Study: Software Firms Shifting to Web Advertising

While major software firms may be decreasing their overall marketing spending in these tough economic times, they plan to increase their online advertising efforts as they decrease spending on traditional methods, according to a new joint survey by Smith & Suita and Marketwise Innovations.

The study surveyed 44 U.S. software companies, most of which are publicly traded, and found that 55 percent intend to decrease their advertising spending during 2002. At the same time, 70 percent said they planned to increase their online ad spending.

Among the largest U.S. software companies, defined as those posting revenues greater than $250 million, a whopping 91 percent said they intend to increase their online marketing spending.

“Internet marketing has really come into its own,” said Smith & Suita Principal Paula Suita. “In the past people just had been looking into doing Web sites … Now, they really see the Internet as a key medium in their marketing toolkit.”

Aside from the obvious match of software ad dollars to the Internet medium, Suita found that online advertising is perceived as being more able to target and to be tracked — which plays into a larger trend of reluctance among advertisers to drop big budgets into broad-based campaigns with questionable returns.

“Advertising … is losing its luster,” she said. “People are still doing advertising but they’re targeting a lot more. You’re not necessarily seeing as many broad-based campaigns — they’re tying it in very closely into sales objectives.”

“In the past, people would have very lofty objectives without necessarily tying it into results,” Suita added. “What we heard from people is … that they perceived they had a difficult time of seeing a measurement of … [offline] advertising. We hear it over and over again — people talking about measurement.”

The study also found that 43 percent of all firms were decreasing their spending on conferences and events, such as trade shows. About 39 percent of the U.S. software firms said they planned to increase trade show spending from 2001.

U.S. software firms also reported they plan to boost spending on consumer research. About 52 percent of all respondents said they planned to increase their research dollars, while 64 percent of large companies said they would. None of the large companies surveyed said they planned to decrease customer research spending.