• by kyle , Daisy Whitney , January 29, 2008

Ad spends gallop online and marketers give chase

Nobody should be surprised anymore that ad dollars are going online. But the rate at which those dollars are getting sucked up is incredible. It's almost like one of those game shows where they put someone in a clear plastic cube and blow money in. Interactive marketing will more than double its share of all marketing dollars over the next four years.  

That's the finding of a recent Forrester Research report surveying the interactive advertising landscape. The study found that by 2012 interactive marketing will comprise 18 percent of total ad spending, up from only 8 percent today. The report covered seven interactive marketing channels: search engine marketing, online display ads, e-mail marketing, online video, social media, mobile marketing and in-game advertising. The entire category will hit $61 billion in 2012, up from $18 billion last year.

The increase will be driven by two factors: better integration between traditional advertising and digital counterparts, and by the continued embrace of interactive marketing by mainstream advertisers, says Shar VanBoskirk, the Forrester analyst who penned the report. For instance, clients buying outdoor spots will be able to include more seamless mobile tie-ins. "There will be an interactive and digital capability as part of any campaign you do now," she says.

Growth won't stem from a single category as in years past, when search marketing or display ads drove overall ad spend. That's because online advertising has now reached an overall level of maturity since consumers spend so much time online: 29 percent of their media time is devoted to the Internet. So the uptick will come from a steady spread of all interactive ad forms, and from advertisers judiciously shifting more traditional dollars to the interactive world. "They are questioning their investments in traditional media like TV and they are thinking about where consumers are spending their time. Clients are being more methodical about it and figuring out what is right," VanBoskirk says.

The report also revealed that marketers fall into three camps: vanguards, mainstreamers and stragglers. Brands like Nike and Quicksilver have stepped quickly into interactive marketing, as have many direct marketers with search. But countless others are still testing the waters. That means that over the next five years as one group of advertisers matures and levels off its search investment, as an example, the next group will boost its spend, thereby driving additional growth in the medium. For instance, search marketing comprises 44 percent of interactive ad dollars, but its share will dip to 41 percent in 2012. However, the category will still grow - from $8 billion in 2007 to $25 billion in 2012 as new marketers come aboard.

Online video will grow quickly, too, as marketers become savvy at either repurposing their TV spots or developing fresh ones for the Web. Online video will experience an average growth rate of 72 percent for the next five years, jumping from $471 million in 2007 to $7.1 billion in 2012. 

Emerging marketing venues will pick up steam including social networks, such as MySpace and Facebook. Despite recent privacy concerns, social media will still mushroom in ad dollars simply because these sites are supplanting traditional media as the places where consumers hang out online. 

As these changes take shape, interactive marketing will simply become part of the overall marketing budget, VanBoskirk says.

Tags: Ad Spending