Several months ago, Procter & Gamble Chairman – CEO A.G. Lafley made a very surprising statement about the state of P&G’s marketing efforts. Specifically he mentioned that by his estimates, P&G spends upwards of 35% of its total marketing budget on digital. For a company long associated with spending huge amounts of dollars on traditional mediums such as TV, Radio and Print this statement seemed completely baffling. Stated another way, Ad Age estimated that in 2012 that P&G spent approximately $4.8 billion on advertising in the US, which would put the range outlined by Mr. Lafley at $1.2 to $1.7 billion.
However, after a closer look, one has to consider how different digital media is from other forms of advertising. How so? Simply stated, When it comes to digital marketing, media as it turns out, only constitutes a small portion of what most companies would consider their entire digital marketing investment. Conversely, when you look at other forms of more “traditional” marketing, online media most often constitutes the lion’s share of the budget. Therefore, it’s the investment in media that often comprises the yardstick by which most budgets are measured.
With the above being said, it came as no surprise that most people were baffled by Mr. Lafley’s statement, because most equated it with an assumption that P&G was now going spending between $1.2 billion and $1.7 billion on digital media. However, when you look at what constitutes a digital marketing spend; nothing could be further from the truth.
Dissecting The DNA of the Digital Marketing Budget
So, where do the dollars go and how do they get spent? As the below chart from Gartner illustrates, while online display advertising/media still encompasses the largest portion of the digital marketing budget, it still only represents 12.5% of the overall spend.
The reality here is that when it comes to digital budgeting, it’s important that it be viewed within the context of the varying facets that comprise the digital “channel”, not just singular initiatives such as media or production. I say this as, as when it comes to digital it’s clear that the lines are blurring and that the tactics noted above are now more than ever, interrelated. For example, to say that website design does not impact content creation and that content creation does not impact search and that search does not impact email marketing, would a completely inaccurate statement. Therefore, when looking at the various facets that comprise the digital budget, now more than ever, it’s important to recognize the integrated nature of the digital channel, and fund them accordingly.
Beyond this, what the aforementioned chart also illustrates is the importance of diversifying the digital budget. Simply stated to heavy-up in one area, but completely neglect another, could result in serious missed opportunity, or worse…wasted spend. For example, if you were to make a significant investment in online display, you also need to consider how this will impact other elements of the digital channel, such as your website, email program and analytics. Therefore, it’s key that you look to design your budget accordingly, such that you are able to effectively capitalize on and realize the full value of your digital investment.
Additionally, when dissecting the components of the digital marketing budget, one factor that is clearly reinforced is the breadth of opportunity that the digital channel provides. Simply stated, when you look to dissect the components of the digital marketing budget, what’s abundantly clear is the varying ways it enables you to connect with your target, be it search, social, email, blogging and more. For client-side marketers, this budgetary dissection can provide a solid foundation for how to build your digital strategy, and for agencies, dissection can provide a roadmap for how to develop and build associated service offerings.
Therefore, in looking at the aforementioned chart from Gartner, while not everyone’s overall digital investment will be the same, one way to look at it is as a yardstick for budget allocation and/or prioritization. For example, as a client-side marketer, you may want to look at your current digital budget allocation and see how it measures against the percentages and initiatives outlined in this chart. Are you covering all the bases? Are you under or over invested in certain areas? Conversely for agencies, you may want to look at your current digital service offerings and see how the measure against what is outlined above. Are your areas of focus is aligned with the ways that marketers are actually allocating their digital dollars? Is there an opportunity to expand or evolve your current service offerings?
Ultimately, when you look to dissect the DNA of the digital marketing budget, it clearly provides what I feel is a unique view into the world of digital. It’s about recognizing the power of the “channel”. It’s about understanding the importance of diversification. It’s about realizing the strength of tactical integration. Most importantly, it not only provides insight into how and where the digital dollars are going, it provides insight into how the marketers of today (and tomorrow) are now framing their digital strategies.