As lower costs and potentially higher returns drive more corporate advertising dollars into online media, the DM industry could be on the verge of another electronic marketing boom.

Direct’s latest survey of its readers’ online activity reveals that more than a third of all respondents allotted a portion of their budget to electronic sales. This includes 45% of those from consumer-focused firms, 38% from business-to-business companies and 28% who service both.

How much are we talking about? According to JupiterResearch, online advertising spending will hit $8.4 billion this year, and should rise to $13.8 billion by 2007, when it will achieve parity with magazine advertising outlays.

The fortunes of firms that attend to e-commerce reflect this. For example, Marchex, an online search service provider, saw a 66% sales spike during the second quarter over the same period in 2003. Aquantive Inc., another Web marketing services firm, did even better during the quarter, reporting an 83% jump in revenue. Also during the second quarter, MSNBC.com turned a profit for the first time since its launch in July 1996.

The number of firms planning significant increases in Web marketing spending during the last few months of this year was considerably higher than the figure from the same period in 2003. Among consumer companies, more than double (29% vs. 13%) indicated they would earmark substantially more money for online efforts, as did a similar amount of mixed-focus firms (22% vs. 11%). And two-thirds more B-to-Bers (12% vs. 7%) say they’ll be boosting spending in a big way.

Looking ahead to 2005, nearly 66% of the consumer companies anticipate further increases in their online marketing budgets, compared with more than half of the B-to-B and mixed-focus firms.

However, despite these hikes, electronic marketing is playing only a comparable role in driving sales as it did in years past. This year, Web site transactions accounted for 20% of all sales, about the same as last year. But the players are getting larger. More and more, the top Web advertisers are Fortune 500 companies, notes the OECD Observer, an economic trends publication.

Take the automotive sector. Honda currently allocates between 4% and 6% of its marketing budget to online efforts, and BMW dedicated 16% of its advertising dollars to the Internet when it launched the 1 Series, according to the Digital Bulletin newsletter.

The increases come as online marketers continue to develop new ways of reaching consumers. Previous years have seen the rise and fall of banner advertising and unsolicited e-mail’s effectiveness. While these tools are still part of online marketers’ arsenals, sponsored e-mail newsletters and search engine marketing are gaining prominence.

In the case of search engine use, the rules are still being written, and the industry is growing. Search-focused revenue has gone from $1.4 billion in 2002 to $3 billion this year, says investment firm Piper Jaffray & Co., and could hit $6.9 billion by 2007. JupiterResearch is somewhat more conservative with its estimates, seeing the search market at $5.5 billion by 2009, with the average click price jumping from 2003’s 29 cents to 47 cents in 2009.

Bringing customers to a Web site through searches may be the hot trend. However, marketers still lag in their efforts to customize the experience once prospects land there. Only 28% indicated they tailor their sites to individual visitors; the mixed-focus (38%) and B-to-B firms (26%) are more likely to do so than consumer companies (22%). But consumer marketers are more apt to analyze clickthrough data gathered from their sites, with 71% indicating they do, compared with 59% of mixed-focus marketers and 55% of B-to-B companies.

If they’re not customizing on the fly, what are these firms doing with their Web sites?

They’re displaying information about products and services and taking orders that are ranked highest across all customer categories.

Even so, while more than half of the B-to-B and mixed-focus marketers generate telephone sales leads, only around 25% of the consumer firms manage to do this

As lower costs and potentially higher returns drive more corporate advertising dollars into online media, the DM industry could be on the verge of another electronic marketing boom.

Direct's latest survey of its readers' online activity reveals that more than a third of all respondents allotted a portion of their budget to electronic sales. This includes 45% of those from consumer-focused firms, 38% from business-to-business companies and 28% who service both.

How much are we talking about? According to JupiterResearch, online advertising spending will hit $8.4 billion this year, and should rise to $13.8 billion by 2007, when it will achieve parity with magazine advertising outlays.

The fortunes of firms that attend to e-commerce reflect this. For example, Marchex, an online search service provider, saw a 66% sales spike during the second quarter over the same period in 2003. Aquantive Inc., another Web marketing services firm, did even better during the quarter, reporting an 83% jump in revenue. Also during the second quarter, MSNBC.com turned a profit for the first time since its launch in July 1996.

The number of firms planning significant increases in Web marketing spending during the last few months of this year was considerably higher than the figure from the same period in 2003. Among consumer companies, more than double (29% vs. 13%) indicated they would earmark substantially more money for online efforts, as did a similar amount of mixed-focus firms (22% vs. 11%). And two-thirds more B-to-Bers (12% vs. 7%) say they'll be boosting spending in a big way.

Looking ahead to 2005, nearly 66% of the consumer companies anticipate further increases in their online marketing budgets, compared with more than half of the B-to-B and mixed-focus firms.

However, despite these hikes, electronic marketing is playing only a comparable role in driving sales as it did in years past. This year, Web site transactions accounted for 20% of all sales, about the same as last year. But the players are getting larger. More and more, the top Web advertisers are Fortune 500 companies, notes the OECD Observer, an economic trends publication.

Take the automotive sector. Honda currently allocates between 4% and 6% of its marketing budget to online efforts, and BMW dedicated 16% of its advertising dollars to the Internet when it launched the 1 Series, according to the Digital Bulletin newsletter.

The increases come as online marketers continue to develop new ways of reaching consumers. Previous years have seen the rise and fall of banner advertising and unsolicited e-mail's effectiveness. While these tools are still part of online marketers' arsenals, sponsored e-mail newsletters and search engine marketing are gaining prominence.

In the case of search engine use, the rules are still being written, and the industry is growing. Search-focused revenue has gone from $1.4 billion in 2002 to $3 billion this year, says investment firm Piper Jaffray & Co., and could hit $6.9 billion by 2007. JupiterResearch is somewhat more conservative with its estimates, seeing the search market at $5.5 billion by 2009, with the average click price jumping from 2003's 29 cents to 47 cents in 2009.

Bringing customers to a Web site through searches may be the hot trend. However, marketers still lag in their efforts to customize the experience once prospects land there. Only 28% indicated they tailor their sites to individual visitors; the mixed-focus (38%) and B-to-B firms (26%) are more likely to do so than consumer companies (22%). But consumer marketers are more apt to analyze clickthrough data gathered from their sites, with 71% indicating they do, compared with 59% of mixed-focus marketers and 55% of B-to-B companies.

If they're not customizing on the fly, what are these firms doing with their Web sites?

They're displaying information about products and services and taking orders that are ranked highest across all customer categories.

Even so, while more than half of the B-to-B and mixed-focus marketers generate telephone sales leads, only around 25% of the consumer firms manage to do this — a big drop from last year. Consumers have become more protective of their telephone numbers, and even companies that have established business relationships with individuals are wary of using the phone to contact them, especially if the individual is on the FTC's do-not-call list.

Companies are using e-mail to contact Web site visitors regardless of the market they serve. But targeting both e-mail and direct mail follow-up campaigns to site visitors ranked higher than generating phone leads for the consumer firms. A higher percentage of B-to-B and mixed-focus organizations indicated that telephone leads were more of a priority than leads serviced through these other two channels.

It's a small wonder that consumer firms are anxious to contact Web site inquirers by e-mail. In the wake of anti-spam sentiment, they are the most cautious when it comes to using unsolicited e-mail. More than a third use e-mail to contact customers or inquirers, while only 5% of the B-to-B and 11% of the mixed-focus companies did so.

This caution also is reflected in marketers' permissions practices. Among consumer firms, 39% rely on single opt-in before sending e-mail, compared with 44% last year. Another 19% use a double opt-in, while just 15% go with opt-out.

Double opt-in's use has grown among B-to-B and mixed-focus companies as well, with 16% and 26% choosing it so far this year. Both are substantial increases from 2003 levels. Thirty-one percent of B-to-B marketers use a single opt-in screen, as do nearly half of the mixed-focus businesses.

What do these messages look like? Fewer and fewer depend on text-only content, with just 60% sending their messages in this format. Sixty-eight percent use HTML messages, while 66% contain direct links to Web sites. Seven percent use streaming video in their e-mail blasts.

For all the growth in Web marketing, staff levels largely have remained constant. Only 14% of respondents expanded their online-related employee base, while 77% indicated the number of workers kept steady. But the past couple of years have seen a drop in firms reporting cutbacks in personnel, from 11% in 2002 to 4% this year.

METHODOLOGY

This survey was conducted for Direct by Primedia Business Market Research, an in-house firm. It was e-mailed to 3,957 Direct subscribers who indicated their jobs were in corporate or general management at companies that use 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 June 9. Two follow-up e-mails, along with the sweepstakes offer, were sent to non-respondents.

Results are based on surveys returned by 162 qualified participants.

Respondents identified themselves as corporate or general managers (77%); sales, marketing or telemarketing executives (14%); advertising or promotion managers (3%); and circulation, list or media managers (1%). The remaining 5% noted they were fulfillment, operations or production managers, development directors, or directors of direct marketing.

The median annual revenue specified was $16 million. Current-year revenue reported by survey participants was as follows: under $1 million (45%); $1 million to $2.5 million (13%); $2.5 million to $5 million (5%); $5 million to $10 million (5%); $10 million to $25 million (10%); $25 million to $100 million (12%); $100 million to $500 million (6%); $500 million to $1 billion (1%); and more than $1 billion (3%).