E-mail will decline as a percent of online budget, report predicts

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By Carol Krol

E-mail marketing—along with search and online display ads—will benefit from marketers’ shift in spending from traditional to online advertising channels, according to a marketing forecast by Forrester Research released this week. However, the report predicted that e-mail marketing, which is now one of the top tactic used by online marketers, will drop as a percent of total online marketing spending in the future.

B-to-b marketers will boost e-mail spending as it proves its effectiveness at lead conversion, wrote report co-authors and Forrester analysts Charlene Li and Shar van Boskirk. They note that a steady stream of e-mail novices, coupled with an emphasis on customer segmentation, analytics and measurement, will drive spending increases. U.S. e-mail marketing spending is expected to increase 4% to $1.45 billion in 2005 compared with 2004, according to the Forrester report. By 2010, that number will hit $1.66 billion.

However, e-mail as a percent of total online spending will drop to 10% in 2005, down from 12% last year, and will continue to drop through 2010. E-mail as a percent of all online spending in 2006 will drop to 9% in 2006, 8% in 2007 and 7% in 2008 and 2009, according to the report.

The falloff in e-mail will occur because marketers won’t treat it as an independent channel as they move to more data-driven strategies, according to the report. E-mail budgets will exist as part of a larger investment that can run multichannel "conversations" that sequence e-mail, direct mail and Web offers.

Nearly half of marketers surveyed for the report said they plan to decrease spending in traditional advertising channels this year to fund an increase in all ad spending overall. Total U.S. online marketing spending will reach $14.7 billion this year, up 23% over 2004, according to the report. By 2010, online advertising and marketing will make up 8% of total ad spending, according to Forrester.

Search engine marketing is projected to grow by 33% this year and reach $11.6 billion by 2010. Display advertising, which includes traditional banners and online sponsorships, will grow at an average annual rate of 11% over the next five years, reaching $8 billion by 2010.

The Forrester report was based on online surveys of 99 marketers, as well as data from previous Forrester studies.

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