Headfake or a Legit Rally?

Nobody knows. But at least some folks are out on the field and they're “in it to win it.”

New numbers from Forrester Research predict that interactive marketing spending will hit $25.6 billion this year -- up 11 percent from $23.1 billion in 2008, despite being flat, as marketers shift money from traditional media to digital channels. That total, which also includes search, email, social media and mobile marketing dollars, is expected to more than double to nearly $55 billion by 2014. "This growth is due to marketers seeking lower cost, more accountable channels which are also widely used by their customers," wrote Forrester analyst Shar Van Boskirk, in a blog post previewing the firm's interactive spending forecast due out in June.

A recent Forrester survey of more than 200 marketers found that 60 percent planned to increase interactive budgets by pulling back spending on traditional outlets. The biggest victim of the trend will be direct mail, which stands to be slashed by 40 percent. Print will not fare much better, with spending on newspapers expected to be cut by 35 percent, and magazines by 28 percent.

By contrast, mobile and social media will enjoy the biggest spending gains in interactive -- increasing nearly 70 percent to $391 million and almost 60 percent to $716 million, respectively, in 2009. But the recession's toll on other segments will leave display advertising virtually flat at $7.8 billion, and email up only slightly to $1.2 billion. Search marketing, which will get a lift from the shift of traditional and online display ad dollars, is expected to grow 14% to $15.4 billion.

Over the next half decade, however, Forrester expects online display advertising to grow at a faster compound annual growth rate (17%) than search (15%) or e-mail marketing (11%). We’re reaching out to Forrester to see if they will explain this phenomenon in their next report due out in June.

As a harbinger of things to come, American Business Media's just-released 2009 Media Financial Survey, showed B2B media company revenue declined 2.2 percent in 2008 versus 2007, but revenue growth in online, live events, and data products helped offset declines in revenue for magazines. Of the six key B2B media company revenue categories (Magazines, Custom Publishing, Data, Online, Tradeshows and Conferences), Online revenue showed the strongest growth, increasing 15.1 percent in 2008, and rising at a CAGR of 26.8 percent from 2006. Magazines were the weakest performers, showing an 8.4 percent decrease in 2008, and a decline of 3.9 percent on a CAGR basis over the three year period.

Search and display ads work together

Just as global marketers are learning to weave together old and new media into their campaigns, it no longer has to be an either/or decision about which form of digital to deploy. New research from iProspect indicates display ads do influence search behavior. The findings rely on data to support industry rhetoric that display ads and search work together to provide a bigger impact on campaigns. The "Search Engine Marketing and Online Display Advertising Integration Study" suggests that while 31 percent of people click on display ads, nearly as many – 27 percent -- go to search engines to provide a search. More than 20 percent type the company Web address into their browser and directly navigate to the Web site, and 9 percent respond by investigating the product, brand, or company through social media.

More signs of things at least not getting worse

• Although unemployment (8.9%) is at its highest level in decades, NEW claims for state unemployment benefits fell sharply last week, the fourth decline in five weeks. Many economists say this trend provides further evidence that the pace of layoffs has slowed after months of steep job cuts.

• Nonfarm payrolls fell 539,000, the smallest decline in six months

• The equity markets are not giving back their historic gains of the past two months – the Dow and S&P are up nearly 30 percent from their March lows and at or near positive territory for the year to date…..Bring on the headfake.

• OpenTable, the online restaurant reservation service, could soon become the first venture-backed company to be brought to the public markets in nine months. It’s a real company, whose service is easy to use, widely adopted with a legit balance sheet behind it. {Disclosure: We have perused its SEC filings, but have no financial stake in this company}

Fred Wilson, a partner at Union Square Ventures and a blogger about venture capital, recently wrote that the I.P.O. drought for venture-backed companies would end in the next year and perhaps by the end of this year. “I don't know if this market rally we've been having is a headfake or the end of the bear market. My gut says we'll see at least one more pronounced down move before we see bottom.”

For one, he said, venture capitalists have been punished long enough for selling shares of so many undeserving companies during the dot-com bubble. There are many high-quality companies sitting in the pipeline, ready to go public as soon as they can, he said. He argued that many of them — including OpenTable — have business models such as subscriptions, which make for strong public companies.

It’s similar to the equity markets in which many traders and analysts remain cautiously bullish on stocks. How come? In part it’s because pressure is rising for investors sitting on the sidelines to put to work their excess cash, which is garnering little interest because of the Federal Reserve's rock-bottom target aimed at spurring an economic recovery.

"The fundamentals almost don't matter at the moment," Cantor Fitzgerald strategist Marc Pado, told the Wall Street Journal today, pointing to recent data from the Investment Company Institute showing that retail investors are holding almost $4 trillion in cash reserves. "If we even get a small percentage of that money come into the market, you can easily get another leg to this rally."

Back to I.P.O.’s, the picture is not exactly rosy. I.P.O. filings are down 94 percent compared to last year and there have been only four I.P.O.’s this year, versus 28 by this time last year, according to Renaissance Capital’s IPO Home.

Still, there are some good signs for technology companies in the pipeline. Over the last 12 months, tech I.P.O.’s have been the most popular. Technology I.P.O.’s have returned on average 28 percent and health care and biotech I.P.O.’s have returned 24 percent, while all other sectors, including clean energy, have posted negative average returns, according to IPO Home.

Can the Big 3 business magazines save themselves?

Like the Big 3 automakers, the Big 3 business magazines may have to undergo a dramatic and painful restructuring to stay in the media game, says TechCrunch columnist Sarah Lacy. She says it’s a near certainty that Forbes, Fortune and BusinessWeek, will be cutting staff and frequency, but can still maintain some form of long-form investigative stories they’re famous for.

Here’s Lacy’s call for competing with blogs, Web pubs and other immediate, lower-cost forms of journalism: "ruthlessly collapse" the print and online versions into one unit, churn out one or two cover-length pieces per print issue while filling the rest with the best stories and user comments from the Web.” Then cut the money spent on courting new subscribers, and shift the entire marketing budget to promoting the Web product or real-life conferences and branded events. You’ve now got one publication, not two pretending to be one. One publication is a lot cheaper, even if it's printed on dead trees. Under this system, Lacy says, 99 percent of your staff's focus is on the online product, with the other one percent devoted to writing lengthy features for the print pub, which will continue to attract a separate audience. Yes, your pub will operate more like a blog, but it won't sacrifice the print ad revenue stream, either.

Food for thought.

As we’ve mentioned numerous times in recent months, every crisis breeds opportunity. You’re never going to get an “ALL CLEAR” memo in your inbox saying “The Great Disruption” is finally over, so it’s OK to resume hiring, spending and innovating. So if you think there’s even a reasonable chance things are not getting worse, then they’re probably a lot better than you think.

As Daniel Pink , author of Free Agent Nation, notes, our nation’s continued viability depends on what he calls the “imagination economy” – things like creativity, vision and playfulness – that cannot be outsourced. Now’s the time.