Curb Your Enthusiasm

Is investment in online marketing growing the way it once did? Probably not, judging from Direct's 2007 online marketing survey.

Fewer DMers are planning large spending increases this time around, and more seem to be embracing a wait-and-see attitude.

Yet there's no doubt that the Web is a major component of almost every firm's media mix. Despite the slowdown in growth, traditional marketing budgets are declining while online ones are on the rise.

Business-to-business firms are the most likely to be ramping up. And why not? A growing number find that online marketing is more profitable than offline, our poll shows.

Not that consumer marketers are losing money online. But the number calling it the most profitable channel dropped this year.

Meanwhile, the percentage of overall sales generated online is holding steady for most companies. It's slightly over one-third for consumer marketers, almost a fifth for B-to-B companies and around a quarter overall.

Why has investment growth slowed?

Here's one theory.

Consumer marketers rely mostly on e-mail to drive prospects to their Web sites. But B-to-B marketers tend to use direct mail, a medium recently hit by postal rate hikes.

In contrast, consumer marketers are quicker to invest in optimizing their Web sites, a strategy that brings prospects in through natural search queries. They're also spending on pay-per-click keywords — activities that don't require postage.

That isn't the only charge being led by consumer firms. Nearly 40% now have the ability to customize their Web sites for individual visitors, compared with about 25% for B-to-B marketers. Both figures represent significant increases over last year.

At the same time, marketers are more wary about who they mail to.

Blame it on mailbox clutter, or on consumers who are quick to push the “This is spam” button. But the number of companies limiting messages to existing customers rose from 15% to 21%.

That said, the permission standard seems to be moving toward single opt-in. This practice is now followed by 41% of all DMers, compared with 35% in 2006, while those requiring double opt-in stayed level at 17%.

On a positive note for those opposed to the “It's easier to obtain forgiveness than permission” rule: The percentage using only opt-outs dropped from 17% to 9%. Among consumer firms, the number fell from 23% to 14%.

As for message format, HTML is solidifying its No. 1 position, with 85% of all e-mailers using it, up from 76% last year. Fifty-seven percent are sending text-only messages, compared with 69% in 2006. And streaming video is taking root — nearly 15% include it in messages, a 5% jump over last year.

And who's doing the delivery work for e-mailers?

In-house operations are still favored by a majority of firms, but a few more are using outside service bureaus. That's especially true of high-volume consumer marketers and companies with annual revenue of over $5 million.

Then there's lists.

Companies have loosened up — very slightly — in their reluctance to rent their e-mail files. Eight percent do so, compared with 2% last year. This uptick may be due, in part, to economic circumstances: Marketers see e-list rental revenue as money available for the taking.

And yet they aren't renting as many e-mail files for their own use: While 29% said they rented outside lists a year ago, just over 19% are doing it this year.

So where are new e-mail addresses coming from? Marketers glean them from their Web sites (75%), person-to-person networking (52%), appending (28%) and affiliate programs (27%).

But there are other ways to generate lists: trade shows, buzz and word-of-mouth marketing.

And how are companies promoting their Web sites? With e-mail newsletters and print magazines. One respondent mentioned an appearance on Oprah Winfrey's television show, and another bluntly stated: “Our URL is on everything that comes out of our office, including bumper stickers and shirts.”

Direct's research also found:

• Smaller firms — those with annual revenue under $5 million — have pulled back from analyzing online clickstream data. But large firms and those that devote at least 10% of their marketing budget to online activities continue to crunch these numbers.

• Privacy remains top of mind for online marketers. Seventy percent have a statement of some sort on their site, compared with 64% a year ago. And this includes consumer firms (83% of which have statements) and B-to-B companies (64%).

• Staff levels for departments responsible for online marketing are holding steady for two-thirds of the firms surveyed. But almost a fifth have increased head count, and only a handful have cut positions.

METHODOLOGY

This survey was conducted for Direct by Penton Research, an in-house firm. It was e-mailed to 21,810 of the magazine's print and e-mail newsletter subscribers with corporate or general management job titles who indicated their organization uses electronic commerce. Participants were chosen on an nth-name basis (a representative sample of all subscribers).

An initial copy of the survey, offering a chance to win one of four $50 Amazon.com gift certificates, was sent out July 12. Two follow-up e-mails, along with the sweepstakes offer, were sent to non-respondents.

Results are based on surveys returned by 216 qualified participants: those in executive or general management positions (70%); sales/marketing/telemarketing management (13%); and advertising or promotions management (5%). The remaining 12% were circulation, list or media managers; fulfillment, operations or production managers; CIOs, or consultants.

In some cases, subscribers who marked “Don't know” or “Unsure” in response to certain questions were eliminated from vote totals. Any question for which this was done maintained the minimum number of responses to ensure stable data.

Respondents' median annual revenue was $1.9 million. They reported current-year revenue as follows: under $1 million (42%); $1 million to $2.5 million (13%); $2.5 million to $5 million (6%); $5 million to $10 million (7%); $10 million to $25 million (7%); $25 million to $100 million (13%); $100 million to $500 million (6%); $500 million to $1 billion (1%); and more than $1 billion (4%). Numbers do not total 100% due to rounding.