Big ad money shifting to promotions (and away from media)

Advertisers are now media companies themselves, and as I tried to point out in my last essay, we now find ourselves actually competing with them. The evidence of this is everywhere, but media companies simply ignore it, because the only thing we can see with advertisers is, well, advertising.

For as long as I have known Gordon Borrell, we’ve both been saying that the ad category to watch — due in large part to the disruptive nature of the Internet — is what Borrell calls “Promotions,” the spending of marketing dollars on things other than traditional advertising. So dramatic has the growth been in this category — and what’s projected to come — that the gouge it takes out of advertising budgets won’t be a small bite.

“This was no boating accident; this was a shark!”

Borrell Associates is a research and consulting company that’s driven by data. Once each year, the company produces major trend reports and then tracks those quarterly. Its latest data about the Promotions category is incredibly revealing, especially as it relates to growth.

Share shift is underway

Kip CassinoIn an email exchange with Kip Cassino, Borrell’s research guru, he noted that for some time, far more has been spent on promotions than intermediated advertising and that this trend is not only continuing but accelerating.

Most of it is money — five cents off a can of peas at the supermarket, or $2,000 off the next new car you’ll purchase. Discounts, deals, couponing, loyalty programs all share one thing in common: they are vehicles for enhancing sales with the promise of savings.

Promotions have another thing in common as well. Their ROI is immediately apparent. If a store owner puts a coupon on his website or in the daily paper, he knows exactly how much business it brought him — no guessing about “engagement,” or reach and frequency. This appeals to most businesses, especially the smaller ones.

Online promotions have lagged online ad spending, but Cassino says that is changing as well. “With the burgeoning popularity,” he wrote, “of mobile devices — the phones and tablets — online promotions will see massive growth during the coming five years.”

upward growth for promotionsHe noted that most businesses don’t separate promotions from advertising, so spending on a website or social media strategy is just “advertising” to them. The ramifications for media companies are stark.

“As overall spending on the intermediated (ad) side of marketing continues to decrease,” he wrote, “these media outlets will either have to learn how to gain revenue from the promotional side or face growing competition for a shrinking revenue pool.”  The result, he added, will resemble “a continuous game of musical chairs.”

Most media companies, Cassino noted, simply ignore the situation. “They note incremental growth on the ad side,” he wrote, “and see no reason to look at where most marketing growth is really occurring.” This is true, he noted, for both legacy and online players. Education, said Cassino, is the first step.

Promotions are not merely an extension of advertising. They have been invisible to many media outlets for decades, because they are primarily tactical tools — the province of the brand or product manager. They are top-line, not bottom line, oriented. Almost any media can find a good spot in promotions, but to do so requires a thorough knowledge of how and when it makes sense, and how it is best applied.

The invisibility is most obvious when it comes to the online world, where, as noted, we’re now competing with the people who have the money. More and more companies are spending promotions dollars on social media, for example, because it really delivers for them. According to Borrell’s latest SOCIAL LA$R™ (Local Ad Spending Report) research, businesses use the following metrics to determine success in this area (in this order):

  1. New Customers
  2. Additional Fans, Friends, Followers
  3. Increased Visits to Business website
  4. New email contacts
  5. Increased Sales volume
  6. Increased Visits to Business Social Network pages
  7. Lead Generation
  8. Increased Tweet Responses

National advertisers are way out ahead of local businesses, as the below graph shows, which ought to look like a big, fat opportunity to everybody.

Online promotions versus advertising, local versus national

When you examine these numbers, it’s pretty clear that businesses — remember, they’re the ones with the money — are now functioning exactly as we function. They are using tools that used to be ours alone, and the energy powering the movement to personal media (which includes businesses) is both abundant and renewable. Our goals are virtually the same as those of business-turned-media-companies, but the problem is we’re still counting on them to support ours. That is not going to last forever.

The opportunity we’ve always had is to use our knowledge and skill to advance this phenomenon and find our new value therein. There’s growth written all over this, and it begins with eyes to see it.

If you haven’t already, I encourage you to read my latest essay, Social TV and Second Screens: To What End?.


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