No ROI doesn’t mean digital marketing spend is falling

The ever illusive Return on Investment figure for digital marketing and in particular social media marketing is not slowing down the trend of companies throwing even more buckets full of cash at the digital marketing channel. Is this the realization of the post-digital era? Is it because there is now an agreed upon ROI conversion? I personally think it is more the former; but let’s see how the numbers look.

Across the board this year marketing budgets appear to be on the increase when compared to 2012. True this is spurred on by a slightly more positive economic outlook; but I think there is a sentiment from business that they need to invest in finding and nurturing new clients or they are going to get left behind.

Online research company eMarketer released the following stat a few weeks ago which compares US companies marketing budgets (online and offline) between this year and the last.

A staggering 71% of companies are planning on increasing their digital marketing budgets; this could greatly be at the expense of their offline marketing spend as only 20% of companies are increasing their offline spend.
According to this same survey; the split between online and offline spend on average is 35% online and the remaining 65% offline. This is still a huge percentage difference; but when we compare this to a few short years ago when nearly all online marketing budget was “experimental”; this is a monumental shift.

Here is where things begin to get interesting for those who report that digital marketing is difficult to report an ROI.

The numbers in the graph above are rather frightening. Digital marketing is by far and away the best marketing medium to demonstrate a ROI.

I understand in the cases listed above such as “video advertising” and “social media investment” as these are similar to TV ratings and radio ratings (TAMS and RAMS). It is difficult to assign a value to a view of your advert or video; there is no direct and built-in way of tracking whether this view became a sale or whether or not it managed to make them feel more or less attached to your brand.

What I do not understand is how PPC (Pay Per Click) marketing has 43% of respondents saying that they were not satisfied with their ability to measure the spend. Pay per click marketing by its very definition has the built-in ability to track how well or poorly an advert is doing. The medium is intrinsically linked to a website which should be running a form of analytics (Google Analytics; Adobe Omniture); not to mention the built-in tracking like in Google’s Adwords.

The same can be said of email marketing; SEO and so on. I personally feel that there are potentially a few things which are at fault here. (As a caveat I would like to point out that I am definitely generalizing with the following two
statements):

1. Companies are not achieving the results that they are expecting to see in their digital marketing efforts and are rather laying blame on the mediums measurability as opposed to their own methods or potentially personnel.
2. Digital marketing agencies are notoriously good at selling an award-winning idea or campaign that is clever and fun; but not aligned to the business goals of the business. When it comes to the punch; the agency then delivers ROI based on the incorrect metrics to show that the campaign was effective; but it is not delivering the ROI that the business was looking for and therefore companies feel that the medium cannot deliver the correct ROI.

In either case; the future is still bright for digital marketing as companies are clearly seeing its benefits of reach and engagement if not for business goal alignment and achievement.