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Online Promotions: The Big Shift
Borrell Associates Inc., April 2008
As the Internet grows more legs than a centipede, we’ve been watching a phenomenon unfold. Businesses are continuing to ramp up their spending on the Web, but not in the way most media companies would like to think. We are seeing a distinct shift of business spending away from classic online advertising per se toward non-advertising marketing expenses – the more nebulous category of “promotions.”
The Internet provides tens of thousands of marketing channels that allow businesses to reach consumers directly with information on pricing, sales, features and new products. Interested in a Ford truck? Go to www.Ford-trucks.com. What about the latest deals, coupons and new items at the TEMA Furniture store in downtown Albuquerque? Go to http://tema.rightvue.com/. Got a beer to sell? Create a clever video about it that people will forward to their friends. The allure of creating one’s own advertising channel is attracting more and more spending . . . much of which comes directly out of budgets once earmarked for traditional advertising.
Not long ago, the only way that businesses could get the word out to millions of consumers was by going through a traditional media company. That’s changed, dramatically. The message for media companies today is painfully clear: The deer have the guns. This report contains a wake-up call for media companies trying to use the Web to merely attract a big audience with local news or classified listings and then sell banner advertising around it.
Startling revelation #1: Online display ads (Web page banners, pop-ups, etc.) have lost their luster; spending on them has been generally flat for the past two years. We believe it will peak this year at $12.6 billion, and then begin a precipitous decline to less than half that amount over the next four years.
Startling revelation #2: Paid search advertising is likewise facing a luster-loss. We foresee it hitting its peak next year at $16.9 billion, followed by a gradual decline.
Startling revelation #3: Online promotions, including the revitalized and expanded practice of public relations, was an $8 billion category last year. We expect it will nearly triple over the next five years to $22.8 billion, surpassing all other online advertising categories. As with off line promotions, most of the value of online promotions is the cash value of incentives that are given to motivate short-term sales.
To many, these may seem to be more strange predictions than startling revelations. But collecting over the past several years.
What does this mean for local media companies? For most, it will force an adjustment in their product mixes and sales strategies in response to advertisers who are no longer interested in just buying home-page banners. For some, it is already opening new opportunities to exploit the Internet to create new revenue streams. Online contests, give-aways, in hundreds of thousands of dollars annually and generating warm partnerships between the media company and the advertiser. The utility of the Internet holds fascinating possibilities for local businesses. Local media companies that are genuinely helping those businesses grow – rather than merely selling advertising to them– are well positioned to succeed in this brave new world of marketing.
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