Digital Promotions Spending To Hit $36.1B This Year

by Mark Walsh, Mar 20, 2013, 5:25 PM

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Local business spending on digital promotions will grow 12% to $36.1 billion this year, as companies ramp up coupons and discounts. That total is expected to more than double to $80.3 billion by 2017.

According to Borrell Associates, the study defines promotions as messages or offers generated and broadcast directly by the market. Advertising, meanwhile, involves messages sent through intermediaries. For example, a newspaper ad by a grocery store offering 50 cents off a pound of coffee is advertising. But the offer itself (50 cents) counts as a promotion.
 
That distinction becomes more blurred on the Internet, where businesses increasingly promote products and services through social sites like Facebook, Pinterest and Twitter, as well as through mobile Web and apps. Still, the vast majority (78%) of spending on digital promotions goes toward discounts and coupons.
 
The report notes that digital couponing continues to increase at annual rates above 10%, with $1 of every $5 coupon dollars redeemed this year coming from a digital source. Among other areas included in digital promotions are event management, licensing, customer retention, contests, sponsorships, and proximity marketing.
 
While mobile is just starting to play a role in areas like location-based marketing, Borrell expects emerging platforms to gain ground spending in the coming years. As of 2012, mobile promotions amounted to $11.2 billion, or about a third of all digital promotions expenditures.
 
But by 2017, roughly three-quarters of promotions will be targeted toward mobile devices. That includes $9 out of every $10 spent on digital discounts, two-thirds of all digital couponing and almost all spending on online sweepstakes and contest spending.
 
In the near term, digital promotion budgets are expected to grow 150% between 2012 and 2017, while online ad spending will increase about 90%.
 
“The increased emphasis on promotions underscores what many analysts have discovered,” the report stated. “Digital marketers prefer the enhanced measurability and pinpoint targeting available to them through promotions. They have begun to depend on them more as these tools become more effective and better understood.”

Local spending on promotions overall (offline and online) is forecast to far outpace that on advertising this year, $176 billion to $101 billion.
 
The Borrell report suggests that $3 spent on promotions for every $1 spent on adverting overall (including online ads) is a good rule of thumb. Keep in mind that this takes into account the value of a discount, coupon or deal as a cost. Ad agencies should be leading this trend.
 
“This is a perfect time to lead a pitch for new business with creative promotional concepts -- especially those that involve social and mobile media,” it states. The study also recommends that media companies form promotional teams with a combination of creative, sales and tech people to work with local advertisers.

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