2004: Digital marketing trends & predictions
Jeremi Karnell, CMO & Founder | One to One Interactive
January 30, 2004
As 2004 gets underway and the corporate climate continues to
respond to an economic recovery, top-line growth has come into
focus, resulting in increased spending on advertising and marketing
services. Several reports, including the "Bellwether Report",
eMarketer's "Online Ad Spending Spotlight Report", Ad:Tech's "First
Annual State of the Industry Survey", and the
"MediaPost/InsightExpress survey" all point to the online channel
benefiting the most from this renewed focus on corporate marketing.
MediaPost's survey in particular highlighted the disparity in
growth between online vs. offline spending in 2004. The study
projected offline spending to achieve less than 1% growth in
overall expenditures, while projections for online show an increase
of over 20%.
Many credit the online channel's measurability, targeting,
reach and return on investment as key reasons for its robust
growth. Furthermore, "2003 was characterized by an increasing body
of evidence that the Internet has become the single most important
medium in the lives of some of the most desirable U.S. consumers.
From teens, to highly sought after 18-34 year old men, to
historically hard-to-reach C-level executives, 2003 has left no
doubt that the Web is the medium of choice – both at home and in
the workplace – with these consumers now spending more time per
day/week/month online than with any other medium".[i] With a
renewed focus and commitment to online, it makes sense to
understand & put into perspective some of the leading trends
and predictions for this year for the top 3 online channels:
Search, Online Advertising, and E-Mail.
Search Marketing
It comes as no surprise that Search & Contextual Marketing
is currently predicted to receive the largest percentage spending
increase in 2004 (+41%)[ii] due to the tactic's continued proven
ability to drive tangible & cost-effective business
results.
Pay-per-Click
Pay-per-Click search will continue to grow in 2004, given that
it is a sure-fire way for marketers to guarantee targeted, top
rankings. While Yahoo! works though its integration of Inktomi,
AltaVista, and FAST (which together will replace Google as its
main search provider), Google continues to refine its algorithms.
Many serious marketers will begin to deploy for the first time
sophisticated pay-per-click bid management systems such as those
offered by Inceptor, Quigo, and Overture to evolve the way they
manage their paid search investment. These systems will provide
the necessary command and control interfaces for automating bid
processes across search engine vendors and applying ROI tracking
and business rules decision support to protect marketers from
paying too much for the hundreds of keywords they have in market.
Paid Inclusion[iii]
2004 is expected to be a challenging year for Paid Inclusion.
The industry is expected to fall from $167 million to $110
million (DM News Ref). This is primarily due to Microsoft
severing its relationship with LookSmart, and Google refusing to
support the tactic fearing that it would dilute its search
results.
Contextual Search Listings[iv]
With only 7% of viewed pages on the top three portals coming
from paid listings and paid inclusion, contextual search listings
will be utilized extensively to expand search results on
contextually relevant content pages. Furthermore, this allows
content-centric sites like Weather.com and CBS MarketWatch to get
into the search boom by utilizing players such as Google,
Overture, and Sprinks, who then have the opportunity to act as a
pay-for-performance ad networks. Forrester Research predicts
Contextual Search Listings to more then double in expenditures in
2004, growing from $48 Million to $135 Million in revenue.
Natural Search
In 2004, marketers will begin to shift their natural search
optimization focus to copywriting. With algorithm changes and
optimization still looming ahead with the major search engines,
one constant that may always be relied upon is their love of good
content.
Search Innovation
A player to watch in 2004 regarding innovation in the search
engine channel is Eurekster. At the beginning of this year they
have launched a search engine that continuously learns from the
behavior of users and their social networks of friends and
contacts to deliver personalized search results (powered by
Overture) and instant sharing of popular Web destinations and
searches among extended communities. Also, don't take your eye
off of Google, who plans to extend its reach into e-mail in
2004.
Interactive/Online Advertising
Spending for online media is also expected to increase in 2004
(14-21%). In MediaPost's September survey of online & offline
media planners/buyers, the Interactive/Online Advertising category
was rated #1 as the most measurable media, generating the greatest
ROI, and providing the greatest targeting. It was second only to
broadcast television in its ability to reach the widest audience.
Things that lie in store for this channel are:
Broadband
Together, research projections provided by Gartner G2, Morgan
Stanley, the World Bank, and Jupiter Research place U.S.
broadband penetration in 2004 at an average of 28.5%. This
expansion of "always-on" high-speed access will spur adoption of
new home networking technologies that will largely impact
household consumption of media, increasing internet media
consumption by 3x and reducing television consumption by 2/3.
This trend will also allow ad creative sizes to increase, making
way for more engaging and transactional media advertisements.
Such pressure may push the industry to begin to focus on some
creative standardization, which would allow rich media to grow
beyond the 11% of ad spending it currently represents.
Integrated Marketing
With the introduction of both the Do Not Call list and the
CAN-SPAM federal legislation, marketers will begin to increase
their focus on maximizing direct response efforts through
Interactive/Online Advertising in 2004. A new emphasis will be
placed on the channel's ability to generate permission-based
acquisition of prospect & customer information, as well as
contact channel preference to ensure compliance with the
aforementioned legislation.
At the same time, brand marketers will be making larger
investments into the interactive channel. Cross-channel brand
studies conducted in 2003 by Dynamic Logic and the Internet
Advertising Bureau (IAB) show that in total, Aided Brand
Awareness for those exposed to both TV and Online ads are 15
percentage points higher on average than the unexposed baseline.
The above effects on direct and brand advertising will
force marketers to take coordination and measurement of
online/offline efforts more seriously in 2004 and beyond.
Furthermore, it will force CMOs to carve out a larger share of
the marketing budget to the currently under-funded online
channel.
Moving Beyond the Browser
As adoption of devices and applications that connect to the
internet continue to explode, marketers will start to explore
ways to capitalize on the expanded inventory. Brand marketers in
particular will exploit the knowledge they have about integrating
their brands within television and movies and capitalize on the
booming gaming market where persistent virtual environments offer
a wealth of opportunities for dynamic electronic display
advertising. Furthermore, the low complexity/low cost options to
brand PC desktop environments, instant messaging applications,
multimedia applications, and PDA/mobile phone interfaces should
begin to set off some light bulbs in the minds of brand managers
as a 2004 to-do.
E-Mail
Although expenditures for e-mail marketing are expected to grow,
it is no where near past projections that put it at 38% increase
year over year.[v] Instead, e-mail will most likely garner a more
modest 16% jump in spending in 2004, effectively moving it for the
first time into third place relative to search and online
media.
Increased Pressure on 3rd Party E-Mail Opportunities
The most recent was the Federal CAN-SPAM legislation, which
has driven marketers to seriously re-consider if not cease
altogether their 3rd party list marketing efforts. List brokers
will begin to promote independent 3rd Party compliance
certification and double opt-in only lists to help stop the
bleeding. In the meantime, demand for e-mail newsletter
opportunities will skyrocket. Don't be surprised to see
corresponding increases in CPM. Furthermore, some e-mail
newsletter publishers will begin to follow the lead of TechTarget
and introduce controlled circulation versions of their
publications, effectively increasing its ability to drive even
higher CPMs, targeting, and effectiveness.
House E-Mail Lists Boom
For marketers who have not spent time seriously building their
e-mail house lists, 2004 is your wake up call. Enterprises will
need to aggressively ramp up their collection of prospect opt-in
e-mail to help fill the void left by policies barring 3rd party
list purchases while list brokers bring themselves into
compliance with CAN-SPAM. Additionally, faced with an
increasingly difficult delivery and legislative environment,
marketers are going to spend significant resources in 2004 to
ensure that their prospect & customer e-mail collection and
communication polices/procedures meet best practices and satisfy
legal compliance (see
Raising
the stakes in permission marketing: The need to better manage
enterprise e-mail processes).
There is no doubt that the economic shakeout of the last 3 years
evolved online marketing in a very Darwinian sense. Although a
healthier and stronger marketplace, online marketing professionals
will need to work harder then ever before in 2004 to keep pace with
the innovation and change that lies ahead.
[i], Online Publishers Association (OPA) 2003 Online Media
Industry Year in Review.
[ii] MediaPost September survey of media planners/buyers
[iii] Paid Inclusion is a tactic where marketers pay to have
their web pages periodically crawled by search engines, without
guarantee of placement.
[iv] Conextual listings work like keyword paid listings,
except that the listing appears next to articles based on the
context of the content instead of a user-submitted keyword.
[v] "Online Advertising Retrenches", Forrester Research.
2001
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