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Each issue of CMO Close-up features an interview with a CMO, as well as other marketing executives answering that issue's "Big Question."
This week's feature:
CMO Close-Up with Steve Liguori, executive director-global marketing at GE
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Online advertising during the downturn
Optimists and pessimists abound, but marketers will concentrate on ROI, analytics to justify spend By Karen J. Bannan
Story posted: October 13, 2008 - 6:01 am EDT
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The cup is half full or half empty, depending on whom you talk to. While some pundits say advertising isn't immune to the world's economic trials and are bearish about advertising and marketing growth in 2009 and beyond, others crow about online advertising's growth and success year to date.
Case in point: This month, global media services agency ZenithOptimedia significantly downgraded its forecast for total worldwide ad spending (combined on- and offline) in 2009.
In June, the company forecast 6.6% growth in 2009. However on Oct. 7, it reduced that to 4.3% and said growth in the U.S. would be just 1.8% this year and a puny 0.9% in 2009. The October revisions override previous U.S. estimates of 3.5% and 2.7%, respectively.
JPMorgan Chase also lowered its advertising estimate for the 2008 U.S. online display market from $8.6 billion to $8.2 billion.
Research firm eMarketer has reduced its ad spending estimates, too. The company has revised its interactive marketing spending forecast for the U.S. twice since last year, when it estimated that 2008 would top the $27.5 billion mark. But in March it cut that number 5.9%, to $25.9 billion, and in August it again lowered its forecast by 3.9%, to $24.9 billion.
Other industry watchers are more bullish. The IAB Internet Advertising Revenue Report from the Interactive Advertising Bureau and PricewaterhouseCoopers, which covers the first six months as well as the second quarter of 2008, found that during the first six months of this year, Internet advertising revenue in the U.S. reached $11.5 billion, a 15.2% increase over the first half of 2007.
The IAB report also found the second quarter of this year was up 12.8% over the same period in 2007, and included record numbers for both search and display revenue.
The IAB report said first-half search revenue in the U.S. was up more than 24%—$5.1 billion up from $4.1 billion—year over year. Display advertising nearly hit $3.8 billion, up from $3.2 billion during the same six months in 2007, a 19% increase.
JPMorgan analyst Imran Khan agrees. An October 7 research note points to a strong demand for search. The company left its previous estimate for 2008 search advertising revenue growth of 27% year over year untouched even in the wake of economic weakness.
What seems clear is that marketers are thinking less about spending and more about optimization. Take for example risk management and insurance brokerage Aon Corp., which changed its interactive strategy as a response to the financial conditions.
“Given our position [in the market], our clients had a lot of questions,” said Dave Cliche, the company's VP-global interactive marketing, adding that the company's “renewed investment” was to use online channels not only for marketing but also for customer communications. “It was important for us to react quickly and do our jobs to get information in front of clients and key stakeholders,” he said. Aon created an online portal called the Situation Room that drew 33,000 unique visitors in a week.
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A SHIFTING LANDSCAPE
Experts such as Dinesh Boaz, founder of interactive agency Direct Agents, confirm that many marketers are improving and adding to their Web presences. But other interactive channels are seeing a renewed focus as well.
The biggest jumps are in paid search and email, which are performance-based, said Steve Cone, CMO of marketing services firm Epsilon. “Most marketers, already operating within tight budgets, anticipate further cuts.” This will drive marketers to focus “spending where it will have the greatest impact,” he said, adding that will prompt a shift away from traditional marketing to interactive and digital marketing that is “data-driven and targeted—an approach that is already generating demonstrable returns and will continue to do so as the economy improves.”
The spending shift will come from existing budgets that had previously been earmarked for venues such as print or radio, said David Hallerman, a senior analyst with research firm eMarketer. And he predicted marketers will shift spending away from media that are more experimental and less measurable.
“This is why search will remain strong and something like video, which is popular, will only be growing 2%,” Hallerman said. “Video is still seen by many large advertisers as something they have to figure out.”
The changing economy also provides unique opportunities for b2b marketers to get into display advertising and search more cheaply than they may have been able to in the past, said NancyJane Goldston, founder and CEO of the UXB, an advertising, branding and interactive agency.
“There are opportunities where some advertisers like financial and automotive companies are not spending as much, so inventory is opened up,” Goldston said.
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ADVANTAGES COULD BE SHORT-LIVED
But Alistair Goodman, CEO of location-based ad targeting service 1020 Placecast, said this advantage could be short-lived.
“In the first wave of the mortgage crisis about a year ago, mortgage advertisers had been among the leading spenders for premium inventory and could afford to bid up the prices,” Goodman said. “These advertisers dropped out of the top spending category but were replaced by other advertisers that had been priced out.” He predicted a similar trend this time around.
What's next for interactive marketers? Budgets may not shrink as much as they will be refocused, said Tom Adamski, CEO of interactive agency LEVEL Studios. “People are going to start analyzing a project's value before analyzing the dollar amount,” he said. A company focused on social media, for example, may decide to continue with that project but realize that they don't need to reinvent the wheel and do it all in house, he said. “Exploratory budgets are definitely starting to dry up,” Adamski said.
Email is likely to gain even more relevance as marketers use it not only to do branding and traditional marketing but also to communicate with customers, partners and prospects, said Julie M. Katz, an analyst with Forrester Research. “Email is going to become much more of an interactive medium,” she added.
“From an agency perspective, we always tell everyone to know their customers,” said Julie Lee, managing partner with Agency.com. “Your brand and business goals matter, but what your users' goals are is very important, too. If your banner or Web site isn't providing the right information it's a self-defeating exercise.” M
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