• August 11, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

Interactive Spending Expected to Rise to $55 Billion by 2014

Earlier this month, Forrester Research released its five-year United States Interactive Marketing Forecast. The space is expected to reach approximately $55 billion--or 21 percent of all marketing spend--by 2014. The shift will be represented in large part by the move away from traditional media-print, television, radio-to interactive media-search marketing, display advertising, email marketing, social media, and mobile marketing. The impetus today is largely being driven by the economic downturn. Unlike years past when marketers were trying to coordinate media time with media budget, Shar VanBoskirk, principal analyst and author of the report, says this year market a much more deliberate shift from traditional to interactive. "We haven't seen so much cannibalism in the past as we did this year," she says.

With constrained budgets, marketers are saying, "let's do interactive because it's cheaper," VanBoskirk says, with less of a focus on relevance. While marketers do recognize that, certainly, consumers are using different forms of media, much of which is in these interactive and digital channels, the motivation today is predominantly focused on efficiency of spend. "Budgets are being cut and marketers are being held to closer accountability," VanBoskirk says. "Interactive tools are just better [for meeting] both of those conditions." In an online survey of 204 marketers, 60 percent reported that increase in interactive would be funded by moving away from traditional, followed by 15 percent who said increases would have no impact on traditional, and 14 percent who reported that increases would apply to both.

In addition to operating in a difficult economy, VanBoskirk highlights other conditions impacting this shift:

  • Consumers expectations in the interactive space: 42 percent of online adults and 55 percent of online youth look to engage with brands through social applications;
  • More than 40 percent of marketers describe themselves as their organizations' "strategic leader," with increased authority in "technology purchases, prioritizing interactive solutions like campaign management, Web analytics, and email marketing."
  • Decline in industry-wide print revenues: consumer readership has declined 17 percent for newspaper and 6 percent for magazine since 2004, according to Forrester's 2008 report, "The Fragmentation of Yesterday's Newspaper," by analyst Sarah Rotman Epps;
  • Proven success with interactive media, as reflected by increasing investments across all industries.

To the last point, VanBoskirk notes that while cost may be a strong driver, this doesn't overlook the fact that interactive tools are exceptionally effective in certain areas of marketing. Is paid search going to be as effective at conveying an emotional response as a television campaign? Probably not, VanBoskirk admits, but that isn't what it was designed for anyway. Interactive tools are arguably better-not to mention more cost effective-than traditional approaches in driving direct response, lead generation, and even direct sales on the Web. "Is interactive always more effective? That's not always the case," VanBoskirk says. What interactive has achieved, she says, is a more established role in the marketing mix as marketers better understand what it's good for.

According to an online survey, Forrester found that the top five channels marketers would be drawing from to amp up interactive spend would be:

  • Direct mail: 40 percent of respondents;
  • Newspapers: 35 percent;
  • Magazines: 28 percent;
  • Television: 12 percent; and
  • Yellow pages: 11 percent.

Conversely, marketers reported increasing spend in the following areas over the next three years (percentages are approximations based on graph, "Marketers See Greater Potential in Interactive Channels."):

  • Created social media: 90 percent;
  • Online video: 82 percent;
  • Search engine optimization: 77 percent;
  • Mobile marketing: 77 percent; and
  • Paid placement in social media: 73 percent.

Over the course of the next five years, Forrester goes on to further break down specific channel spend within the overall U.S. marketing landscape (dollar figures in millions of dollars):

  • Search marketing spend will increase from $15,393 in 2009 to $31,588 in 2014;
  • Display advertising spend will increase from $7,829 to $16,900;
  • Email marketing spend will increase from $1,248 to $2,081;
  • Social media spend will increase from $716 to $3,113; and
  • Mobile marketing spend will increase from $391 to $1,274.

Even when the economy turns around, VanBoskirk is reluctant to say marketers will revert back to their extravagant ways. Advertising spend overall, she says, will continue go down. As channels become increasingly less expensive and at the same time, more targeted, it will become cheaper to accomplish marketing goals, she says.

"Media decisions are so data driven," she says. "It's less about what feels right and much more about data and understanding who's consuming which media at what time, what offers they're responding to, ad where they are in the buying process. All the data marketers need in order to plan creatives, media channels, specific offers, and even placement strategy is available today. The skills marketers need now are around how to create the highly-coveted customer-centric strategy given this information. "Most traditional agencies haven't shifted their skillsets fast enough," she says. "They're still relying on their creative and production capabilities, when the world is moving toward data, technology, and analytics." Although she defends that there will continue to be a need for creative and production skills, those particular talents will come to rely heavily on the strategic component first and foremost.

Where the extra savings will go may depend entirely on the business model, but VanBoskirk anticipates companies will be investing in activities that "will foster and nurture customer relationships." Instead of spending on other kinds of advertising, the money saved will be invested into building an experience with the customer.

Interactive marketing may be showing positive returns but there's undoubtedly room for improvement-most of the technology is under 10 years old, many of which are younger than three. "The more marketers can leverage data to improve the efficiency and effectiveness of their investments, the better that's going to be," VanBoskirk says. "It's a- smart thing for budgets and it's better for the consumer."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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