Your Digital Dollar

Tuesday, May 20, 2014

By Adam Kleinberg

eMarketer released a report today showing how the $50 billion in digital ad spending in 2014 is being divided across branding and direct response.

Unsurprisingly, direct response is winning. Marketers crave a clear ROI and direct response gives them one.

Let's take a quick look at the data and see how it breaks down...

US digital ad spending share 2014

When you look at the breakdown by industry, a few things jump out:

  • Retail leans heavily toward DR. This should be no shocker. Retailers are in the business of selling other people's brands as much as their own. I recently spoke to the CMO of one major ad tech company who told me his company "built" 1.9 million ad units for a large retailer in one month. That's not creative, that's a business process. As we step into "what's next" that's the kind of process every online retailer is going to need to master. Hence, 70% of those ad dollars are going to response-oriented work.
  • Travel is even more heavily weighted toward direct response. This may seem counterintuitive, but the dynamics of that market are unique. People don't usually demand a trip to the Hyatt, they demand a trip to Hawaii. I actually spent 5 years as a travel agent after college so I know this well. People tend to research their travel purchases online a lot, so there are a lot of highly contextual placements to "go fishing" with DR. Decisions tend to be made by a combination of price and pictures of the pool. In my view, brands should be investing in making their owned properties (i.e. their websites) look amazing with amazing photography of balconies, hot tubs and swimming pools. That may sound simplistic, but I sat across the desk from hundreds of people as they chose their vacations and that's what sells. From an advertising perspective, travel brands should consider driving engagement first, rather than a direct sale, because they are more likely to pull people in that way.
  • CPGs and consumer products are weighted heavily in the other direction . 65% of ad dollars spent on line for CPGs is brand-focused. Why? Because the odds of you seeing a banner ad, clicking it, being so compelled by a landing page offer and whipping out your credit card are slim. CPGs need to build their brand so that they are top of mind when you go to those retail store.
  • Most categories, however, are about between 50/50 or 60/40. This includes media, healthcare/pharma, auto, telecom and that mysterious "other" category. This is not inline with how budgets are allocated offline—where they are weighted heavily toward the top of the funnel. This goes back to the desire for ROI. What this really reflects is that brands have shifted DR budgets from offline to online at a more rapid pace than they have their brand budgets. Look for this to continue to change as convergence takes place between TV and digital. Only when we're watching "digital content" on bigger screens where we have more tolerance for more intrusive advertising, will we see a balance in digital ad spend that actually reflects brand's overall priorities.
About the author
Adam Kleinberg

Adam Kleinberg is CEO and and a founding partner of Traction. He has written over 75 articles in publications like AdAge, Adweek, Fast Company, Forbes, Mashable and Digiday.

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