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Digital Advertising Growth Outpaced by the Hype

Recent growth in digital advertising, fueled by the ongoing shift away from print and the rapid expansion of mobile content delivery, is often touted as a huge and rapid paradigm shift. But even with all the new tools advertisers have to play with, the change, experts say, will take years to play out.

According to Forrester Research, digital was projected to be about 12 percent of overall advertising in 2009, and is likely to grow near $55 billion and represent 21 percent of all marketing spent in 2014, as marketers shift dollars away from traditional media and toward search, display advertising, e-mail, social media and mobile marketing.

But if the projections for growth are there, why are marketers still tiptoeing around digital?

"It's because they’re scared," said David Sable, vice chairman and chief operating officer of Wunderman, a company that is part of a global network of digital marketing agencies called WPP.

"If you don’t put money into it and experiment, there won't be results. It’s that simple … and in an age when generalizations are the norm and when every new anything is the latest, greatest, biggest and, of course, category killer, I find a Mark Zuckerberg quote from a conference to be refreshing and honest: 'The biggest competitor for us is someone we haven't heard of."

Unrealized power of digital marketing

Jeff Hilimire, chief digital officer of advertising and marketing agency Engauge, agrees that companies aren't pushing the envelope just yet.

"Many marketers don't understand the power of digital marketing. Some believe it's far too easy to stay with what's worked for the past 20 years and, therefore, have been resistant to change. Companies are only moving small amounts of money into the digital realm, so there is still a ton of room left for improvement."

Internet market research firm eMarketer's December 2009 estimate for online ad spending for 2010 was projected for $23.6 billion in the United States. In May 2010, that number was revised to $25.1 billion, which indicates what many are calling massive growth. The data are fairly consistent among projections from various research firms and 2009 estimates fall in line with what actually occurred, eMarketer said.

However, the estimates for online advertising do not include mobile advertising, which the company says will be $743.1 million in the United States in 2010, up 79 percent from $416 million in 2009.

But Sable of Wunderman says the terms "massive" and "new" to describe the category are misleading.

"Digital is definitely growing, but when you see numbers like a 150 percent or 300 percent jump in ad spending, that's because the base is so small," Sable said. "The industry is also doing a disservice by calling digital new — it's not new. Everything is digital now in some form — from print and catalogs to video. More marketers are just starting to get involved."

About 80 percent of advertisers and agencies reported that they planned to spend more on online media in the coming year, according to a survey by market research company group Ipsos Reid. However, digital media still remains a small segment of advertiser budgets – and many have been reluctant to change with the times.

Part of the reluctance for change may be in what Shar VanBoskirk of Forrester says: "This cannibalization of traditional media will bring about a decline in overall advertising budgets, death of obsolete agencies and a publisher awakening."

Shift away from tradition

Slowly but surely, though, the effects of the digital age are being felt by advertisers. People's attention spans are shorter than ever, and it's becoming increasingly difficult to tell a story through a stagnant print ad or high-rise billboard. To bring traditional ads to life, more companies are telling consumers to visit their Facebook pages, where they can engage with the brand, ask questions and become a part of the conversation. [Related: Product Placements on Social Media Sites Will 'Hack' into Your Memory]

Similarly, TV commercials are now being crammed into 15-second spots to meet the shrinking attention spans of its viewers, according to a recent Associated Press report.

Meanwhile, various companies have announced plans to go digital by developing newspaper editions for tablet computers and smartphones. In response, advertisers will have to make a shift to capture this new audience in innovative, creative and engaging ways.

Some expect a thrust into the e-book space: Instead of having the word "soda" featured in a digital novel, "Coca-Cola" could be used instead. Tracking data would then gauge how many people were reading that e-book page as though it was an ad impression, according to Erik Qualman, author of the best-selling book, "Socialnomics: How social media transforms the way we live and do business" (Wiley Publishing, 2009).

Neil Strother, a practice director and analyst for ABI Research, believes the first move will include linking up e-books as though they were articles.

"If you are reading something about Egypt, a consumer should be able to click on a certain word and be transported to a travel or informational site to learn more about that topic," Strother said.

Move to mobile

Perhaps the biggest opportunity for ad growth is through the mobile sector.

Mobile ad spending is expected to be up 79 percent to $743.1 million in 2010, compared with 48 percent growth last year with $416 million, according to eMarketer. However, spending in this category remains fairly low: the $743.1 million expected to be spent on mobile ads in the United States this year is compared with $837 million that will be spent via Facebook.

"Advertisers are dipping their toes in to see if the mobile waters are warm, as consumers do the same," said Clark Fredricksen, strategic communications manager for eMarketer. "It's not just about text messaging and banners anymore; it's about interactive-rich media ads that people can access in various formats and really make an impact."

Google recently acquired mobile ad network AdMob for a whopping $750 million in stock, giving it access to usage data of many of the most popular mobile apps, including the ones in the iTunes App Store. This means that if Google aims to take on Apple for mobile OS market share, it puts them at a competitive advantage. The move also provides Google with details about how people are using iPhone apps, how they are engaging with advertisers, and their app loyalty.

Location-based marketing

Taking it a step further, mobile devices have always been a way to reach people anytime, anywhere. But advertisers have yet to find a good way to take advantage of this without just throwing ads in front of consumers' eyes. Now with sites such a FourSquare and Facebook Places on the map, which encourage users to "check in" to different businesses and share their location with others, geo-targeting is becoming the next big thing.

"Advertisers are very interested in these new platforms," Fredricksen said. "The catch, however, is that FourSquare is still relatively small. Although FourSquare now has 3 million users, Facebook Places, which only launched in August, boasts 30 million users. In terms of usage, more FourSquare users check in every day. Marketers are intrigued by this and the savvy ones are already getting their piece of the pie."

Starbucks, for example, recently launched a program that rewarded FourSquare users with coupons for checking into its stores. Meanwhile, vendors such as Placecast have helped retailers, including American Eagle and Sonic restaurant chain, bring in more sales: When a consumer comes within a determined radius of the business, they will receive a message announcing their proximity and be offered an incentive — such as a coupon — to go into a store.

Placecast reported 79 percent of participating customers said these types of programs increased their chances of visiting a store and about 65 percent actually made a purchase from the retailer after being prompted by a location-based marketing message.

Other vendors such as PlaceParch have been able to geo-target consumers with relevant information based on their location. If someone checks into the Holiday Inn in downtown Atlanta, a consumer could receive information about a nearby bar or restaurant. Meanwhile, a coupon for a free appetizer or drink would help seal the deal to bring in foot traffic.

Hilimire of Engauge believes that the concept of incentives should be used to help encourage word-of-mouth marketing.

"Advertisers aren't really giving incentives to Facebook users — and they should," Hilimire said. "People are writing up movie reviews or posting links to their new Apple computer just for fun, but if companies start building this into their marketing programs by offering credit, discounts or free small gifts for sharing their thoughts, the impact could be huge."

TV revolution

Some traditional modes of advertisements are also getting an update in the digital age. For example, television is about to get a whole lot more personal.

"There's going to be a huge change in way advertisers can use TV again," Hilimire said. "Devices such as Google TV that are connected to the Internet will allow consumers to interact with brands in ways never seen before."

For example, if a commercial for a car or sweater comes on TV, a viewer sitting on the couch will be able to bring up information about the item with the click of a remote- control button. From there, they could read about the product, make a purchase (thanks to partnerships with click-to-buy vendors such as PayPal) or link it to their Facebook page: "There may even be a 'like' button on remote controls in the future," Hilimire added.

"We will also get to the point where you can pause a television show and read more about the products featured in a scene," he said. "'30 Rock' loves product placement to the point where they are obvious about it. They have been promoting Cisco's video-conferencing technology, so in theory, a consumer could request more information about the device, read reviews or buy it right from their screen."

Samantha Murphy
Samantha Murphy was a contributor to Live Science, covering the tech industry. She holds a degree in journalism and cinema studies from New York University.