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July 16, 2009

Advertising will change forever

by Josh Bernoff

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."

Interactive ad projection 2009

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, television, 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 will decline.

This is huge.

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.

Note (7/22): This was reprinted at the Ad Age site, where there are over 50 additional comments from marketers.


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» "Advertising will change forever" from Hear 2.0
Says Forrester's Josh Bernoff: "If you're in advertising, you'd better learn to speak digital, because that's the way the world is going." Just look at this crystal-clear chart: Radio's not in this picture. Nor is any other traditional ad medium.... [Read More]

» Interactive marketing has finally come of age from Content 911
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Jim Movo

With all the recnt reports out there that people trust TV ads more than online, I'd think people would start understanding how these media could be most effectively used together - broadcast to generate Awareness and Interest, online to stimulate Desire and Action. Integrated is the most efficient approach.

Mike G

Hi - Where would you include CPA and/or Lead Generation? I have read estimates that it is already a $2-5BN market. Why does Forrester not categorize this market separately?

Shar Van Boskirk

Thanks everyone for your comments regarding this research. I wanted to follow up the question about lead generation and CPA based ads. We don't size this as a separate bucket of media because it is more of a media buying model which is used to buy display media and search ads than a category of media. We do have data in the report which forecasts what % of display media buys are performance based. This number is at 58% today growing to 66% by 2014.


I couldn't understand how the fact that people are investing more on an emerging channel suggests that they trust the other channels less.

The way I see it, there are business objectives and marketing solutions. Sometimes one channel is more suitable for a problem than others. But no such generalization is possible.

Furthermore: advertising will change forever... blergh, that's yesterday's news.


Really interesting stats. I don't think we should think of it as shifting money from one budget to another, but rather integrating digital as a necessary expense in all budgets. The data collected from online initiatives is valuable to multiple areas of any company, so it's not just marketing people who can find value in digital efforts. Cross consumer sentiment with sales or the peaks and valleys of online activity with digital spending.

I try to think of digital as a not just a way to enhance a brand, but improve every way you communicate with customers.

Steve Schaffer

We are seeing the same move of marketing from offline to online. However, most "advertisers" we work with break out Performance Marketing (CPA: Transactions, Referrals, Leads) from display and track it separately.

Promotional Products

This is somewhat sad for traditional marketers, but definitely true. Digital marketing and advertising is just a progression and marketers will have to adapt their strategies to survive.

Anthony Dayal

Thank you for this research. It is indicative of the direction our company has to take. Since we are not US based things will happen later here.
We are a mixed company i.e. we offer both conventional advertising as well as digital marketing. We will have to start realigning ourselves, and as you rightly pointed out at a slow pace.

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