The State of Online Marketing
By: Lisa Picarille
Online marketing is no longer the Wild, Wild West: expect growth but also consolidation and possible governance and regulations.
By the time Revenue magazine hit newsstands in January 2004, performance marketing and affiliate marketing had already had their share of ups and downs. Online marketing had survived the dot-com bust and continued to evolve from the e-commerce craze into something that sparked enthusiasm and life in a shell-shocked market.
The idea that retirees, housewives and those with "real jobs" could work at home a few hours a day (or into the wee hours of the night) and make some extra money earning commissions by promoting products from someone else seemed too good to be true. But it wasn't. And in many cases, people weren't just supplementing their income, online marketing had become their main source of income. They were able to quit their day jobs and focus on their new business.
Revenue was born out of that passion and enthusiasm to help chronicle, sort out, explain, educate and bring to light all the pertinent issues facing online marketers. We've been here for two years now, and we hope to be here for many more as the market remains on its incredible growth trajectory.
To celebrate our milestone, we've brought together some research, voices from the industry and past history. It just may help you navigate your continuing journey into online marketing.
Search is hot. Local search is even hotter. The areas of podcasting and blogging are white hot. Then there are predications for growth in ad spending over the next year. There's no lack of research to show that all segments of online marketing are going strong and getting stronger. The facts, the figures, the surveys and the data all point to a future filled with opportunities for online marketers. We bring you some of the key indicators (see page 58).
And if you're still not convinced how the market will shape up, you can forget the numbers and go right to those in the trenches. We asked online marketing leaders to give their opinions on how things have evolved over the last two years, an update on where the online market is right now and where it's headed. There are comments from a lot of different types of folks, all with different jobs and all with their own perspectives, but the optimism about online marketing is a common thread among them (see page 60).
If you're wondering how businesses adapt and survive in such a rapidly changing marketplace, look no further than the "5 Who Thrived." These are five individuals we profiled in our premiere issues because they had already carved out some early success in the affiliate space. We revisit each of these folks and find they all have been able to roll with the punches and not only survive but thrive. Actually, they've all grown their respective businesses and have no plans to rest on their laurels (see page 62).
Finally, Revenue magazine has worked hard to stay on top of the constantly evolving online marketing space. And along the way we've made some changes in the look of the magazine as well as how we handled the editorial content. Take a stroll down memory lane with us as we revisit each of our past issues (see page 64).
Facts & Figures
Online Retail Sales
Online sales were $96 billion in 2003 and are expected to reach $230 billion by 2008 (10 percent of all U.S. retail sales). Source: Forrester Research
Online retail sales in the third quarter of 2005 reached $23.32 billion – 26.7 percent more than the $17.6 billion for the same period of 2004. Source: The Census Bureau of the U.S. Department of Commerce
The proportion of online retail sales to total retail sales reached 2.3 percent in the third quarter of 2005, compared with 2 percent in the third quarter of 2004. Source: The Census Bureau of the U.S. Department of Commerce
Online Ad Revenues Total revenues for 2005 are expected to reach $12 billion, a 25 percent increase over 2004's final tally of $9.6 billion. Source: Interactive Advertising Bureau
Total U.S. online advertising and marketing spending will reach $14.7 billion in 2005, a 23 percent increase over 2004. It's forecast to reach $26 billion (8 percent of total ad spending) by 2010. Source: Forrester Research
Eighty-four percent of marketers had plans to increase U.S. online ad budgets in 2005. Source: Forrester Research
Almost half of marketers plan to decrease spending in traditional advertising channels like magazines, direct mail and newspapers to fund an increase in online ad spending in 2005. Source: Forrester Research
Display advertising, which includes traditional banners and sponsorships, will grow at the average rate of 11 percent over the next five years to $8 billion by 2010. Source: Forrester Research
Search Engines
Forty-one percent of 1,577 Internet users surveyed in September and October reported that they had visited a search engine the previous day. That is up from 30 percent in June 2005. Source: The Pew Internet & American Life Project
Search is the second most popular task on the Web with 41 percent. Email still leads the list with 52 percent of U.S. Web users saying they had sent or received email on the day before being surveyed this fall. Source: The Pew Internet & American Life Project
Users average 24 minutes a day on email, compared with less than 4 minutes for search. Source: comScore Media Metrix
Search engine marketing will grow by 33 percent in 2005, reaching $11.6 billion by 2010. Source: Forrester Research
The Big Three
Yahoo's third-quarter 2005 marketing services revenue grew 46 percent, to $1.16 billion, from $797 million in third-quarter 2004. Ad revenues at America Online increased to $324 million in the third quarter, marking a 28 percent leap from 2004. And Google saw thirdquarter revenues surge to $1.578 billion – a 96 percent leap from the third quarter of 2004. Source: Company information
Keywords
The average "cost per keyword" increased from $20 in July to $26 in September 2005. Source: Performics
Keyword costs for the words kitchen, food and wine-related terms went up 8 percent in the third quarter of 2005. Prices for keywords about apparel and accessories rose 10 percent during the same period. Source: SEMphonic
Travel
Among the 35 million consumers searching for travel, nearly one-third purchased a travel-related service either online or offline within the eight weeks following the initial search. Among these buyers, 80 percent completed travel purchases online. Source: comScore Networks, Yahoo and Media Contacts
Only 20 percent of all travel transactions linked to search engine activity occurred directly following the initial search referral, while the remaining 80 percent took place in the days and weeks following the initial search session. Source: comScore Networks, Yahoo and Media Contacts
Over the last year, Merrill Lynch reported that direct travel supplier sales increased 27 percent compared to 19 percent for online travel agencies. Travel search engines were driving direct supplier sales and accounted for $600 million in direct bookings last year. Source: Merrill Lynch
Youth
Nearly 60 percent of children ages 6 to 11 go online at least once a month, and about one in 12 goes online daily. Continued on Page 2...
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search, local search, regulations, changes, past, present, future, predictions, 5 who trive, back issues,
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