The Unforeseen Consequences of Shifting Ad Spend to Mobile

Ad Spend Growth RateAccording to Kantar Media Intelligence, search and display ad spend cratered in Q4 2011, causing the digital advertising industry a mere 0.8 percent growth in all of 2011.

According to Kantar, which is owned by global ad-agency conglomerate WPP, the fourth quarter of 2011 was the worst three-month period for U.S. advertising growth in two years. In fact, since growing 8.7 percent in the third quarter of 2010, ad revenue growth has decreased every month since, actually declining in the fourth quarter by 1 percent (see chart).

With traditional sectors like broadcast TV up 7.7 percent in the fourth quarter and cable up 2.4 percent, digital sectors were singled out by Kantar for stymieing growth of the overall market. Paid search, for example, fell 6.4 percent in the fourth quarter, and 2.8 percent for all of 2011, with financial, insurance and local service providers investing fewer dollars.

Meanwhile, internet display advertising decreased 5.9 percent in Q4, dragged down by smaller budgets from auto manufacturers, telecom providers and travel companies. For the entire year, display increased 5.5 percent.

Why the sudden drop? Mobile ads saw triple digit growth in 2011 alone, suggesting marketers are redistributing their digital advertising budgets away from more mature markets into hot, emerging platforms. Considering mobile advertising’s high engagement rates at the moment (in my eyes people are clicking out of novelty, not because mobile advertising is fantastic), it’s certainly not a bad idea to invest in mobile.

As Facebook engagement is increasingly driven by paid advertising though (one way to supercharge your fan visibility up from the average 16 percent up to around 75 percent is to use paid ads), this kind of derailing of advertising spend won’t cut it for long. Twitter is also taking baby steps toward getting in bed with brands. (Read about their promise to prevent ambush marketing in the #London2012 Olympics.)

As the salad days of social media come to an end, marketers need to start thinking about how they are going to address all digital touch points, and the answer isn’t to spread the same sized digital budget thinner and thinner. I know I’m biased because I work in the industry, but as total retail spend increases online and starts biting into brick and mortar revenues, marketers have to increase their digital budgets to keep pace.

About the author: Entrepreneur with ten years of experience running a digital marketing agency out of New York City. I work with startups and brands such as Virgin Airlines, L2 Inc (Gartner), American Express, Fabletics, LOFT, and more. When I’m not helping companies increase their audience and revenues, I love to travel, sail, and read. I also moonlight as a bartender at a classic cocktail bar.

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