Monday, January 23

The Marketing Pie Keeps Moving

I have a theory. It's something so simple and it affects an entire industry.

UK advertising spend represents an £18.bn industry which each year grows at 3 to 4%. That's more than 1.5% of GDP. Marketing Directors hold the keys to billions in marketing spend each year. And each year, plans are discussed to use budgets more effectively to better reach consumers.

A key chart in every annual marketing plan is spend by media. X% to TV, X% to Radio etc. Since in most organisations plans and budgets are set annually, this simple pie chart affects an entire industry for the coming year. Media organisations at the margins stand to gain, or lose, enormously from a few percentage points change. Whilst the fat cats with the largest shares (print and TV) stand to face an unprecendented world of tight margins and cost reduction when spend declines even slightly.

With most financial years rolling in April, marketing people will be shifting the pie another couple of notches towards new media once again. Last year, the pie moved 2.2% towards online versus 2004. That's a 62% increase for the online advertising industry.

Because of the ridiculous annualised nature of budget setting, these changes don't come along gradually. And the online industry finds itself suddenly trying to cope with 62% more demand for advertising formats and products that it already lacks enough of (... we're still inventing them). Don't missunderstand me. In the short-term this is great news for all us netophiles. But it also leads to rushed and poorly planned marketing spend, with huge degrees of wastage. Driven into an industry with a derth of talent.

So every-time that pie moves, and another flood of budget hits the online advertising industry, we had better be sure that at least 50% of it is effective for the advertiser. Since 50% is the long-accepted benchmark for old-media.

"Half the money I spend on advertising is wasted; the trouble is I don't know which half." John Wannamaker, US Department Store Merchant (1838-1922)

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