Forrester Research: US Interactive Marketing Spending To Reach $61 Billion By 2012.

Barriers Between Traditional And Interactive Marketing Will Dissolve Within Five Years

CHICAGO -- Interactive marketing spending in the US will more than triple over the next five years, reaching $61 billion by 2012, according to a new Forrester Research, Inc. (Nasdaq: FORR) report released today at the Forrester Consumer Forum 2007 in Chicago. Forrester expects that a maturing perspective about interactive channels coupled with technology advances will eventually lead to interactive technologies infusing all marketing efforts, and the interactive marketing organization will dissolve.

"As firms continue to make customer centricity a higher priority, they will recognize that maintaining separate marketing teams to manage different sets of channels that all target the same customers makes no sense," said Forrester Research Principal Analyst Shar VanBoskirk. "Over the next five years, we see interactive technologies gradually infiltrating all media -- including such traditional paragons as television, billboards, and direct mail -- and the concept of a separate interactive marketing organization will disappear."

The growth in interactive marketing spending represents a 27 percent compound annual growth rate (CAGR) over the next five years. Interactive marketing -- which currently comprises 8 percent of all ad spending -- will grow to 18 percent of total ad budgets in five years.

The Forrester forecast is based in part on a survey of 344 interactive marketing professionals and their budget decisions affecting display ads, search, email marketing, online video, and emerging media (social, mobile, and advergaming). Forrester's breakdown of spending includes the following:

* Search marketing will triple in five years. Mainstream marketers' aggressive use of search marketing will grow the category at a CAGR of 26 percent to $25 billion by 2012 due to the increasing costs of paid search, additional spending on optimization tools and services, and international expansion.

* Display advertising will reach $14 billion by 2012. Display ads will be a key factor in the interactive marketing budget by having an essential supporting role for all interactive campaigns.

* Services and integration -- not volume -- will drive email marketing growth. Spending will focus on improving email relevancy with analytics and data management, and will grow to more than $4 billion by 2012.

* Online video ads will significantly increase. Growing consumer adoption of online video will result in a dramatic 72 percent increase in online video ad spending to $7.1 billion by 2012. More customer-centric online video applications will increase the medium's appeal for consumers and marketers.

* Social media will drive emerging channels to $10 billion by 2012. Mainstream adoption will boost spending in emerging channels such as social media, mobile, game marketing, widgets, podcasts, and RSS. Spending on social media alone will grow to $6.9 billion as marketers understand how to use and measure this channel.

* Mobile marketing will grow to $2.8 billion. As consumers become increasingly tied to personal computing handsets, they'll want to extend their mobile utility to accommodate transactions. This transition will drive mobile marketing to grow to $2.8 billion by 2012.

"These changes will not only affect the budget structure of marketing organizations, but it will also give interactive marketing professionals a more legitimate seat at the marketing table," VanBoskirk continues. "In fact, with interactive marketing gaining executive visibility as much for its popularity with young consumers as for its measurability and cost effectiveness, we see a class of marketers emerging who will involve themselves with a few high-profile interactive experiments in order to catapult themselves into the CMO seat."

"US Interactive Marketing Forecast, 2007 To 2012" is currently available to Forrester RoleView clients and can also be purchased directly at http://www.forrester.com/go?docid=42463

About Forrester Research

Forrester Research, Inc. (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. For more than 24 years, Forrester has been making leaders successful every day through its proprietary research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com.

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