 6% from 2001.”

So now that you have some statistical data about spending online, it’s time to put statistical data, generally, into perspective. French Philosopher Jean Baudrillard is quoted as saying, “Like dreams, statistics are a form of wish fulfillment.” And never does this seem truer than when re-reading some stats from 1999. Try on this Forrester Research forecasted data compiled in an August 1999 article by Michael Pastore at Internet.com. “Forrester projects that online advertising spending in the U.S. will grow from $2.8 billion to $22 billion by 2004.”

Ah, the good ole days. So, on one hand, we have to take all these figures with a grain of salt. On the other, it’s good to have some survey data to back up what intuition, client testimonials, and personal experience has been telling online marketers for years – the web (and search) marketing industry is growing because it delivers results!

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Rocky Lewis is co-founder and a managing partner of SageRock.com, which is an online marketing company specializing in SEO, Paid Search, and ROI/Usability Analysis.