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February 12, 2008

MarketingSherpa’s Annual ad:tech Survey: Top Web Advertisers Rate Best & Worst Online Tactics & Budget Plans

SUMMARY: What’s the best performing marketing tactic in online marketing? Whose budget got the biggest increase this year? We have the answers to those questions and more in our fifth annual ad:tech attendee survey.

Five new charts with data, including:
- What gets the highest ROI
- Marketers’ No. 1 test this year
- How important is social media
Online ad metrics are evolving into precise measurements that reflect exact ROIs -- and marketers love it. More than 60% of all those surveyed said they’ll do the following:
o Measure search (66%)
o Conduct A/B tests on landing pages (63%)
o Integrate offline and online tracking (63%)
o Integrate Web analytics with search and email (68%)

At the end of each year, ad:tech and MarketingSherpa ask some of the biggest Internet marketers what tactics worked (and what didn’t) in the past 12 months and where they plan to spend most of their budget in the coming year. These ad:tech marketers spend more than most online -- they are good indicators of what’s working online and what’s to come.

Among the top tactics:

- Behaviorally targeted ads favored: Still a favorite, marketers say they will be investing more in them in 2008.
- House lists top paid search: More marketers reported success with house email lists than paid search ads -- a reversal from a year earlier.
- Test, test, test again: Marketers are measuring and testing more in almost all categories surveyed.
- SEO begets strong ROI: Search engine optimization is delivering a strong return on investment, according to more than half of the marketers surveyed.
- Viral gains converts: Agencies are urging marketers to explore viral marketing and advertising in mobile phones, online video sites and virtual worlds.

Here’s a few snapshots from Internet marketers. The survey received 421 responses.

Chart 1: Search and Email Are Top Online Performers

Paid search continues to be a strong money maker for more than a third of the marketers surveyed, but that number is down steeply from the previous year. The decline reflects an increase in competition that raised keyword prices and lowered ROI.

SEO continues to increase in popularity. Its low costs and high returns make it a leader among more than half (57%) of the marketers surveyed. Those numbers were 45% in 2006 and 33% in 2005.

The percentage of marketers achieving high ROI with email marketing took a dip for both house and rented lists. These figures likely reflect consumer fatigue with the platform, causing lower returns.

Chart 2: Behavioral Targeting Ranks as Top Online Tactic

Behavioral targeting again proved to offer a stronger ROI than contextual targeting, and by an increasing percentage. It increased 10% percentage points while contextual advertising fell 8%.

The largest drop was in rich media ads. The development-intensive platform fell 75% to where only 7% of marketers surveyed said it delivered a strong ROI in 2007.

The “worst Web ad of 2007” award goes to pop-ups and pop-unders, which no marketers claimed provided a significant ROI.

Text-link ads, a new option on this portion of the survey, were said to be a good investment by 23% of marketers. Affiliate marketing remained the same as the year before, with 25% of marketers finding success with it. Banner ads continue their slow decline, dropping 2% from last year and down 4% from 2005.

Chart 3: Marketers Plan to Increase PPC Budgets the Most

Budget plans for 2008 reflect the changing landscape of the online ad world. Marketers plan to invest more in PPC and behavioral ads and move away from poorly targeted display ads.

The high percentage of marketers achieving strong ROI from behaviorally targeted ads is attracting more investment -- 27% of marketers said they’ll increase their spend, a 33% increase over 2006.

Surprisingly, 26% of marketers surveyed plan to increase spending on rich media ads, despite only 7% saying they had success with them in 2007.

Chart 4: Marketers Plan to Integrate Analytics

Online ad metrics are evolving into precise measurements that reflect exact ROIs -- and marketers love it. More than 60% of all those surveyed said they’ll do the following:
o Measure search (66%)
o Conduct A/B tests on landing pages (63%)
o Integrate offline and online tracking (63%)
o Integrate Web analytics with search and email (68%)

More than or almost half will do the following:
o Update analytics software (55%)
o Run multivariate tests (49%)

Online brand awareness studies are less exact than other types of ROI analysis, which is causing marketers to turn to sharper metrics. The number of marketers planning a brand awareness study dropped 33% -- to 28% of respondents.

Chart 5: Wireless, Virtual Worlds, Viral – What's Hot?

As in previous years, viral marketing gets its share of attention, especially with the YouTube phenomenon.

- 93% of marketers said agencies recommend either an increase in spending or begin spending on viral video.
- 87% reported recommendations to start or increase viral marketing on social networking sites.
- 62% said agencies advised advertising in games and virtual worlds – the highest number of recommendations for a first-time budget while paradoxically attracting the highest number of recommendations to decrease spending. This confusion clearly reflects the medium’s unproven status.
- 60% saying they are urged to try wireless ads on mobile networks –- it came in second in first-time budget recommendations.

Research Notes
ad:tech’s Fifth Annual Study was conducted by MarketingSherpa’s research team. There were 421 survey responses from ad:tech attendees in December 2007.

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