Dot-com Boom

THOSE WHO FOLLOW MEDIA SPENDING PATTERNS MAY BE in for a surprise.

Four years after the dot-com bust, DMers are creating a mini-boom, according to Direct’s 2005 online marketing survey. Almost 60% plan to raise their online spending in 2006, and this year they shifted money out of traditional channels to do it.

Where are these dollars going? For search, analytics, Web site customization and staff. However, there’s little or no growth in outside e-mail list rentals, largely because of the spam issue. But e-mail is still being used for multiple purposes.

The result of all these expenditures? Online sales now account for 25% of our respondents’ total revenue, up from 20% a year ago. And online orders have been as profitable, or more so, than offline ones.

FOUR YEARS AFTER THE dot-com bust, DMers are creating a mini-boom, according to Direct’s 2005 online marketing survey.

Almost 60% plan to raise their online spending next year, and that’s only one sign of a tidal shift.

On average, our respondents allocated 41% of their marketing budgets to online channels this year. That’s up from 25% in 2004.

And they moved dollars out of traditional channels to do it. They’ve budgeted 59% for the old DM channels, compared with 75% last year.

What are they spending their online dollars on? Search engine marketing, analytics and Web site customization programs. The number of firms listed on at least one search engine has jumped, with smaller companies leading the way.

And once prospects have been lured onto Web sites by search engines, they’re finding the sites customized for them. To support this, marketers are investing in analytics and data capture systems.

In addition, DMers are using their sites to perform functions that will be followed up by postal mail — i.e., billing and invoicing, lead generation and loyalty building.

Companies also are investing in personnel. Nearly 25% added to their online marketing staffs during the first half of 2005, a jump from 14% last year.

These efforts are paying off. Online sales now account for 25% of our respondents’ total revenue, up from 20% a year ago. And online orders have been as profitable, or more so, than offline ones.

But growth lags in at least one area. DMers have become wary of using their Web sites to generate e-mail or telemarketing leads. They’ve also pulled back on renting outside e-mail lists — at least according to one set of responses.

Asked about the sources they use to build their e-mail marketing lists, 23% cited rented lists, compared with 29% in 2004. A similar number — 24% — said they rent outside lists. But that number rose by three percentage points over ’04.

Despite that discrepancy, it’s clear that marketers are wary about renting e-mail lists, and that is largely because of the spam issue.

Dierdre Baird, CEO of e-mail deliverability services firm Pivotal Veracity, offers this explanation: A legitimate company can be branded a spammer if the IP address its vendor uses to blast messages has previously been tagged as a spam source, or if its URL appears in an e-mail message that’s caught by a spam filter.

Most of the big e-mail players aren’t making their own lists available for these reasons. The net result, Baird says, is that the quality of lists on the market has been diminished In fact, only 6% of all respondents rent their lists at all.

Where are they getting e-mail addresses? From customers, and to a lesser extent through affiliate programs.

This is not to say that there isn’t money to be made in e-mail. As the channel matures, marketers are switching to service firms such as traditional list vendors, e-mail specialists and affiliate partners to get their messages out.

Methodology

This survey was conducted for Direct by Primedia Business Market Research, an in-house research firm. It was e-mailed to 2,923 Direct subscribers with responsibilities in corporate or general management at companies using electronic commerce. Participants were chosen on an nth-name basis (a representative sample of all subscribers).

An initial copy of the survey, offering a chance to win one of four $50 Amazon.com gift certificates, was sent out July 14. Two follow-up e-mails, along with the sweepstakes offer, were sent to non-respondents.

Results are based on surveys returned by 130 qualified participants.

Respondents were corporate or general managers (66%); sales, marketing or telemarketing executives (10%); advertising or promotion managers (3%); and circulation, list or media managers (2%). The remaining 19% were fulfillment, operations or production managers, development directors or direct marketing managers.

The median annual revenue specified was $16 million. Participants reported current-year revenue as follows: under $1 million (44%); $1 million to $2.5 million (9%); $2.5 million to $5 million (8%); $5 million to $10 million (8%); $10 million to $25 million (6%); $25 million to $100 million (9%); $100 million to $500 million (5%); $500 million to $1 billion (3%); and more than $1 billion (7%). Numbers may not total 100% due to rounding.