Outsell Survey Predicts Strong Growth in Online Marketing

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Spending on online advertising is encroaching on budgets allocated to traditional forms of advertising, though those traditional forms continue to be seen as the most effective ways to generate leads and bolster brands, according to a new Outsell survey.

Online spending is expected to grow 19 percent this year, and it will make up a larger proportion of the total marketing budget, according to Outsell. In comparison, print spending is anticipated to grow just 3.3 percent and TV/radio 2.4 percent. In 2005, online media made up 16.2 percent of advertising budgets. This will increase to 18.2 percent in 2006, according to the survey.

In November 2005, Outsell surveyed 1,200 marketers who control $2.4 billion worth of advertising dollars. The survey combined data from marketers primarily targeting consumers, business-to-business, healthcare and government. Outsell found that 80 percent of all advertisers use online advertising. By 2008, this is anticipated to grow to 90 percent.

Search engine marketing will take up 16.2 percent of this year's spending. The study found that advertisers think keyword advertising is the most effective form of search advertising, over contextual and behavioral advertising.

The efficacy of keyword marketing comes from its ability to match exact search terms entered by a user and certain keywords nominated by the advertiser, said Chuck Richard, vice president and lead analyst at Outsell. Contextual ads are not as effective at matching the wants of the consumer to an appropriate advertising message.

Google is rated as the most effective provider of keywords ads with 71 percent of advertisers rating it extremely or somewhat effective, the report said. Yahoo received a 62 percent effectiveness rating and MSN 46 percent.

Richard said Google's top rank could be the result of its two-part algorithm, which combines bid price and traffic to prioritize ads, whereas Yahoo only places ads by the highest bidder. Therefore, Google will replace low-trafficked ads with a high bid price with higher trafficked ads with a lower bid price, Richard said.

Though advertisers increase their usage of online advertising tactics, advertisers still see traditional forms of advertising important. Marketers are particularly reliant on traditional media to generate leads and branding.

Events, direct mail and print trade magazines are rated as the three most effective and most used forms of marketing for generating leads, according to Outsell, while print trade magazines, events and direct marketing are rated as the three most effective and most used for branding.

However, advertisers targeting consumer markets, rate e-mail as the second most used advertising technique after direct mail. Eighty percent of marketers use e-mail advertising to generate leads, and 85 percent use e-mail advertising in their branding efforts, Richard said.

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