April 22, 2007

Online Advertising And The Marketing Digital Divide

Using SpyFu, one can get very rough estimates of what leading brands spend on online advertising on a daily basis. The data is prone to errors and inaccuracy, but can be used to view general trends.

Take three companies that thrive on catalog marketing, namely L.L. Bean, Lands' End, and Pottery Barn. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.
  • Annual Average Spend Across These Brands = $10,201,000.
  • Average Annual Clicks Generated From The Advertising = 12,015,000.
  • Average Cost Per Click = $0.87.
Next, look at three large retailers, namely Macy's, Nordstrom and Neiman Marcus. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.
  • Annual Average Spend Across These Brands = $23,550,000.
  • Average Annual Clicks Generated From The Advertising = 33,312,000.
  • Average Cost Per Click = $0.78.
Finally, look at two larger-sizes online pureplays, namely Zappos and Blue Nile. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.
  • Annual Average Spend Across These Brands = $40,654,000.
  • Average Annual Clicks Generated From The Advertising = 63,483,000.
  • Average Cost Per Click = $0.68.
Notice that as we progress from companies with a catalog heritage, to companies with a retail heritage, to companies with an online heritage, the amount of online spend dramatically increases --- and, the average cost per click actually decreases. This is counter to what analytical folks expect to see happen.

I tried to pick companies that had annual traffic that was directionally similar. How the businesses use advertising to drive web traffic is very different. What this does show is that there may be a marketing digital divide. There may be a way for catalogers and retailers to migrate advertising online, and actually see better returns on investment.

As postage escalates, traditional catalogers have an opportunity to emulate the techniques that the folks at Zappos and Blue Nile use. Over the next five years, there is an opportunity to transition advertising strategy from print to online. There is an opportunity to cross over the marketing digital divide.

3 comments:

  1. hanks for the tips. Hopefully these can help me create useful Internet advertising strategies. I can earn more profit and improve my business as I learn more online adcrtising tips.

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  2. Hi Kevin --

    We've found little correlation between our client's actual PPC spend and the numbers reported by SpyFu. For the sites we checked, SpyFu was off, sometimes by an order of magnitude, for small ($10k/month), medium ($100k/month), and large ($500k/month) advertisers.

    A neat idea, but needs better accuracy

    Alan

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  3. Alan --- who would know better than you? Thanks for pointing out the error in the analysis.

    Now, what do you think about the hypothesis that some companies have figured out how to market online, and are way ahead of traditional marketers?

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