We’ve had lots of questions about our numbers for email advertising — $12 billion – being wildly higher than other tracking companies’ numbers. For instance, the Interactive Advertising Bureau, through Price Waterhouse, is reporting less than $500 million for e-mail. Are we nuts?!
If you give me 60 seconds, I’ll tell you a fascinating secret that underlies why many media companies severely underestimate the Internet advertising opportunity – and why those who understand this phenomenon suddenly become empowered to change their companies.
In the legacy media world, it’s very easy to track advertising expenditures. The methodology involves looking at all the revenues from the major daily newspaper in a market, or all the companies that hold FCC broadcast licenses. There are usually three or four TV stations that get all the revenues, so BINGO! there’s how much is being spent on TV. So when you use that methodology to track Internet advertising, you get a handful of “known” entities and – BINGO – there’s your number!
Can anyone name all the companies selling e-mail advertising? More than three?
Here’s the difference with our methodology: We track spending, not revenues. That is, we know from various records and surveys what businesses spend on e-mail advertising, and we calculate from the bottom up. We do the same for all advertising, and our numbers wind up pretty much the same for traditional media, but very different for Internet advertising.
With the Internet, however, you can’t fathom the universe of companies and individuals selling things like email advertising or search advertising or banners. In a lot of cases, they aren’t even companies, but individuals who don’t have business licenses and thus cannot be tracked at all for their “ad revenue” receipts.
The amount advertisers are spending is truly stunning, and much larger than most people imagine. Those who understand the true breadth of opportunity are more likely (in my humble opinion) to get a larger share than those who underestimate it.
Tags: ad spending, e-mail advertising, methodology
Well said, Gordon, and this knowledge gap is a trap. To use one of my favorite Borrell quotes, “The deer now have guns.” Everybody’s a media company these days, and this is the root that your research reveals. The pond of online legacy media revenue is but a fraction of the whole, so it’s where you dip your net that matters. Oh, and you ARE nuts!
[...] Borrell — in a refreshingly titled post, “Are we NUTS?“ — tells why his company believes there’s a whole lot more online spending going [...]
And this spend estimate is truly ‘advertising’ (buying placement in a separate entity’s email newsletter for example) and not ‘marketing’ (expenditures on mailing to an in-house list)?
We try to look at e-mail marketing the same way we look at direct mail advertising – in fact, the same way we look at any media choice, on- or off-line. For off-line direct mail, there are two major components of spending to be measured: postage/handling, and production. Production, in this case, includes all the design, printing, list purchase, and other expenses necessary to create a direct mail piece. We do not count the production expenses in our ad estimates for direct mail, because we do not count them for broadcast TV, cable, radio, or out-of-home. Instead, these expenditures are put in a separate estimate called “ad production” – a non-advertising marketing expense.
By the same token, we will count the expenditures necessary to transmit e-mail to targeted addresses in costing e-mail marketing. Payments made to Constant Contact or a similar firm would qualify here. Buying placement in a separate entity’s e-mail newsletter is similar to what legacy direct mailers call “marriage mail,” so we count that as well.
KC
[...] Are we NUTS? « Borrell Associates [...]
The methodology you had mentioned is really a reveal. And it is indeed true! For me, internet advertising is a great marketing machine. Informative post there!
I believe that internet marketing has lost its value in the present day world, as it is not meeting the expectations of the customers.