E-Marketing Budgets – How big is BIG?

Coca Cola may have millions of dollars in its online marketing budget to spend, but you don’t. How do you compete with that? You don’t. Jacqueline Dooley compares the sizes of various online marketing budgets, and discusses how to make the most of your online advertising spend regardless of the size of your budget.

Internet spending was the fastest growing media segment in 2004, according to this btobonline.com article, which quotes a report released by TNS Media Intelligence. The TNS report reveals that ad spending across all media channels wasn’t too shabby, reaching $141.1 billion in 2004, an increase of 9.8 percent over 2003. For online marketing, the numbers are particularly bright. In fact, eMarketer reports that online ad spending increased nearly 40 percent in the first half of 2004.

A 10,000 Foot View of Online Media Spending

So how much of that $141 billion was spent online? According to Searchenginewatch.com, $8.4 billion was spent on online advertising in 2004. That’s just under six percent of total advertising dollars spent. This isn’t a huge percentage of the overall media spend, but it’s a great sign for the online advertising industry. In fact, the same Searchenginewatch.com article reports that online media spending will grow to $16.9 billion by 2009, overtaking magazine advertising by 2007.

This is a strong indication that more and more companies are including online tactics in their media mix. Obviously, the average percentage each company spends on various advertising channels varies greatly. Some companies advertise exclusively on the Internet, while others rely on more traditional sources such as TV and direct mail to reach their audiences. The potential for online media spending to grow to the predicted $16.9 billion lies, in part, with those companies who don’t yet realize the potential of reaching consumers online, and thus don’t allocate a large portion of their advertising budget to the online space.

It’s all relative. If you’re Coca Cola, then you may have $10 million to spend online which is, hands down, a BIG e-marketing budget. However, $10 million may only be one percent of your BILLION dollar advertising budget. Small companies, sole proprietorships and the self-employed compose the other end of the spectrum, with budgets limited to a few hundred, possibly a few thousand, dollars a year to spend online.

Most companies fall in between the two, with many mid-sized businesses spending ten to twenty thousand dollars a month online. You can reach a surprisingly large amount of people with a few hundred dollars a year on the Internet, a downright shocking amount of people at $10,000 a month and an obscenely large amount of people at $10 million a year. So how do those of us in the online marketing industry get all companies, large and small, to allocate more advertising dollars to the Web? The trick is to lay out the possibilities.

If you’re working with a microscopic or nonexistent marketing budget, then online marketing makes sense, because there is a solid grassroots component that enables you to reach a targeted market with little more than sweat equity. This is where tactics such as link placement, SEO, directory submission, blogging, product feeds (tip: it’s free on Froogle) and newsgroup posting come into play.

If you have very little money to work with, then these are good do-it-yourself tactics that enable you to get your website address out into the great online continuum. Most of these tactics cost the most in terms of your time, but if you want to drive traffic to your website and don’t have the money to spend on an advertising blitz, they provide a good solid starting point.

If you have a few hundred or thousand dollars to play with, then you can augment the above tactics with some low-cost advertising to get an even broader reach. For example, you can start a low-cost PPC campaign on Overture and some of the secondary PPC search engines, provide paid product feeds (if you’re an e-commerce site) to shopping engines like Yahoo where you pay on a per-click basis, and advertise in low-cost, highly-targeted newsletters (they abound!)

Don’t feel bad if you “only” have $20,000 to spend in a twelve-month period for an online campaign. And don’t let anybody tell you this is not good enough for a fairly decent online campaign. This budget may not get you very far in the offline space, but it provides you with many options online. In addition to all of the options listed above, you can actually start focusing on branding and reach with a bit of a budget to play around with.

Branding and reach are best achieved with banner advertising, both on websites and in newsletters. If you’re targeting women between 50 and 65, for example, you may think of sites like iVillage and Oprah.com, which are likely way above your banner-buying budget. Don’t worry. There are many smaller sites that offer flat fees for run-of-site banner placement which reach the same constituency. This is true for most target markets. Sit down and do some surfing. Start with your favorite search engine and see what sites come up for your targeted keywords. Follow the list of links on “links” pages for even more topically-relevant sites and build a list. You’ll likely find many affordable online advertising venues and a variety of different media tactics including banners, text ads and email sponsorships.

If you have a medium-sized budget of about $20,000 a year to $50,000 a year to spend online, then be sure to plot out your monthly advertising spend and media venues beforehand so that they coincide with any offline advertising you may be doing. It’s also beneficial to time your advertising initiatives so that they coincide with special promotions and offers you have throughout the year.

For a retail site, this means that you’ll bulk up your advertising around the holiday season and yearly events such as Mother’s Day and Valentine’s Day. For a mortgage lender, you’ll want to bulk up your advertising around seasonal peak buying times. Special events such as the launch of a new site (or a newly redesigned site) should also be promoted with accompanying incentives such as “storewide discounts” or “free shipping” to gain new customers. Timing media placement with appropriate events and incentives helps maximize your budget. After all, why pay for clicks that don’t convert to leads and sales?

If you’re one of the lucky ones with over $100,000 to spend on the Web in a period of twelve months or less, then you can reach a very large online audience, and one that’s targeted, to boot. If you have this much money to burn, you’re likely to be working with an agency and don’t need my advice. However, I will give you some food for thought when considering your agency’s media plan. Make sure they diversify!

If more than two thirds of the budget is focused on one tactic such as pay-per-click ads, then you’re missing out on other, valuable online channels that reach your target audience. For example, pay-per-click is a great targeted, response-drive tactic that makes agencies look great because the clickthrough rate is so high. But paid search ads do not tell the whole story, particularly if your goal is one of branding more than acquisition (e.g., for sites that don’t directly sell a product, but want to get the “word” out).

The best plans diversify media so that you get optimal reach and frequency while staying targeted. Large budgets allow you to experiment with different types of media (e.g., Flash banners, streaming media, expandable ads, floating ads, etc.) which have shown much higher response rates than standard animated GIF banners. Just because something is hot and trendy doesn’t mean it’s right for your campaign, or it’s the only option. Do some research and ask your agency about ad sizes, ad types and different online venues that are up and coming, such as podcasts and blogs.

Online media is often looked at as a separate entity from offline media. It gets its own slice of the budget, is planned and managed by separate agencies, and is often approached with caution and confusion by traditional-minded marketers. It doesn’t help that the online industry itself is so fragmented, with agencies and consultants cropping up for every tactic from SEO to PPC to affiliate marketing.

If you take the word “online” away from “media,” then the tactic simply becomes “media.” It’s just another channel to reach your targeted market. Slicing up your budget, no matter how big or small, becomes much easier if you fit your online media into a cohesive plan that is designed to reach your target audience no matter where they go — online and off.

Media convergence is growing. Many offline marketing tactics support and enhance your online tactics. Just displaying your website’s URL on product packaging, business materials and billboards can greatly increase your traffic. Likewise, media companies that own websites, TV networks and magazines can offer you integrated packages that enable you to reach your audience at multiple touch points. Even those of you with the smallest budgets can benefit from this (e.g, by advertising in local newspapers that display your ad in both their print copy and via their website).

Conclusion

It is much easier to reach a large amount of people with little or no money in the online space than in the offline space. Likewise, the definition of a “large budget” is different online than offline. Understand your options before making media buying decisions that focus on only one or two tactics. Realize, also, that the smaller the budget, the more likely you are to focus on just online media, rather than traditional (and expensive) offline tactics. For those of you with a larger budget, the possibilities are endless and the audience is there, so don’t let anyone tell you you’re budget is too small.

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