Commentary

Forecasting Your 2005 Interactive Budgets

How are you budgeting for your 2005 interactive ad spending?

Over the coming weeks and months, most companies will finalize their ad budget allocations for next year. As a result, this is a very important period for the interactive ad industry. All signs point to a continued increase in online spending, but how are individual companies allocating these dollars?

One typical way that companies address the budgeting is to analyze the performance of the past 12 months then determine if they were successful at achieving their metrics, then increasing or reallocating their budgets according to the response they saw. This model is certainly one way to go about the process, but I would like to suggest a slightly different method.

Do some research into your target audience and gather the details on their media consumption patterns prior to allocating your budgets. The data that I see on many clients, and that I've heard from my colleagues, continues to point to the increased usage of the Internet and the decreased usage of other, offline vehicles. Television and magazine consumption continue to decline in favor of interactive media. As more people are spending more time online, doesn't this suggest that a larger portion of the budgets should be allocated to this medium?

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Of further interest is the capability of the interactive medium to support your offline spending. As more people spend their time online during the workday and later into the evening, are we seeing a primetime emerge? Is it possible that the primetime for interactive is lunchtime and late evening, as more people are working from home and working slightly longer hours?

What about the purchase decisions for most of the U.S. audience? Beyond basic media consumption, one must think about the ways in which online is being used. Are the hours that a person is online more influential to the purchase decision cycle than they are within other forms of media? Are the influences from interactive more important than the influences from outdoor, print, or television? My guess is yes in many cases, based on the information-gathering and community-oriented aspects of the online audience versus those of other vehicles considered.

All of these arguments speak to the increased role of interactive in the media mix. All of these elements point to the need to increase the slice of the pie dedicated to interactive, though the relative percentage certainly differs from category to category and target to target. I have heard/seen that some companies spend up to 25 percent of their budgets in interactive, and I have heard/seen that many obviously spend less, but the question is answered by factoring in the questions above. If your target spends 15 percent of their time online, should you spend a 15 percent minimum in the medium? If you factor in the influential nature of the medium into a weighted average, does it make the case to spend slightly more?

You obviously need to run these analyses for yourself and measure the data against internal opinion, but I'm sure you will come to the same conclusion: interactive is more important now than it ever was before.

Don't you agree?

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