Growth in Digital Marketing and How to Benefit from it

Tuesday, March 3, 2009
By Faisal Laljee

The economy has affected all sectors of the world economy and there is not a single area that has not felt the pain. Retail, autos, health-care, finance, non-profit, government, manufacturing, services, consumer staples – all have suffered in some form or another. One of the areas hit hardest is Media.

Anyone affiliated with media agencies, service providers, newspapers, television and radio will tell you that business is down significantly, circulation of newspapers and magazines are staring at an accelerated decline, advertisers have tightened their belts and as a result, a lot of agencies have shut down completely.
According to the U.S. Local Media Annual Forecast (2008-2013) by BIA Advisory Services and division Kelsey Group, advertising in traditional media such as television, radio, magazines, newspapers, direct mail and print Yellow Pages will decline from $141.3 billion in 2008 to $112.4 billion in 2013, a loss of over 20% in 5 years. In 2009 alone, Newspaper advertising will decline more than any other medium, going from $37.9 billion in 2008 to $31.9 billion in 2009, a drop of almost 16% according to eMarketer. Ad spending on TV spending too, will decline by 4.2% in 2009, to $66.9 billion.
Contrast this with digital media – internet, mobile, display ads, search advertising, video ads etc. This segment of the media business is set to increase by 129%, from $14 billion in 2008 to $32.1 billion in 2013. In other words, digital media will jump from being 10% of all media spend in 2008, to 30% of all media spend in 2013.
So why is traditional media suffering when digital media is thriving? Economy as I mentioned above, is the number one culprit. However, there is another event taking place. More and more people are consuming digital content than ever before, and consuming it for longer hours than they watch television, listen to radio or read newspapers. Whether it is in the form of social networking on Facebook, LinkedIn or MySpace, or in the form of consuming video content on Youtube or Hulu, or simply reading the news on or WSJ online, the internet is fast catching up to the current (but not-for-long) champion of media – the Television.

Moreover, audience participation and interaction to advertising on the internet can be monitored, tracked and reported a lot more easily and accurately compared to other media outlets, so businesses want to pour their budgets more and more into the internet for the sake of being able to track their revenues back to the spend.

The one internet giant that stands to benefit from this shift is Google. It has over 70% of the internet search market. Competitors like Yahoo and Microsoft either don’t have the focus or the technology to compete with them while they keep rolling out innovative ways to capture the internet audience.

Since November 2007, Google has seen its stock price tumble from around $750 to $330 last week (although it has dipped below the $300 mark on a couple of occasions in the last four months). The time to buy Google is now. It is trading at less than 14 times earnings and has over $15 billion in cash. With media trends pointing to this shift from traditional media to digital, you can be rest assured that Google stands to be the primary beneficiary.

– Faisal Laljee
Full Disclosure: I do not own Google, but my position can change anytime without notice.

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