Thursday, July 01, 2010

Business Marketers at Mid-Year Crossroads

Fast your seatbelt. No matter how the second half ends up, it won’t be boring. Banners battle video and search for control of digital ad budgets.

The July 4th Holiday weekend is typically when we take time out for a breather from the frenetic pace of daily life to hit the beach, the mountains or just the backyard hammock for a little R&R and some good old fashioned pyrotechnics. It’s also a typical juncture in the business world as we try to decide whether we’re going to have a good year or not and start fretting about the 2011 budget.

I spoke the other day with John Graham, President & CEO of the American Society of Association Executives who said we live in an instant gratification “experience economy.” Consumers don’t want to have marketing messages pushed at them so much as they want to control the dialogue with your organization. It’s all about “I want what I want when I want it and how I want to get it,” related Graham.

So what do they really want? “Truth in advertising,” said Graham. “You need to earn their trust,” and thanks to social media, they have more tools than ever for punishing you for not delivering.

Second half forecast?

All signs point to “not clear.”

The financial markets have recently given back all their gains for the year – end then some. A stream of reports released this week pointed to slowing growth throughout the economy, from slower manufacturing growth to higher claims for jobless benefits and declines in home construction and pending sales. U.S. factory activity slowed in June amid a moderation in inflationary pressures. Private research group the Institute for Supply Management reported Thursday that its manufacturing index for the most recent month moved to 56.2, from 59.7 and 60.4. Readings above 50 signal expansion, so June's reading represented continued growth at a slower pace. Economists had expected to see slight moderation at a reading of 59.0.

Persistently high unemployment, modest gains in overall output, when added to weakness in housing and the threat posed by weak growth and financial problems in Europe, have driven up fears about what lies ahead for the U.S. recovery. Also, in the U.S. labor market, the four-week moving average of jobless claims -- which aims to give a better idea of the trend by smoothing volatility in the data -- went up by 3,250 to 466,500 in the week ended June 26. That represents the highest level since March 6, 2010.

Experts say compared to past recoveries from deep recessions, the current one is moving slowly. The economy expanded by less than an annualized 3.0 percent in the first quarter and there are increasing concerns that growth may slow down in the second half of the year. U.S. consumer confidence fell sharply in June, wiping out the gains posted in the previous two months as Americans worried about their job prospects. Some economist fear consumer spending won't be strong enough to replace a fading government stimulus in lifting the economy.

The June Consumer Reports Trouble Tracker Index measuring financial difficulties faced by consumers in the past 30 days, worsened, rising to 63.5 from 53.0 in May. The most troubling increase is in missed mortgage payments, which reached 3.9 percent, its highest level since tracking began in April 2009. The latest numbers show consumers have taken a step back facing increases in financial difficulties and a soured employment picture, says the report.

In June, more consumers reported difficulty in affording medical bills or medications versus the prior month, and faced lost or reduced healthcare coverage
• The Employment Index has dropped, pointing to an increase in the ranks of the unemployed, at least temporarily. The decline was led by the proportion of Americans that lost their jobs in the past 30 days
• Despite the high job losses posted in June, 7.4 percent of Americans reported starting a job in the past 30 days, well above May, and achieved its highest level recorded since April 2009.
• Consumers have scaled back their interest in shopping as well. The past 30-Day Retail Index for June, reflective of May activity, is 10.8, unchanged from the prior month
• May's next 30-Day Retail Index, reflective of planned purchases for June, is down slightly from the prior month. Per capita spending for the index categories in the past 30 days was $234, down slightly from May ($248)
Consumer Sentiment is unchanged from the prior month. The most optimistic consumers are between the ages of 18-34 (52.3), and with a household income of $100,000+ (54.9). The most pessimistic are households with an income less than $50,000 (39.2) and Americans 65 or older (41.7).

The Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse.
The Trouble Tracker Index addresses the proportion of consumers that have faced difficulties and the number of hurdles they have encountered. This index has shown a significant increase this month, pointing to more troubles for consumers, rising to 63.5 in June from 53.0 in May.

Banner Ads Still Relevant?

In surveys, consumers will tell you they ignore static banner ads, and don't click on them. But eMarketer Senior Analyst David Hallerman cites stats from a Microsoft Atlas study that animated .gif display ads running across the tops of Web pages still influence purchase decisions.
Hallerman, who has been researching a report about online brand marketing, calls banner ads "somewhat subliminal" because banner ads appear to affect consumers whether they realize it or not. "The positive, yet not always easy-to-measure effects and the increasingly lower cost and availability of banners give campaigns a steady foundation," reports Hallerman. "Banners help to fill in the campaign."
As marketers look to engage consumers -- and to gain better measurement and targeting tactics than what's available with most other media -- they will continue to increase budgets for Internet ads of all kinds, most likely at the expense of newspapers, magazines and other traditional media. Forecasters we typically cite in this blog expect the Internet's share of total media ad spending to rise from about 15 percent in 2010 to more than 20 percent in 2014.

The power of video

A large part of the growth will come from video, even in banner ads. Spending for online video advertising will make the format the second-biggest recipient of new ad dollars from 2010 to 2014, according to the eMarketer report "U.S. Ad Spending: How Big Is the Bounceback?" Of the more than $13.6 billion incremental dollars that will flow into online advertising during the next five years, one third (33%) will come from video ads, compared with 44.5 percent from search.

As search attracts more dollars and video gets more growth, experts say banner ads will increasingly become filler for those two ad formats, as well as for other elements of advertising campaigns. And as the market share for banner ads continues to decline -- even in 2014, when spending on banners will make up just one-fifth of all the ads on the Internet -- the format will remain strong.

I wish I had more direction for you. Just stay smart. Keep holding your breath. We’re either going to have a sparkling second half or a wet fuse dud. The winners will be those who are most able to adapt to adapt to the changes the new world order throws at them.


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