Advertising Spend Forecast to Increase in Recovery

The International Advertising Association launches its 42nd IAA World Congress in Moscow this week where "1,200 delegates are gathering from 45 countries to see and hear global ad industry leaders focus on Change : Consequences!" Senior execs from Google, Microsoft, HP, P&G, Yahoo and McCann Worldgroup, along with others, will be speaking at the event. According to Reuters, released today, "Some of the world's top advertising and marketing chiefs will meet ... to exchange ideas on the best ways for the $450 billion industry to capitalise on a still fragile economic recovery ... [where] Global advertising spending is expected to rise 2.2 percent this year..."

Reuters reports that "As the proportion of total marketing budgets spent online increases -- ZenithOptimedia estimates online will account for 13.9 percent of all ad spend this year and 17.1 percent by 2012 -- the money available to spend on external ad space diminishes." That's $62.5 billion in 2010 increasing to $77 billion by 2012 based on the current $450 billion industry spend without the projected 2.2 percent increase. Chuck Richard, lead analyst at information advisory and research firm Outsell is quoted saying "companies now spend more than half their online marketing budgets on their own sites [and] it's been 50 percent or more for the last three years ... Richard reckons that U.S. companies will spend about $63 billion this year on their own websites -- roughly equivalent to the total size of the U.S. television advertising market."

In a related development, McKinsey Quarterly recently released a paper titled A new way to measure word-of-mouth marketing in which they claim "word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions." And goes on to claim that "its influence will probably grow: the digital revolution has amplified and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-on-one communication. Today, it also operates on a one-to-many basis: product reviews are posted online and opinions disseminated through social networks. Some customers even create Web sites or blogs to praise or punish brands." In fact, Reuters states that P&G "has started to use more non-traditional approaches to advertising and promoting its household products, such as having pages on social media sites such as Facebook and reaching out to bloggers with new product samples."

For those who are curious, the IAA invites monitoring of this week's events here. What's your take on how social media, mobile advertising, in-house and out [of] house web branding and advertising is determining your advertising spend in 2010 and beyond?

William Busch

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