For years it has been subject of speculations that traditional marketing spend is on the decline as businesses turn to digital channels to cut their advertising costs and effectively measure return on investment. Attracting a more specific audience with a fraction of the cost of traditional marketing was a sound proposition and Google has made this easy thanks to their AdWords pay per click (PPC) advertising platform, among others. So far, online marketing has worked for everyone in the business but its popularity in the past couple of years stemmed increased competition which resulted in constant rise in cost of online advertising.
Before the advent of the Internet and the popularity of search engines, advertising was a simpler and much more linear process. Crafted for decades, print, TV and radio were all well understood and accepted channels of communication. Unfortunately the communication was one-way, providing little or no feedback from the audience, keeping the advertisers in the dark, hoping that it will bring “some” effect. Marketing pioneer John Wanamaker perfectly illustrated traditional advertising by saying “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
The coming of the age of information technology significantly changed everything. What makes online marketing so big is the ability it gives you to understand where your marketing dollars are going and what return you get for your investment. There’s also a matter of cost – with a little fraction of the annual marketing budget, businesses today can reach tens of thousands of people that are willing or actively seeking to buy your product.
Apart from these obvious benefits, probably the most important factor that made online marketing boom in recent years is the global financial crisis. It’s not without reason to say that Google wins when the economy loses. Since its peak in 2005, print media advertising continually declined in popularity giving way to online marketing and PPC. Unsurprisingly, industries that spent the most on Google AdWords last year in the USA are financial & insurance and retail.
Although around 96% of PPC advertisers spend less than $10,000 a month, according to AdGooroo, Amazon alone reportedly spent $54 million in the first half of 2012. The list of big-budget advertisers goes on to include automotive, consumer electronic, travel and tourism, industry’s big players that once spent significantly on print media, and are now shifting their budgets online.
Coincidently, a milestone has been reached this year in terms of the decline of print media in comparison to digital advertising. In the first six months of 2012, Google ad revenue surpassed that of the entire US print industry, including magazines. The chart below originally published by Statista, explains how the market has changed. Just a few years ago, Marissa Mayer, Google’s search and user experience director, stated how much Google cared for newspaper industry and its financial fortune, explaining that “..it’s really about partnering with content providers and finding distribution and monetisation channels for them”. Five years later, it looks like that “partnership” didn’t work out for the print industry.
Likewise, Australian publishers are facing a similar decline in revenue, as online ad expenditure surpassed that of newspaper advertising for the first time ever. This places online spending at the second spot, right after free to air television advertising.
Despite criticisms that AdWords and other PPC models will fail to deliver a return due to the constant rise in cost, it is most likely that this trend will continue in 2013. The growing demand for accountability and measurement is pushing more and more marketers to online advertising in order to achieve results. But there’s an effect to this cause. A wider adoption means much higher competition will continue to drive up the prices for keywords and make it even harder for small companies to compete, especially as online advertising has become a standard advertising channel for large companies. Unless you’re a business that has a narrow niche or high barrier to entry, your only choice is to do it better than others. You can definitely understand the principles of online marketing in a month, but it’ll take years to master it, so partnering with an experienced marketing agency might be the first step toward securing your business‘ future.♦ End