Spending on Alternative Media Jumps 22%

Marketers Follow as Consumers' Broadband Use Surges

By Jonathan Lemonnier

Published: March 26, 2008

NEW YORK (AdAge.com) -- Spending on alternative media hit $73.43 billion in 2007, a 22% increase over the previous year, and will continue to grow, according to PQ Media's Alternative Media Forecast: 2008-2012, released today. The research firm tracked 18 digital and nontraditional segments, with a combined 16.1% of total advertising and marketing dollars in 2007, up from 7.9% in 2002, yielding a compound annual growth rate of 21.7%.

The forecast predicts a 20.2% increase over the next year, to a total of $88.24 billion, and a compounded annual growth rate of 17% for 2007-2012, reaching $160.82 billion. By then, alternative media will represent 26.6% of all advertising and marketing dollars.

'Where the money is going'
The upswing is as much a result of the effectiveness of new media in a fragmented market as it is from a lack of confidence in traditional media, said PQ Media President Patrick Quinn. "Traditional ad budgets have been going down, but spending has remained stable. This shows where the money is going," Mr. Quinn said.

"There is a lack of standards in these new areas," Mr. Quinn added. "Digital out-of-home advertising is getting recall rates as high as or higher than traditional mediums, but there are few studies on this. They're going to need more and deeper metrics: The bar is being raised across the board."

Alternative advertising, including online, mobile, entertainment and digital out-of-home advertising, saw spending rise at a compounded annual growth rate 25.8% to $39.22 billion in 2007, accounting for 17.7% of all ad spending that year (compared with 7% of all ad spending in 2002), and grew at a compounded annual growth rate of 26.2% from 2002 to 2007.

Online and mobile advertising spending --including search and lead generation, online classifieds and displays, e-media, online video and rich media, internet yellow pages, consumer-generated ads, and mobile advertising -- reached $29.94 billion in 2007 (up 29.1% compared with 2006), a compounded annual growth rate of 31.4% over the 2002-2007 period. The category received heavy infusions from brand marketers trying to reach key demographics that have migrated online and to wireless thanks to wider broadband adoption.

Entertainment technologies
Entertainment and digital out-of-home advertising -- including local pay TV, digital out-of-home media, video on demand, interactive TV, and digital video recorder, video game, home video and satellite radio advertising -- increased at a compounded annual growth rate of 15% from 2002-2007, and rose 16.2% over the previous year to $9.28 billion in 2007. The growth was driven by rising adoption of entertainment technologies, including ad insertion technologies and ad platforms to reach young audiences.

Alternative marketing -- including branded entertainment and interactive marketing -- hit $34.21 billion in 2007, a 17.9% rise over the previous year, and grew at a compounded annual growth rate of 17.5% from 2002-2007. This brings its share of total marketing expenditures up to 14.5% in 2007, compared with 8.7% of total spending in 2002.

Branded-entertainment marketing -- including event sponsorship and marketing, paid product placement, advergaming and webisodes -- also saw and increase of 14.7% to $22.30 billion last year, and climbed at a slower compounded annual growth rate of 13.4% from 2002-2007.

New-media strategies
The deployment of new-media strategies focusing on better interactivity, entertainment and engagement than traditional media was the driving factor.

Thanks to strong gains in segments that reach affluent and influential consumers, interactive marketing -- including e-direct marketing, word-of-mouth marketing, and e-custom publishing -- saw big increases in 2007 of 24.4%, reaching $11.9 billion, compared with the previous year, and a compounded annual growth rate of 28.6% over the 2002-07 period.

"The top-growing segments all share the same similarities," said Mr. Quinn. "They tend to be influential or youth demographics, the coveted 18- to 34-year-old, mostly male demographic with a strong digital component."