Interactive Marketing Nears $55 Billion; Advertising Overall Declines

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:

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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.

Comments

re: Interactive Marketing Nears $55 Billion; Advertising Overal

I understand that this is a forecast, and useful in many ways, however I think marketers should be wary of any forecast regarding online advertising that projects out more than 3 years.Technology and internet connectivity change fast and dramatically. Consumers adapt and online behavior changes and thus online marketing tactics and spend change.What if the Obama admin made Internet connectivity ubiquitous in the U.S? That would be an incredible infrastructure investment which would give life to all sorts of mobile devices and services dramatically changing the SEM landscape.I would like to see a clear definition of "social marketing" and "Mobile marketing" in context with this report. Will a netbook used in my backyard be mobile marketing? What if I'm on Facebook on my netbook; social mobile marketing?

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Isn't it a waste of time trying to predict five years in advance.All it takes is a new social media ad platform or the equivalent of an iPhone to be released and your figures are out the window.What are the chances of something like this happening? Very high! Five years is a long time, especially when you're talking about digital marketing.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Another thought is this...what would happen if an internet transaction becomes taxed?It appears to be a possibility here in the US, and could shift the balance back to traditional media.I tend to agree that online predictions beyond a year or two is nothing more than a guess.The Internet, and the politics that surround it, change too rapidly to predict reliably what will happen.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

The key takeaway in my mind is that these more efficient interactive tools allow you to instantly measure the efficacy of your marketing spend and optimize. You have a more direct ability to connect on a personal level with your customers. Accountability will be key for marketers (both client and agency side).We definitely need to take a 5 year forecast as a guess if we look at the past few years and what has developed as the relevant and effective interactive toolset. Each marketer is looking at mobile and social from a different perspective and the range of services offered by agencies varies greatly in this regard.It will be interesting to watch how some of the larger corporate brands continue to embrace these technologies and tools and see what other shifts become apparent in the interactive space.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

The takeaway for me is that overall ad budgets will decrease, because social media projects cost less. We may see a large part of the budget dedicated to measurement of objectives vs. cost of production.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Beware of Click Fraud. All businesses need to do is spend their search marketing dollars on pay-per-response rather than pay-per-click and they'll do very well.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Search marketing will lead always. Natural search has strong part for a committed & in-expensive user, so SEO will be play a great role. I personally believe that market may cross above these figures.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Nice prediction, but you forgot to include classifieds. In 2008 share of classifieds in interactive advertising was 14% according to IAB&PWC report. How can anybody belive in the forecast which is so unconsistent!??!!

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Mobile marketing will gain further traction and growth once campaign creation becomes "on par" with social media outreach like blogs, facebook, twitter, etc. Anyone can create all of the above. What does it cost? Labour. Tools are popping up that are removing huge barriers such as cost and special programming skills for companies wishing to quickly and effectively enter the mobile marketing space. Magmito.com is one such example.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Interesting prediction.One question left...can you tell me if Social Network Advertising Spending (i.e. ads/banner in social networks) are included in "social media" or "display advertising"?Thanks,Martin

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Got a second (similar) question as well:Does the data for "Social Media" in this chart include resources devoted to their social media activities as blogs, twitter, etc. or is it just ads on social networks?

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Wanted to take a minute to reply to the comments here regarding the US Interactive Marketing Forecast. Thanks for taking the time to remark.A few of you remarked about the veracity of a 5 year forecast. It is certainly true that estimates like these are most accurate in the immediate timeframe. But Forrester's business is in making the hard call about how markets will change in the future. So our standard outlook is a 5 year horizon. Our belief is that it is worth putting a stake in the ground in order to force us and readers to consider all of the possible forces that can affect spend within a marketer's long term planning horizon.Regarding definitions of the different media included in the report, we do define them in the report in order to help readers scope what is "in and out" of the numbers. For example, mobile represents spend on mobile display ads and mobile search (display ads delivered to a content site accessed by a pc using WIFI are counted in the display advertising bucket, not the mobile one). Social media includes money spent to buy integrated social campaigns through social networks (eg, Chevy creating its plant a tree campaign with MySpace) and money spent to agencies for help developing owned social media assets. Diplay ads on social networks are included in the display ad bucket.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Thank you for clearing this up for me!-Martin

re: Interactive Marketing Nears $55 Billion; Advertising Overal

It will be great if the principles of the study can be applied in the context of Asia. Most of today's publicly available studies such as this are focused on the US market.Nonetheless, the forecasts in the article present a realistic progression for marketing professions to prepare for an eventual digital world. What is holding back many of today's advertisers to increase their media mix in digital is the perceived lack of trust and credibility which the online space represent. This perception is built over the years by traditional media companies such as newspapers and public radio. This explains why these media assets are still used by media agencies and advertisers.

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Thanks for sharing your forecast Shar. I note in comparing the October 2007 to the July 2009 reports:Interactive Marketing SpendOctober 2007 Forecast: $61B by 2012July 2009 Forecast: ~$40B by 2012Social Media SpendOctober 2007 Forecast: $10.6B by 2012*July 2009 Forecast: $1.7B by 2012*From Oct 07: "Social Media Will Drive Emerging Channels To $10.6 Billion By 2012"A couple of questions:1. Which assumptions changed between Oct 07 and July 09 to cause your 2012 IM forecast spend to decline 34%?2. Is the social media forecast comparison fair or is there a definition problem here?3. Roughly speaking, how do you model the interactive direct marketing space? For example, to model the microchip business, you start with electronics systems demand, which causes chip buys, which pulls from chip inventory, which leads to increased chip production... an so on. Where do you start your demand with interactive marketing? Total marketing spend?Cheers,

re: Interactive Marketing Nears $55 Billion; Advertising Overal

Shar --Thanks for the forecast data. I recall a slide from your 2007 presentation on the same forecast hosted by the AMA -- could you provide the slide that referenced the transition of boomers out of the workforce.