Ad Agencies Follow the Money for Faster Growth

 

Follow the money

 

While we all know that 2009 has turned out to be a dismal year for everyone (advertising spending down 12.1% from 2008), there is some light at the end of the tunnel. On July 8, 2009 Forrester published their latest “US Interactive Advertising Forecast” on their company blog. It contains some great information to help ad agencies plan their future strategies and resource needs.

As expected, internet advertising (wired and mobile) is projected by PriceWaterhouseCoopers (PWC) to grow the most with an estimated CAGR of 7.7% over the next 4 years. Growing from 12% of US advertising spending in 2009 to an amazing 21% by the year 2014. However, internet advertising is a large category with many sub-categories, so let’s now take a deeper look at exactly where the money is being spent.

Take a look at the Forrester Research “US Interactive Advertising Forecast” published July 8, 2009:

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  • Search marketing (SEO/M) currently accounts for over 50% of all interactive dollars spent. According to the forecast, it will remain the largest channel through 2014 growing at an impressive 15% CAGR.
  • Social media is expected to be one of the fastest growth areas in the category. Coming off a fairly small base in 2009, Forrester expects it to grow by 35% CAGR over the next 5 years. Currently accounting for less than 3% of total category spend, it will double to 5.8% by 2014.
  • Mobile marketing is another fast growth category. Forrester expects mobile advertising to grow at 27% CAGR over the next 5 years.
  • While E-mail Marketing is expected to grow at about 9% CAGR by 2014, it’s expected to have dropped over a full percentage point from 4.9% of the total current interactive category spend to 3.8%.
  • Online Display advertising remains a big player. Holding its position at just over 30% of all interactive spend it is predicted to grow at about 9% CAGR. Although the actual costs may well continue to fall. Recently Google announced that it’s average cost per click had decreased 13% during the first six months of the year.

So, what does all this mean to ad agency leadership? I believe it provides a great roadmap to help you plan where to look for growth, and what resources will be required to support your initiatives.

Clearly interactive remains a growth opportunity as we see dollars shifting away from traditional media and into the interactive category. Within the category, social media and mobile marketing are the growth leaders. Agencies who are early adopters and are able to help clients successfully navigate this space out will win big. However don’t forget display and e-mail. They continue to account for large amounts of money and are ripe for innovative approaches and integrated efforts.

 

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