It's a Great time to be Digital

by Jonathan Marshall

Digital Marketing Chart

It’s official, digital marketing is no longer considered trial and error. Most marketing experts agree that the effectiveness of traditional marketing will most likely stay the same or decrease over the next few years. What will replace those mediums are new, digital channels where users can contribute- Twitter, Youtube and Mobile marketing. And even though many business applications of social media remain to be proven today, most marketing experts also agree that the effectiveness of those channels will increase dramatically. What does this all mean? The result is that digital marketing, which currently holds a little more than 10% of overall advertising spending in 2009, will most likely double in the next five years. This is obviously great news for digital marketing agencies like Jacob Tyler. Josh Bernoff from Digital Next goes on to talk about Forrester Researcher and their 5-year marketing forecast including trends, conditions and very convincing statistics in his blog below.

Here’s one of the things we do at Forrester Research: we interview as many marketers as we can about their plans, identify trends and project future likely conditions, and then we put together some numbers to make a projection. If you’ve ever seen a Forrester projection, it comes from a process like this.

This means that inside every projection is an idea or ten about the future. Those ideas can be powerful, and they come from research with marketers and consumers.

My colleague at Forrester, Shar Van Boskirk, just published our five-year interactive marketing forecast. The idea inside it is the real kicker.

In this recession, marketers have learned that interactive marketing is more effective, and advertising less effective, per dollar spent. While budgets for online have decreased, they decreased less than other budgets. Six out of ten marketers we surveyed agreed with the statement “we will increase budget for interactive by shifting money away from traditional marketing.” Only 7% said “we have no plans to increase our marketing budget.”

Unlike the last recession, digital marketing is no longer experimental. Now it looks more like advertising is inefficient, relative to digital. More than half of the marketers we surveyed said that effectiveness of direct mail, TV, magazines, outdoor, newspapers, and radio would stay the same or decrease within three years. In contrast, well over 70% expected the effectiveness of channels like created social media, online video, and mobile marketing to increase.

The result is that digital, which will be about 12% of overall advertising spend in 2009, is likely to grow to about 21% in five years. Along the way overall advertising budgets won’t grow much.

It means we are all digital marketers now, since digital is at the center of many campaigns anyway.

It means media is in trouble, or at least in the middle of a transformation. For example, online video ads, which will be about $870 million this year, will grow to over $3 billion in 2014. What will this do to networks plans to put more of their shows online in places like Hulu. How will it accelerate some newspapers plans to become more and more centered around online?

And it means that social “media,” which will account for $716 million this year between social network campaigns and agency fees, will generate $3 billion in five years. And this doesn’t even count displays ads on social networks (which are in the display ads category.) Of all the parts of digital marketing, social network marketing one is poised for the most explosive growth.

Pundits have been declaring the end of mass media and advertising for years now. From my 14 years of experience analyzing this stuff, I’ve learned that things die very slowly, but there are real trends you can see. If you’re in advertising, you’d better learn to speak digital, because that’s the way the world is going.