Advertisers shifting money from, well, ads

Borrell Associates logoThe amount of money advertisers are spending on their own web applications has skyrocketed in the past year, offering a chilling clue as to where the disruptive nature of the Internet is taking media companies next. According to new data obtained from Borrell Associates, advertiser spending in the “online marketing and promotions” category jumped 130% between 2006 and 2007 to an estimated $8 billion nationwide. That’s money that advertisers would likely have spent on conventional advertising before the Web.

“The meteoric rise of promotional spending on the Internet is changing the face of advertising ‘sales’ as we know it,” Borrell Associates CEO Gordon Borrell told me in an email. “Media companies are having to become far more creative and consultative, acting a lot like agencies, to help local businesses attain their marketing and sales goals. They can’t get away with just taking orders anymore.”

Some of the specific categories within the whole show growth that can only be described as incredible. Every category in the medical profession, for example, is far above the average. Doctors, up 160%. Other medical professionals, up 236%. Pharmacies, up 245%. Hospitals, up 150%. Other medical facilities, up 225%.

Political organizations have increased spending in this category a remarkable 1,021%. I’m sure television will still reap a windfall in political ad dollars, but this is an area that ought to concern everybody.

It’s important, again, to understand that this is brand new in our world. Never before have businesses been able to, in essence, become their own media companies, and that’s clearly what’s happening.

“The Internet,” said Borrell, “is far more utilitarian than, say, newspaper advertising or TV advertising. And it’s phenomenally measurable. So when Oil of Olay wants to spread the word about a new wrinkle lotion, instead of a mass-mailing of free samples and coupons, it can place an Internet campaign that collects names and addresses of people who actually want the free sample — and continue marketing to them.”

Promotional opportunities for (former) advertisers are something media companies have been slow to understand. In today’s world, it’s often far more important to help businesses with their web strategies than it is to simply provide brand message opportunities. Advertisers are willing to spend money without actually running ads, as long as the opportunity to obtain data is there. It’s why Borrell’s “green zone” performers (those who get 28%+ market share of online ad revenue) all use a consultative sales strategy in working with clients. This whole game is increasingly about their needs, not ours.

If you follow the money in this strange new world, it’ll lead you down paths you don’t expect, and if you pay attention along the way, it’ll also open doors to new opportunities. The ad-supported content revenue model is slipping slowly into the past, but if we’re smart, we’ll see that all of these new websites and web applications that the people formerly known as the advertisers are making offer a significant revenue growth opportunity for the company that can tie them all together.

This is why one of our top recommendations is the creation of a local ad network for media companies, regardless of where local advertisers are in their level of web sophistication. The trend noted in the Borrell data is unmistakable and will impact every business downstream. In my book, the smart local media company will do whatever it can to accelerate the trend in its market.

(Originally published in AR&D’s Media 2.0 Intel)

(UPDATE: This report in yesterday’s Online Media Daily about American Airlines’ Facebook widget is a textbook example of the above.)

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  1. […] Advertising is constantly changing and trying to remain in step, or on the cutting edge is very difficult without lots of money. Case in point, there was an interesting post on a blog I read about how advertisers are shifting their dollars away from ads in favour of developing online campaigns. While this is a great way to promote a product, it can get expensive. […]

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