Interactive Budgets Are Growing At The Expense Of Offline

Sharvanboskirk [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.

Forecast slide   

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.

Traditional tools losing share  

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.

Print and direct mail lose the most share  

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.

Comments

re: Interactive Budgets Are Growing At The Expense Of Offline

Hi Shar,Thank you for sharing, this is great information. I note that Forrester is estimated the U.S. mobile marketing spend at $950M for 2012. Other sources such as e-marketer put the U.S. estimate at $6B for 2012 which is quite a difference. Although e-marketer's estimate date back to March 08 and does not account for the economic downturn, this is a huge discrepency. I am wondering if this would be the only explanation. Any insights? Are you looking at all aspect of Mobile marketing (Messaging, Display and search)?Thank you,Xavier

re: Interactive Budgets Are Growing At The Expense Of Offline

I suppose my only real surprise is Mobile Marketing that, while growing at an expected CAGR of 27% (second only to Social Media), still accounts for a tiny fraction of the total expected interactive media spend. I've seen and heard reporting and pundits suggest that Mobile is the next-payoff in the game of Social Media

re: Interactive Budgets Are Growing At The Expense Of Offline

shar,this research is clearly meaningful for any marketer, so we in the agency/consulting business really appreciate this post. i look forward to the full report, specifically to learn what the long-term drivers are for the shift in spending. sifting the short-term urgencies (i.e., save money) from the long-term drivers is the nut that remains uncracked...

re: Interactive Budgets Are Growing At The Expense Of Offline

Scott -- great to hear from you and thanks for your comment. I'm actually in the process of writing the full report now (will include individual forecasts for each of the channels rolled up into that summary forecast) and I appreciate your thoughts on what insight you'd like to see in the research. I'm hoping to include long term and short term trends for each channel as well as recommendations and "WIM" for interactive marketers overall.Hope you are well!

re: Interactive Budgets Are Growing At The Expense Of Offline

Good comments on the mobile piece. I remain very cynical about mobile. Not about mobile's eventual marketing value -- I think it certainly has great potential for targeted, location-specific and time-sensitive marketing communications. But the reality is that today marketers aren't embracing it as they are other emerging media, nor are the mechanics of how to use and measure mobile worked out to a degree that will convince mobile naysayers (like me) that it is worth all the effort.Forrester does have some good research on the reality of mobile marketing. Check out this recent piece by my colleague Christine Overby http://www.forrester.com/Research/Document/0,7211,53590,00.html.But for the purposes of the forecast, keep this in mind, only 28% of marketers claim to be using mobile today and the % of firms expecting to adopt mobile this year has actually declined from last year. So our expected growth shows smaller in 2012 because I'm not expecting to hit a real inflection point in mobile marketing adoption until about 2012.

re: Interactive Budgets Are Growing At The Expense Of Offline

Hi Shar,Thank you for responding. Please know that my intent in my earlier comment was not to question your numbers but rather to understand the source of the discrepancy with other sources. I can appreciate your conservative approach with mobile, as I agree with you on the slow adoption by marketers.I suspect that the growth of mobile will be driven by the consumers. Marketers will react once consumers are overwhelmingly using their mobile devices for internet related activities (other than located based). I do believe that mobile devices will become the first screen as it already has in some parts of Asia. I am trying to decipher whether or not the cycle here in the U.S. will trend exponentially at one point, where we are in the cycle and finally where the critical mass of adoption / response of marketers is? (If I understand your timeline you are placing this around 2012). It seems to me that the emergence of more enabled devices (iPhone, html enabled web browsing capabilities…) and fixed-cost data plans, are driving a quicker adoption by consumers and I am wondering if this signals a tipping point. That tipping point obviously is on the consumer side which would be followed by a marketers’ response with a delay. Does this correlate with your 2012 timeline?Again, this is great information and thank you for sharing it.

re: Interactive Budgets Are Growing At The Expense Of Offline

Thanks for validating what we've been seeing for some time now. Offline channels are still effective and have their place, but the down economy has forced many to reconsider the costs, especially when you realize how effective and inexpensive mediums like email can be.Mobile can still be pricey if you're just starting out. Cost per message rates are still much higher than email.I believe the key is to create an integrated marketing strategy that uses each medium where it makes sense and produces the highest return on the investment. In many cases, offline media is required to drive the online following or list growth.

re: Interactive Budgets Are Growing At The Expense Of Offline

Interesting numbers for sure. But am more interested to see the percentage share (or in terms of numbers) from emerging markets like India. Any fillers on that front?---Sampad

re: Interactive Budgets Are Growing At The Expense Of Offline

Shar, this is very interesting info. Something I've had a feeling about for quite some time, so it's nice to see some numbers. Something else I believe and would love to see something quantitative is how clients are spending dollars for internet marketing vs web development. I know it's switching for me as more and more clients want internet marketing instead of lavish new websites.Thanks again! Can't wait for the full report!

re: Interactive Budgets Are Growing At The Expense Of Offline

Thanks all for your feedback; I'll try to address the comments raised.Regarding the mobile forecast, I would also agree that consumer behavior toward mobile is reaching a critical inflection point. In part due to the iphone and iphone applications which tie much better into life entertainment, employment, family activities than did previous mobile devices. However, I don't think consumer behavior is the only limiting factor in mobile marketing adoption. There are infrastructure issues too which are keeping marketers from fully embracing mobile (how are consumer mobile behaviors, responses to mobile promotions/ads, and even offer redemptions tracked? Can point of sale systems redeem mobile coupons? Are out of home ads or commerce locations mobile-enabled?). Because of the recession, I don't see this hard work beginning until 2011, which will stunt real mobile marketing adoption until 2012-2013.I don't actually have an interactive marketing forecast for rest of world. Forrester historically has sized US (this forecast)and Europe. But the data in India, China, Latin America is still too limited for us to be able to do a good forecast of those markets.Great question on the outbound IM channels investment compared to Website investment. We bandy that notion around at the beginning of every forecast cyle. But...the limitation comes again down to accessibility of data. Web site development costs are usually associated with agency fees, purchased technologies and internal resources costs...fees that we have a very difficult time accessing and standardizing. This model is based on media investment (and in some cases reported services fees) that we can actually define and validate. So for now, we keep not including Web development because of the difficulty in defining what would be represented in that bucket of money and how we would get to any accurate measure of it.I wholly agree with the notion of taking an integrated or multichannel approach to marketing. Even as marketers are shifting money from traditional to interactive tools, I would certainly second the thought that on is not universally better than offline. Channels should be planned in concert in order to be best used to further the brand and facilitate the consumer's experience.

re: Interactive Budgets Are Growing At The Expense Of Offline

Shar,Thanks for sharing this information. I'm looking forward to reading the full report.Your first graph indicates that the Search Marketing spend for 2008 was 13.5 billion. After examining Google's 2008 revenue numbers - 21.8 billion - I'm wondering why there is such a large difference between the two numbers.Thanks again,Patrick

re: Interactive Budgets Are Growing At The Expense Of Offline

@PatrickI'll jump in. The difference is explained by two things:1) This is a US forecast and Google's revenue encompasses the entire world. Indeed the majority of Google's revenue last year was International (52%).2) For their US revenue Google earns money through three ways:a) search ads on Google.comb) representing search ads on sites like Ask, AOL and broadband ISP portals.c) representing display inventory on sites like the New York Times and tens, if not hundreds, of thousands of others.Only the first two are included in our search number. The third is included in our display forecast since the ads are not targeted based on any explicit keyword a user has typed in (rather they are targeted based on contextual, geographic and behavioral factors).Hope that helpsNiki ScevakForecast Analyst, Forrester

re: Interactive Budgets Are Growing At The Expense Of Offline

Shar,As always, great stuff. Could you clarify what "social media" represents? Ads purchased on Facebook, for instance, is that "display advertising" or "social media"?Thanks,Jeff

re: Interactive Budgets Are Growing At The Expense Of Offline

Hi Jeff --Social media includes two buckets of money:1) Spend on integrated campaigns through social networks (think MySpace creating a page where users could record their version of the McDonald's Big Mac chant and then chat about it with other folks)2) Spend to agencies for help creating owned social media assets (think a blog, community, discussion boards on your own site)Display ads on social networks are included in the display media number.

re: Interactive Budgets Are Growing At The Expense Of Offline

Niki,Thanks for the information. Can you share how much revenue Google generated with its display ad products?Thanks,Patrick

re: Interactive Budgets Are Growing At The Expense Of Offline

Hi Shar.Thanks for the info. I was wondering if you have any data with respect to revenue/advertising spend in both traditional and interactive media, and what these trends look like over the next few years.Thanks again.Xavier

re: Interactive Budgets Are Growing At The Expense Of Offline

We are seeing a TON of clients at the local level reallocating their Yellow Pages budgets over to online strategies, particularly SEO campaigns. I was a little shocked when your chart showed Yellow Pages as only fifth on the list of old media victims. The guys at the top (newspapers, magazines, etc..) must really be getting pummeled!

re: Interactive Budgets Are Growing At The Expense Of Offline

Thanks for sharing this information. I'm looking forward to reading the full report.Your first graph indicates that the Search Marketing spend for 2008 was 13.5 billion.

re: Interactive Budgets Are Growing At The Expense Of Offline

Muy buena info, se le sacará el mayor probecho posible y espero sean correctas las cifras, sobre todo aquí en Chile !!!