B2B Internet Startups Boost Marketing Efforts

Despite the widespread, protracted economic downturn, business-to-business Internet startups are actually spending more on marketing than they were in 2000, according to a new study.

According to an annual study by San Francisco-based marketing consultancy Launch Pad and communications firm Blanc & Otus, who surveyed marketing executives at B2B Internet firms nationwide, marketers are increasing their spending from $2.2 million in 2000 to $2.8 million this year on average.

However, the survey also found that marketing spending as a fraction of total expenditures fell 5 percent, to 15 percent, as companies cut their online advertising spending by 72 percent and print ad budgets by 44 percent.

Yet, Internet startups are more likely to tap direct marketing channels, with e-mail marketing seeing a 300 percent increase in budgets from 2000. Indeed, according to the survey, marketers are wary of investments in longer-term, brand-building marketing programs in the current economic climate.

That finding fits with reports from other industry players, such ad online ad giant DoubleClick, which said that direct marketing spending accounted for 40 percent of its revenue during last quarter.

“Particularly today, marketing departments must emphasize programs that produce measurable results,” said chief executive Greg Spector, chief executive of Blanc & Otus, a unit of WPP-owned Hill and Knowlton.

If the survey does accurately reflect reality, the news could spell continuing troubles for the online media industry, which is desperately promoting itself as a channel for branding — not direct marketing. Through studies sponsored by groups like the Interactive Advertising Bureau, DoubleClick, and Microsoft’s MSN, the industry at large is aiming to show that there’s a calculable return on investment for online brand ads, much like the easier-to-measure return from direct marketing.

However, the Launch Pad survey would suggest that such efforts aren’t necessarily taking hold with the startup community.

Nevertheless, several players in online media are hedging their bets that direct marketing could prove lucrative while ad revenues are down. For example, SportsLine.com last month acquired a popular fantasy sports Web site, Sandbox.com, with the aim of boosting its opt-in consumer database.

Later that month, pan-Asian content player chinadotcom consolidated its marketing units into a new company, which will focus in large part on e-mail, direct and database services.