• May 5, 2005
  • By Colin Beasty, (former) Associate Editor, CRM Magazine

Marketers Need To Log-On

Half of marketers plan to decrease spending in traditional advertising channels like magazines, direct mail, and newspapers to fund increases in online ad spending in 2005. According to a report by Forrester Research, online advertising and marketing spending will reach $14.7 billion in 2005, a 23 percent increase over 2004. According to Forrester's five-year forecast, online marketing and advertising will represent 8 percent of total advertising spending in 2010. The report, "US Online Marketing Forecast: 2005 to 2010," was conducted via an online survey that included 99 leading marketers, as well as interviews with 20 vendors and user companies. Forrester also spoke with four large online portals: AOL, Google, MSN, and Yahoo!. "There is a large disparity between the amount of time consumers are spending online and the money marketers are spending trying to reach them online," says Charlene Li, principal analyst at Forrester Research. "When at-work Internet use is taken into consideration, online consumers spend more than one third of their time online. That's roughly the same amount of time they spend watching TV, yet marketers spend only four percent of ad budgets online versus 25 percent on TV." Forrester expects search engine marketing to grow by 33 percent in 2005, reaching $11.6 billion by 2010, and display advertising to increase by 11 percent over the next five years, to $8 billion in 2010. Eighty-four percent of marketers surveyed plan to increase their online budgets this year, with an average increase of 25 percent over 2004 spending levels. They also found online advertising channels will draw interest. Sixty-four percent of respondents are interested in advertising on blogs, 57 percent through RSS, and 52 percent on mobile devices, including phones and PDAs. "Consumer behavior will be the primary driver of online advertising growth over the next five years," Li says, adding that four consumer trends--time spent online, online buying, online product research, and a consumer ad backlash across many traditional channels--will move marketing dollars online. Marketers also are losing confidence in the effectiveness of traditional advertising channels and feel online channels will become more effective over the next three years. Seventy-eight percent of survey respondents said they think search engine marketing will be more effective, compared to 53 percent of respondents who replied that TV advertising would be less effective. Li maintains that rather than pouring money into awareness advertising through traditional marketing channels, marketers will have to adapt to consumer technology trends and spend their resources on people who can grow customer relationships. "As consumers become more sophisticated and variegated in their use of media, marketing will have to follow suit," Li says. "Successful marketers and publishers will use new tools like blogs, RSS, and even social networking to develop deeper ties to company and product loyalists." Related articles: CMO Council Publishes a Marketing Performance Framework
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