Interactive Marketing Nears $55 Billion; Advertising Overall Declines

[Posted by Shar VanBoskirk]

I'm pleased to announce that Forrester's five year forecast is now complete and live on Forrester's site.  It feels like this has been a long time in coming from my side too! Please see the full report for detailed explanations of the trends affecting overall marketing budgets and the growth of the channel in the forecast.

You may remember we previewed our forecast at Forrester's Marketing Forum at the end of April.  If you cross reference this post to the one we posted as follow up to the forum, you will notice that the "% of all advertising spend" has changed.  The absolute forecast is still the same, we just changed this calculation to make sure it was done in the same way as in years past. See below for the most recent release:

  

This research will certainly help marketers plan their channel strategies.

• Search continues to lead interactive spend followed by display. 

• And owned social media assets (like internal blogs, community sites) are really the only emerging media getting traction in today's economic climate.

But to me, the most interesting takeaway from the research is that overall advertising budgets will decline.  Yep.  With dollars moving out of traditional media toward less expensive and more efficient interactive tools, marketers will actually need less money to accomplish their current advertising goals.   But reasonable marketers won't relinquish budget because their programs are running too efficiently. Instead, marketers will allocate unused advertising dollars into investments like innovation, research, customer service, customer experiences, and marketing-specific technology and IT staff, in order to further marketing's strategic influence within their companies. 

New Limits for Text Messaging?

Marketers using text messaging beware. A recent federal court ruling says sending ads in text messages potentially violates the law.

In a nutshell, here's the situation:

• The Ninth Circuit Court of Appeals said a lower court mistakenly absolved Simon & Shuster and its agency partner ipsh! of violating telecommunications law in sending text messages to promote Stephen King's novel "The Cell" in 2006.
• The case hinges on two critical questions: Was an auto-dialing system used for the campaign? And, should a text message be defined as a "call"?

The case, which now goes back to the lower court for review, has galvanized mobile vendors like Shane Neman, CEO of Ez Texting, whose own company faces a similar suit. Neman has organized the Mobile Advocacy Coalition, which intends to ask the FCC to recognize vendors as "mere conduits" of text messaging, giving them an exemption from this kind of legal action - an exemption the carriers already enjoy, he notes. The coalition is not seeking to exempt unscrupulous marketers who violate the law by sending unsolicited text messages.

This is a very important case for marketers because it could result in new restrictions on the use of text messaging. It also points to the growing pains for mobile as it becomes a more established marketing platform.

The Golden Rule of SMS Marketing

[Posted by Nate Elliott]

Here at Forrester we continue to see a lot of industry excitement around mobile marketing. In a recent survey more than 60% of mobile marketers told us they'd continue to increase their spending on the channel despite the bad economy. And according to our latest ad forecast, mobile marketing spending in the US will more than quintuple over the next five years.

There's just one problem: SMS is the only mass-reach mobile marketing channel, and no one -- not marketers, and certainly not users -- seems to like it much.

More than twice as many people use SMS as use the mobile internet -- or any other mobile service, for that matter. (The mobile internet and mobile video may well become great ad platforms one day, but the fact is not many consumers use these services right now and those who do use them don't spend much time with them -- meaning there's simply not much reach or inventory.) And believe it or not SMS can actually work incredibly well for marketers. We regularly hear that SMS campaigns get response rates of 5% to 25%. Better yet, when Calvin Klein and their agency OMD sent SMS messages to a well-targeted SMS list, fully 39% of users who received the message opted in to receive a sample of CK's new fragrance.

But despite this success, marketers just can't seem to love SMS as a marketing channel. Some marketers are worried about looming government regulation. And lots of marketers tell us they're waiting for richer channels (like mobile display ads and mobile video) to come of age. But the biggest problem is that marketers are afraid users will hate them if they send SMS. According to a survey we did in the UK last year, they're right to be worried. On average, consumers are four times more likely to delete SMS and MMS marketing messages without reading them than they are to take a moment to consider the product or service being offered:

So how can SMS marketers avoid user backlash and generate those great response rates we hear about? I think they need to follow a simple best practice that I call the "golden rule of SMS marketing": If you can't target an SMS, then don't send it. After all, when your marketing is targeted well, users stop thinking of it as marketing and start thinking of it as content, or a service. That's the reason CK did so well with SMS -- they targeted users who were most likely to appreciate the offer of a free sample. In fact, in nearly every successful SMS campaign I've heard about, messages were only sent to users who were either pre-qualified or targeted in some other way.

There are two ways for marketers to follow the golden rule of SMS marketing:

1. Only send messages to your own list. If users have signed up to hear from you by SMS, then you know they're qualified leads who won't be offended by your choice of marketing platforms. Every marketer interested in using SMS should work to build a house list of SMS leads -- with a contest, a lead form on your site, or if you're in a hurry by promoting a short code in your traditional marketing efforts like Kraft has done.
2. Get access to a highly targeted list. Blyk is one good example of a vendor who can segment and target their SMS audience, but at the moment they only operate in the UK and the Netherlands. We haven't seen many other ad sellers who can do this (if you want to recommend others, do so in the comments below) -- but I've no doubt we'll see more operators and vendors take this approach in the future.

If you want to read more about our research on SMS marketing, check out my report The Joy of Text: Using the Golden Rule of SMS Marketing in Europe or my colleague Neil Strother's report SMS Marketing: Leveraging Call-to-Action Features of Cell Phones to Maximize Effectiveness.

And as always, I'd love to hear your thoughts -- feel free to comment below, and I'll check back to participate in the conversation.

[This was cross-posted to my personal blog]

Interactive Budgets Are Growing At The Expense Of Offline

[Posted by Shar VanBoskirk]

During my presentation at Forrester's Marketing Forum on April 23,  I previewed Forrester's latest forecast of interactive marketing spend.  We expect marketer spend on display media, search, email, mobile and social media to reach nearly $55 billion by 2014.

  

This growth is due to marketers seeking lower cost, more accountable channels which are also widely used by their customers.  This year, we are also finding that marketers are migrating dollars away from traditional channels and into interactive ones.

  

Direct mail and print are suffering the most loss to interactive tools.  According to our survey, 40% expect to cut direct mail budgets, while 35% will decrease newspaper spend and 28% will slash magazine money in order to spend more in interactive media.

 

I'm actually currently at work on Forrester's full forecast report detailing the growth trends around each of the channels itemized in this forecast.  Look for that report -- which will include additional data and explanation -- on our site around the first part of June.

Mobile Boost

[Posted by Neil Strother]

 

Spending on mobile advertising just got a boost. Jaguar and Land Rover committed this week to a combined $1.6 million mobile ad buy buy for 2009.

 

That might not mean much in other channels, but for mobile this is significant. Few brands have devoted that much money to mobile in a single year. And it shows that even in a recession some are willing to spend, especially to reach consumers who increasingly access Web content from cell phones. (You can view a report on mobile Web adoption, if you’re a Forrester client, or arrange to buy it if you aren’t.)

 

The two luxury auto brands – now controlled by India’s Tata Motors – will split the budget on campaigns through AdMob's U.S. network – a nice lift for AdMob itself as the mobile ad network continues to gain ground.

 

Is your brand budgeting on mobile in a significant way in 2009? If so, I’d like to hear about it for upcoming reports. Send an email to nstrother@forrester.com.

Barcelona Rumblings

[Posted by Neil Strother]

The quiet rumblings out of Barcelona shook the mobile marketing landscape this week – a little. If you weren’t paying close attention to goings on at Mobile World Congress, though, you likely missed it. Some highlights:

 

• GSMA’s interesting mobile marketing metrics for Europe: Search (Google), social networks (facebook) and news (BBC) are among top mobile sites, and use is consistent throughout the day, with early morning hours (7 to 10 a.m.) the heaviest

 

• Recognition the mobile Web has arrived – thanks to smartphones and that handset from Apple

 

• More brand advertisers spending on mobile – AdMob reported more than a doubling in number from last year

 

All encouraging. And props to the Euro operators involved in the GSMA feasibility study. So where are the U.S. carriers and those in Asia or Latin America on this?

 

Clearly, much work needs to be done to remove the friction involved in mobile marketing and there’s a need for greater understanding of the ROI. Yet these rumblings signal some growth, and the next jolt might not be so imperceptible.

Mobile Change

A new global leader promises change this year – no, not that one – Mike Wehrs, the new head of the Mobile Marketing Association.

 

Recently, two colleagues (Thomas Husson and Mary Beth Kemp) and I spoke with Wehrs, who has some big plans for advancing mobile marketing in 2009, and he’s likely to get most of his agenda. Key initiatives he and MMA members will tackle this year:

 

• Measurement – they’ll put a stake in the ground on standards for measuring mobile campaign effectiveness
• Cooperation – they’ll work with other associations like the GSMA on global measurement standards
• New programs – they’ll roll out efforts in the second half of 2009 to help boost the mobile channel, though he declined to give details

 

Much of this will be on the table this coming week in discussions at Mobile World Congress in Barcelona.

 

Implications

If you’re involved with or thinking about mobile marketing, it's worth paying attention to these efforts. The fledgling channel needs some clarity on measurement standards so all players can better evaluate the ROI. And cooperation and new programs raising awareness certainly have merit. Taken together, these MMA moves signal growing maturity and progress.

 

Realistically, however, agreement on measurement standards could be a ways off. Even now online marketers don’t always agree on measurement standards – so how can one expect it to happen sooner for mobile? Welcome to the messy world of mobile marketing.

 

In a refreshingly candid moment, Wehrs said this year is not the breakout year for mobile marketing. There is still too much friction, although he did point to 2010-2011 as the most likely time frame for a bounce. Reasonable.

 

I applaud Wehrs for tackling tough issues in his first year at the helm, and wish him well as he and MMA members push mobile marketing forward. And it is moving forward, even if it might not seem so given the small budgets now involved.

 

What do you think is in store for mobile marketing, and is the MMA on the right track? Post a comment or send me an email at nstrother@forrester.com.

 

(NOTE: This is my first post here. So, a little bit about me. I came to Forrester when the company acquired JupiteResearch last summer. My previous research has focused on mobile marketing and media. Now as part of Forrester’s Interactive Marketing Professional team, my focus will be on helping clients navigate the choppy waters of mobile marketing.)

NFC Made Me Believe In Mobile Marketing

The last day of Nokia World, I interviewed Jeremy Belostock, the Head of NFC for Nokia's Device Experiences group.

NFC -- for those of you non-gadget types, like myself -- stands for "near field communication."  And it is basically a functionality which allows mobile handsets to have "contactless" communication with other handsets, ear pieces, keyboards, other devices, even with out of home media, product packaging, kiosks, turnstiles, or anything where you can enbed an NFC-smartcard.  Think of NFC as a tooll which allows you to use your mobile phone as your subway pass, your credit card, your change at a vending machine, or as a way to interact with media for additional information or promotions. 

There are a few hurdles keeping NFC from becoming a mainstream application:

1) First, users have to buy NFC-enabled phones. This of course is Nokia's big push.  It wants to increase sales of NFC phones by showing users value in some very personal applications of NFC -- like sharing photos, games, videos phone to phone.
2) Second there needs to be a development of access points which allow consumers to transact using their NFC phones.  NFC phones are only good for phone to phone sharing until someone (retailers, mass transit authorities, movie ticket kiosks) enables an access point which will process NFC transactions
3) Finally, I learned that NFC is one of those things where the value of having it increases exponetially the more other users and access points there are.  So the last hurdle is getting wireless carriers, banks, other handset manufacturers on board to help users get value out of NFC.

Per my previous blog post, nothing in mobile marketing is working itself out quickly, and NFC isn't going to either.  But I came away from my conversation with Jeremy much more bullish on NFC than on many of the other mobile marketing applications I've seen.  NFC, although a new and sort of "Jetson's like" delivery mechanism, can easily be treated as an extension of the types of marketing you are already doing.

*You have couponing/promotional relationships in place with supermarkets already.  NFC lets you deliver those coupons direct to a mobile phone instead of to a dedicated loyalty card or cicular
*You are doing direct mailers, NFC lets you include a smart card in the mailer which downloads an offer, video, product demo to a mobile handset
*You are a merchant looking to close the loop on out of home or even in-store marketing.  Now users can transact at point of message via their mobile.

Trials of NFC today are mostly in Shanghai, Germany, Austria and New York, through applications like vending machines and mass transit passes.  But you don't have to wait for mass adoption or a lot of new technology infrastructure to give it a whirl.

Nokia, Sony and Ericsson are part of the NFC Forum and are eager to develop NFC applications with marketers to help gain traction for their handsets.  I actually think a conversation about NFC could have more affordable, more immediate results than alot of other mobile marketing experiments I've seen.

Still Nothing Happening in Mobile Marketing

[Posted by Shar VanBoskirk]

I'm at an event in Europe.

Sponsored by Nokia.

And still only talk about the "eventual opportunity" of mobile marketing. 

A panel moderated by Tom Henriksson, Head of Nokia Interactive, starring Ethan Stock, CEO of Zvents -- a local online promotions enabler, Mark Reed, Director of Strategy at WPP, and Prinz Pinkatt, Manager of interactive marketing at Coca Cola EU was happy to discuss the existing challenges with mobile marketing:

Handsets --  Their size, ability to facilitate interactivity limit marketer applications
Data -- Ownership and structure of consumer data is still in flux
Operators -- Operator cooperation with manufacturers, media firms and advertisers is still inconsistent
Standards -- Definitions of ad formats, impressions, metrics, costs are all still under development

We've heard these challenges before.  (See also this post from my colleague Nate Elliott ).  But I'm still waiting for some real grit around progress made toward knocking off some of these issues.  The panel sentiment was that it would just "take time" to overcome these hurdles.  And that starting small with SMS or MMS based messaging programs can be a great place to start with mobile.  (Prinz said Coke EU has seen a strong 4% opt in to My Coke Rewards via text response to invites on product packaging).

I believe in the promise of mobile marketing.  In fact, some one on one conversations at this event have quickened my pulse around mobile applications that I think will transform consumer relationships with marketers and financial institutions (see upcoming blog post on NFC).  But I'm still waiting for mobile to become a primetime marketing tool.  Thirteen months after my 2009 IM Forecast, it feels like mobile marketing adoption is still two years out.

Prove me wrong!  What progress do you see toward tackling present challenges to mobile marketing adoption?  What mobile campaigns have you tried that have worked well for you?  What did you do that made mobile work?  When do you think mobile will matter as a mainstream marketing tool?

The Future of Mobile Devices: Services?

[Posted by Shar VanBoskirk]

This morning finds me still one of the five women at Nokia World (ok, slight exaggeration) and certainly one of the few non-gadget geeks here.  But based on what I now know about Nokia (one day into the event, and frankly much smarter about context for many of the product announcements made yesterday), I actually think they are quite interested in connecting with the non-gadget types going forward.  In fact, many of the mainstage presentations yesterday as well as the small group breakouts conducted just for Forrester talk about Nokia's goal to be both a product and services company.  In this case, services means providing wireless services -- music, games, messaging, and media sharing -- to consumers via their Nokia handsets.  Nokia calls its "suite" of services (mentioned above) "Ovi."  Ovi is sort of a platform, sort of a set of products. 

Here is how it works: A consumer buys an Ovi-enabled Nokia handset, and they have immediate and embedded access to navigation systems, music downloads, connectivity to their email and IM inboxes, and the ability to share/curate images, videos, etc with others.  This happens without a carrier's involvement -- these services are hardwired into the phone.  And the business model is usually without a subscription -- consumers pay a premium for the handset which is Ovi-enabled.

I'm not going to pretend to be the mobile device expert, here. There are other analysts at Forrester who know alot more about Ovi than I.  But I wanted to introduce it to talk about the marketing implications of handset manufacturer as service provider. 

I think this blend of services bundled with device could actually change consumer behavior in a way that makes the mobile handset a consumer life utility and not just a tool for making calls, sending texts and checking email.  This would be a crucial turning point for mobile marketing .  It would 1) Increase adoption and tolerance for multiple functions/content on a mobile; 2) It would increase consumer facility with using their phone for transactions; 3) It would foster consumers using their mobile to continue experiences they initiate via Web or email.  All steps that would aid the development of smarter mobile marketing programs.

Do you agree?