US Interactive Marketing Forecast, 2009 To 2014 for Interactive Marketing Professionals

by Shar VanBoskirk
This year, more marketers are shifting budget from traditional to interactive media rather than
supporting interactive efforts with new monies as they have in years past (see Figure 1).1 To explore the circumstances behind this trend, we surveyed 204 marketing executives from firms with more than 200 employees across multiple industries. We dug into their current and planned interactive marketing budgets and found that the following factors influence interactive planning:

· Poor economic conditions. The majority of marketers find that interactive tools are more
effective than traditional ones, especially in a recession. When faced with
budget cuts or the need for immediate sales, these marketers find that interactive tools are less
expensive, more measurable, and better for direct response than traditional media. For example,
Busch Entertainment — the theme parks arm of Anheuser-Busch Companies — is using
Facebook and iPhone applications to try to regenerate slumping theme park attendance.

· Increasingly interactive customer relationships. Empowered consumers today expect a
customized, interactive brand experience that goes way beyond a 30-second television spot or
two-dimensional print ad. Forty-two percent of online adults and 55% of online youth want to
engage with their favorite brands through social applications.3 HRB Digital’s H&R Block took
this to heart. It used Facebook, MySpace.com, Twitter, and YouTube to make tax preparation
accessible, even social, and to engage consumers with the brand throughout the year — not just
at tax time.

· More strategic marketing organizations. Although not yet universally involved in setting
business direction, marketing is gradually assuming more organizational leadership in part
because of its close connection to customers. More than 40% of marketers say that “marketing
is the strategic leader in their organization.” As part of this shift, CMOs will begin to buy their
own technology, prioritizing interactive solutions like campaign management, Web analytics,
and email marketing.

· Moribund print inventory. Consumer readership of newspapers and magazines has dropped 17% and 6%, respectively, since 2004 while offline publishers have struggled to translate their impression-based ad sales model into viable online business. The result? Publishing giants Hearst Communications and Condé Nast are closing magazines like CosmoGirl and Men’s Vogue while Gannett and The New York Times Company are restructuring and selling off physical assets. This leaves more advertisers disdaining print for interactive options: The Publishers Information Bureau reports that advertising revenue is down 20% for Q1 2009 compared with the same time period in 2008.

· Proof that interactive marketing works. At last, even laggard industries feel that they have enough experience and data to prove interactive marketing’s worth. Online display spending by telecom companies in Q1 2009 grew 50% over Q1 2008.8 Pleased with double-digit growth in applications, Cornell University’s business school, The Johnson School, is increasing its investment in interactive to between 60% and 70% of its overall marketing budget. Randy Allen, the associate dean for corporate relations explains why: “If we do [new media] strategically, we can target more effectively and do it more cost-effectively as well.”


As with past forecasts, this year we adjusted our scope and approach to best align with marketers’ increasing interactive maturity. We also adjusted our modeling process a bit — this year working with an internal team of dedicated forecasting experts — in order to standardize Forrester’s forecast methodology and ensure consistent outputs and forecast updates.10 As you consider this forecast against former ones, note that this one:

· Shows delayed adoption of emerging media. In 2007, we projected that adoption of online video would begin immediately with mobile marketing following by the end of 2009. Because of the recession, however, firms have been too resource-constrained to trial untested media. With the exception of creating social media assets — which 86% of marketers expect to do before the end of the year — adoption of emerging media is currently flat. Our new forecast projects that video and mobile spend will initiate in mid-2010 and early 2011, respectively, as marketers emerge from the recession.

· Shifts contextual ads out of search. Contextual ads — typically text ads bought on a keyword or category basis — historically have been rolled into the search budget because of their cost- per-click model. But as search programs increase in complexity and contextual ads start to
include more visual elements — like images or video — they are shifting more wholly to the
display budget.

· Rolls online video into display. In our last forecast, because of its newness and limited
availability, we sized online video spend based primarily on reported earnings from the few
publishers selling it. The present forecast still sizes online video as pre-roll, mid-roll, and post-
roll ads but does so based upon the number of available video impressions and as part of the
overall display advertising category. We do not include video production costs or costs to
maintain on-site video assets as these are not typically part of the interactive media budget.
· Includes only email marketing delivery. This year, we forecast growth in delivery of retention, acquisition, and transactional emails. To be as accurate as possible, we limited our email sizing to just the delivery and services included in the CPM paid to email service providers. In years past we also estimated spend on professional services like data integration, analytics, or creative. However, as email becomes more integrated with other channels, it is increasingly difficult to tell which part of the professional services spend is dedicated to email.

· Sizes only integrated social media campaigns and created social assets. This time, our social media forecast includes only money that changes hands for: 1) campaigns that are uniquely enabled by social media — like the McDonald’s Big Mac Chant-Off, which encouraged users to record and post their own versions of the Big Mac chant using tools created by MySpace.
com; and 2) the creation of social media assets that a marketer will own, like a proprietary blog,
community site, or downloadable widget. We include online ads on social networks in our
display ad category and do not size internal social media staffing costs.

· Breaks out mobile. Limited available mobile marketing data in 2007 led us to wrap mobile
into a larger “emerging media” bucket for our 2007 forecast. For this forecast, however, better
data is on hand. We looked at a variety of inputs — mobile handset sales, usage rates, available
inventory, and pricing — and projected expected mobile marketing adoption rates based on
current trends and adoption of analogous media in order to create a unique mobile marketing
model.

INTERACTIVE MARKETING SPEND WILL NEAR $55 BY 2014

Marketers are getting better at balancing channel investments with consumer media time.
Newspaper, magazine, and television share is down while Internet spend stands at 12% of overall
advertising — a percentage that will continue to grow as marketers shuffle dollars away from low- performing traditional media into more relevant interactive channels (see Figure 3). Our forecast examines the pace of the shift toward interactive marketing as a more substantial part
of the marketing mix. We expect search marketing, online display advertising, email marketing,
social media, and mobile marketing collectively to grow to nearly $55 billion by 2014 (see Figure 4).