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Online Marketing Eats Into Traditional Media

Interactive marketing will near $55 billion and represent 21 percent of all marketing dollars spent in 2014 as advertisers shift money away from traditional media to search marketing, display advertising, e-mail marketing, social media and mobile promotions, according to a recent study.

The trend is already underway, as more marketers this year are taking money from traditional marketing budgets and using it in interactive advertising, as opposed to supporting interactive efforts with new funding, as was the case in years past, according to the Forrester Research report "US Interactive Marketing Forecast 2009 to 2014," by Shar VanBoskirk.

"This cannibalization of traditional media will bring about a decline in overall advertising budgets, death to obsolete agencies, a publisher awakening and a new identity for Yahoo," writes VanBoskirk.

She goes on to say that while ad budgets will decrease, marketing investments won't, as any money saved by using cheaper interactive media will be put toward funding IT technology and staff, customer service and so on.

Given this, traditional ad agencies must include interactive marketing for mere survival. "We've hinted before that agencies that can't transition from pushing out messages to nurturing customer connections aren't long for this world. Agency readers, heed our warning. Services firms that lack data management, analytics, listening, social media execution, and strategy expertise will dry up," warns the report.

She also sees ad publisher sites becoming more cutting-edge, saying they will begin using site metrics to show advertisers the type, frequency, and format of interaction marketers should have with their audience, not just which users to target. "We see individual publishers selling multiphase "conversations" instead of impressions," says the report.

The trend also will impact Yahoo. "With media becoming more syndicated, consumers will digest media across devices, not just across sites. Advantage: Microsoft with its device heritage and Google per its experiments with alternative platforms. Disadvantage: Yahoo with its declining ad business and floundering mobile strategy," says VonBoskirk.

She adds that Yahoo will again start courting buyers, and offers an interesting scenario -- Apple as acquiring entity.

In response, a Yahoo spokesperson said "Yahoo! is committed to delivering 'wow' experiences to our users and we continue to explore innovative ways to do so. Beyond this, we have nothing to announce and do not comment on rumor or speculation."

So what's causing the seismic shift in ad dollars from traditional media to interactive? The recession, consumer expectations of interactive and personalized brand relationships, declining print readership, maturation of the interactive ad industry as well as increases in social media use and mobile phones are all factors contributing to the shift.

Social media campaigns are growing into an established part of the interactive ad mix as more companies embrace it -- 64 percent of marketers already build social media applications and 22 percent more will by the end of 2009.

As more brands embrace social media, companies are becoming more comfortable using it, even as the sector is still developing tools, metrics and benchmark standards.

Search marketing continues to do well, in both adoption, today 80 percent of marketers use it, and money spent. "Search marketing accounts for 59 percent of the overall interactive pie. We project spend on paid listings, which includes paid inclusion, and search engine optimization (SEO) to grow at a CAGR of 15 percent, to $31 billion by 2014," according to the report.

Meanwhile, display advertising is rebounding, after spending in the category dipped this year as recession-constrained marketers reallocated money to direct response media. But VanBoskirk says don't count display advertising out. Including contextual listings and online video, the sector will grow at a CAGR of 17 percent to reach $17 billion by 2014.

The report says advertisers favor pay-per-click over impression-based display campaigns, with 58 percent going to PPC - and the trend is expected to continue. Rich media is also gaining traction, currently about one-third of display spend, rich media will grow to 45 percent by 2014 as marketers use more and pay a premium for rich media.

E-mail marketing continues to grow, with an 11 percent CAGR over the next five years, due to the "green" market campaigns being in vogue and to increased integration with social media sites.