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Customer Acquisition

The Online Marketing Arms Race

Online marketing was pretty easy when I first started doing it in 1996.  It wasn’t rocket science that you should test ads for response rates and measure conversions (the deeper the better). But surprisingly a lot of people weren’t following this process.  Considering that there was less than $20 per year competing for the attention of each US Internet user, this little edge made it easy to profitably acquire lots of customers online.

Marketing is Getting Harder

But in the last few years, online marketing has gotten much harder. Marketers now pile in more than $140 per user in advertising each year.  To compete, today’s online marketers must seek every possible advantage. The graph below highlights the problem, showing a trendline of the average dollars spent advertising to USA Internet users in each of the last 16 years.  I calculated it based on IAB spend reports and several different data sources for USA Internet users over the years.  Based on the trendline, it appears the problem will continue to get worse.

Dollars spent advertising to each USA web user

Before 2010, Process and Tools Were Nice-To-Haves

Until a few years ago, it was only the savviest marketers that spent a lot of time focusing on the post click user experience.  This gave them a significant competitive edge in the channels.  It certainly worked for me. For example, at one startup we had hit a wall scaling our marketing spend so we refocused efforts on funnel optimization for a few months.  Afterwards, we went back and tested the same channels that had previously scaled to only $10,000/month in profitable spending and they now scaled to over $1,000,000/month in profitable spending.

And I was a bit of a laggard when it came to keeping up with marketing tools.  Sure I had a few favorites to help with optimization but told myself I was too busy to keep up with all the tools.  Fortunately, most really were “nice-to-haves” so I was still able to compete as an effective marketer.

One example of a category I missed in recent years was the emergence of marketing automation. I didn’t even know what it really meant until about six months ago.  Now that I’ve explored marketing automation solutions like Marketo and Hubspot, it’s clear that they provide a tremendous advantage to B-to-B marketers that effectively integrate them into their marketing and sales process.  These tools essentially push the marketing process deeper into the funnel, where sales people previously wasted a lot of time qualifying leads over email or ignored them altogether. By automating the lead qualification and nurturing process, marketing automation tools free the sales team to focus on prospects that are most ready to buy.

The net result is that more leads convert to sales, allowing the marketer to spend more money generating each lead.  Of course this only exacerbates the “noise” problem in the paid channels.

And competition for people’s attention is no longer constrained to paid online marketing channels.  Over the last few years, many online marketers have hacked growth in ways that didn’t require spending on online media.  This ranges from incentivized user-get-user programs like the one at Dropbox, to content and social marketing, ecosystem integrations, search engine optimization and the list goes on…

Must-Haves for Marketers

We’ve reached a point where it’s increasingly difficult to consider leading edge processes and emerging marketing tools as “nice to haves.”   Without the edge they provide, most marketers will fail.

Most enterprises realize this and are expected to dramatically increase their investments in marketing tools over the next few years.  This Gartner study suggests that the marketing technology budget will soon be bigger than the CIO’s technology budget.

Innovation Accelerating

All of this investment by enterprises is accelerating innovation cycles in new marketing tools.  More startups, including Qualaroo, are raising significant funding to pursue that next “break through marketing innovation.”

Staying on Top of It All

Of course there will be some duds in the emerging marketing tools. But that’s no excuse to not stay on top of things and give many of tools a good test drive.  Finding the right tool is only half the battle.  Being creative enough to leverage the tool to drive a result is where the best marketers will really shine.

If you’re not sure where to start with all the emerging tools, I tend to find that marketing consultants are the most knowledgeable.  I expect over the next few years that marketing consultants will increasingly play “system integrator” roles that help companies select and leverage the right marketing tools to drive growth.  I’ve already come across a handful of consultants and agencies that provide tremendous value with these types of services.

Discussion

3 Responses to “The Online Marketing Arms Race”

  1. Agree, IMHO creative gurreilla marketing esp. something that leverages the social graph are going to get more popular as the CAC on SEO, SEM continues to go up.

    You mentioned consultants and agencies that you have come across that provide tremendous value. Could you please share those agency names on my email?

    Posted by Goldee Udani | February 1, 2013, 6:37 am
  2. Great post, Sean. Really surprised that more people haven’t talked honestly about this.

    My observation has been less quantitative: it is getting harder and harder to get any consumer mindshare for what I write. There is just an overwhelming amount of content fighting for scarce attention.

    These trends need to be a major consideration for startups and marketers at established companies: innovate on marketing or get killed.

    I made some additional comments on this article in a Soundcloud podcast:https://soundcloud.com/kevindewalt/what-the-online-marketing-arms

    Posted by Kevin Dewalt | February 16, 2013, 11:45 pm
  3. Very informative post. I think that marketing technology and processes are changing very quickly. It’s important for the smaller companies without marketing departments to spend time researching the new stuff, but not jumping on different bandwagons, until the marketing tool is tested and have favorable reviews.

    Posted by Tish | April 25, 2013, 4:00 am

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