It’s the conundrum facing all marketers, and it’s one that’s becoming ever more pressing as marketing becomes increasingly results focused – how should I be proportioning my marketing spend to achieve maximum return on investment?
Of course, the answer is different for every product and brand, but one useful input into this process is ‘what is everybody else doing?’ and it’s here that Ofcom’s recently released Communication Report for 2011 can help.
The report, produced annually, examines a wide range of communication trends from media consumption habits to smartphone adoption. It also includes figures from a wide range of sources which analyse advertising spend by media from 2005 to 2010. Here are the key findings:
- Spend on internet advertising, including search, display and classified, has more than trebled proportionally since 2005, from 8% of overall spend to 26% in 2010.
In the first year of the recession, between 2008 and 2009, it was the only spend category which grew in absolute terms, overtaking TV to become the largest single spend category in 2009 – a position it retained (but only just) in 2010.
Throughout the 5 year period, most of the growth has been driven by increased search spend, which has not only grown in absolute terms each year between 2005 and 2010 but has also grown as a proportion of overall online spend – from 56% in 2005 to 61% in 2009.
Expenditure on search advertising grew yet again between 2009 and 2010, by 9%, but for the first time its share of internet ad spending fell – from 61% to 57%. This proportional fall was driven by the phenomenal growth of online display advertising. In 2010, online display ad revenues increased by 33%, driven entirely by the growth in Facebook advertising. Facebook accounted for over 41% of all online display advertising in 2010. Online advertising expenditure across other media actually fell by 3%.
- So which sectors have been losing out as marketers shift their budgets online?
Well, it’s not TV, which has proven to be exceedingly resilient. TV advertising revenues enjoyed their best year last year since 2005, buoyed by the World Cup, and TV still commands 26% of overall spend (compared to 25% in 2005).
The main losers have been newspaper and magazine advertising. The former is down from 30% of overall spend in 2005 to 21% in 2010 and the latter down from 12% to 7% in the same period.
Given the sharp falls in circulations seen by newspapers in particular, these falls in spend are hardly surprising. What is frustrating for the publishing industry is that they haven’t been able to reap the full benefit of the growth in online display advertising as Facebook has stolen their thunder. It’s no wonder that the advent of the tablet computer is seen by many in the industry as a means to claw back not only subscription revenues but ad revenues too.
- So are mobile ad revenues growing as fast as publishers would like them to? Well, they’re growing rapidly, but from a very small base.
Mobile advertising revenues almost doubled in 2010 from £36.7m to £83m but the mobile advertising market ended the year only 2% of the size of the overall internet ad market.
Search based advertising drove most of this growth from a volume perspective, growing by 172% in 2010 and growing its share of overall mobile marketing from 54% to 66%.
Mobile display advertising may be losing share, probably due to the limitations of screen size when viewing advertising on mobile phones in particular, although ads do dominate more page real estate than their PC-viewed competitors. The growth of the tablet market, both through the established market leading iPad and new entrants such as the Kindle Fire may do something to redress the balance.
The other interesting fact about mobile advertising is that its client base is becoming broader. A discipline dominated by the entertainment and media sector, accounting for 66% of spend in 2009, is now much more diversified with sectors such as Finance, Consumer Goods and Automotive seeing significantly increased spends.
In general, Ofcom’s report shows that brands are still probably more wedded to ‘old media’ than perhaps they should be, particularly premium and luxury brands whose affluent consumers are more likely than the mass of the population to be consuming their media online, be it via their PC or mobile device. Progressive brands such as Burberry are reported to be as spending as much as 60% of their on digital – well above the average.
But offline media still has a role to play in delivering impact, tangibility and in being ‘interruptive’ in a way that consumers are accustomed to and comfortable with.
It’s not all about conversion at the bottom end of the purchase funnel – offline media can play a vital and very effective role in driving prospects into the funnel in the first place. The key is to understand your audience, what media they consume and how, understand your product and the best environment in which to showcase it and understand exactly what your competitors are doing. Of course, collecting data on what is driving sales is key – but as you’re likely to be recording only what is happening at the sharp end of the purchase funnel it’s just one of the factors you should be taking into account.