November 30th, 2010
Best Rank is essentially a Search Marketing company. Sure, we’ve expanded into other areas of Internet Marketing and we tout ourselves as being Internet Presence Managers, which we are. However, Search Marketing is still our core competency. I like to keep up with the latest trends in the Search Marketing space and recently I came across some pretty compelling data, which highlight the fact that Search Marketing is still a growing industry. Not only is this great news for us, but it should also be eye-opening for business owners who are not participating in some form of Internet Marketing. The trends are clear: Internet Marketing is here to stay and Search is the main driver of traffic and sales (as evidenced by the revenues).
First, Some Data:
The shift away from traditional advertising to online advertising is in full effect. Evidence of this has recently been reported by the Interactive Advertising Bureau (IAB) and PwC US in their Q3 2010 Internet Advertising Revenue Press Release. For Q3 2010, online ad revenues in the US reached $6.4 billion, which sets a new record for Internet ad revenues. This also represents a 17% increase over the same period in 2009.
According to IAB’s half year 2010 report, Search Marketing accounts for approximately 47% of the total online ad revenues. If we apply that 47% to the Q3 results, then we’re looking at about $3.01 billion spent on Search Marketing last quarter. Search Marketing spending continues to grow even as some of the other online advertising mediums shrink.
Take a look at the following graph, provided by IAB:
You’ll notice that the Search sector continues to grow while Classifieds, Lead Generation, and Sponsorship are in decline or are largely flat.
Now, take a look at this graph showing quarterly revenue growth in online advertising revenue since Q1 2001:
From Q1 2003 we’ve seen a significant growth in online ad revenues and, except for the recession period in Q2 and Q3 of 2009, the upward trend is continuing nicely.
Second, Look at Traditional Advertising Spending:
According to projections completed by SNL Kagan and published by MarketingCharts.com (click here for reference), the study, “Advertising Forecasts: US Market Trends & Data for All Major Media,” the total U.S. advertising market is projected to rebound 2.8% to $210.5 billion in 2010, following two consecutive years of declines. Further, "SNL Kagan predicts that the sectors with the strongest growth this year will be mobile, broadcast TV stations and Internet, while business publications and newspapers will show the largest declines."
There is a general rebound happening in the U.S. advertising space, however not all of the different mediums are experiencing an uptick. It’s quite the opposite for many traditional forms of advertising (e.g., print/newspapers, direct mail). Take a look at this chart:
You’ll notice that Direct Mail is down nearly 27% from 2007 and Newspapers are down a whopping 45%. Cable TV held strong whereas Broadcast TV dropped slightly. The biggest gainer was Internet.
Third, Why Should Business Owners Care About This Data?
For the most part, the writing is on the wall. Many forms of traditional advertising are quickly becoming obsolete as evidenced by the increase in advertising money being allotted to online channels and the decrease in "old media" spending.
So, why do we (as business owners) care about these numbers? Because large advertisers (e.g. Proctor & Gamble) are savvy; they know what works and what doesn’t. The shift in these numbers (more for Internet and less for print) reflects the will of the consumers. More people are online and less people are reading newspapers. So, my question is, "why wouldn’t you be advertising online where the consumers are?"
I have a theory, let’s call it Matt’s Theory (original, huh?). Matt’s Theory is about the correlation between Advertising Spending and Effectiveness (in driving sales/revenue). Disclaimer – I don’t have any data to support this theory, but once it’s outlined I think you’ll appreciate the logic. I feel that advertisers spend their money where it is most effective; makes sense, right? The shift in marketing spending is a reflection of the marketing medium’s effectiveness. If a marketing medium is not effective any longer, then why would an advertiser put more money into it? Conversely, if a medium is very effective, then the advertiser will pump as much money into that effort as possible in order to expand. Watching the shift in advertising budgets is an indicator of effectiveness. The stats are clear: Internet marketing is where we’re seeing the biggest positive shift happening and Search Marketing is the leading medium in the Internet Marketing space. Therefore, we can logically conclude that the most effective marketing medium is Internet Marketing and the most effective medium within that space is Search (generally speaking and not applicable to all businesses).
Finally, What about Social Media?
Oh yeah…Social Media; the category that is projected to grow from $7 Billion in ad spending in 2010 to over $38 Billion by 2015 (just a small 440% increase…nothing really worth mentioning). Ha! If you’ve picked up on my sarcasm, then bravo!! Take a look at this study done by Borrell Associates and the corresponding chart below:
I’m very interested to see what happens over the next several years in the Social Media space. If the shift in advertising spending is any indicator of effectiveness (per Matt’s Theory), then Social Media could be poised to lead the way in driving revenue well into the future.
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