Budgeting for digital


Internet Advertising has experienced a meteoric rise in recent years and in 2006 accounted for 11.4% of the total advertising market in the UK.

It has been interesting to watch the shift from traditional marketing channels to the internet. What seemed like a slow start has turned into a massive flight to online, underpinned by solid return on investment metrics.

Perhaps what is more interesting is to observe how some companies struggle to get to grips with digital and seem unsure of how to plan and budget for their online spend.

Back in the old days the marketing department would produce a marketing plan for the year and the budget would be set in stone. It was unlikely that you would get any more money until the following year.

But does this model work for digital marketing, where feedback and results are far more instantaneous and opportunities present themselves on a more dynamic basis?

I often see big brands pausing their paid search campaigns or pulling their affiliate programs because they have ‘run out of budget’. Apart from annoying the affiliates (which is bad enough), it seems absolutely ridiculous that you would pause an activity that is producing your lowest cost per acquisition just because you didn’t put enough into the budget!

Surely digital requires a different approach? The results and feedback are instantaneous so the approach to budgeting needs to be fluid. It seems commonsense to me that marketing spend online should be tied to cost per acquisition (CPA). As long as the target CPA is met I see no reason to limit the budget.

Of course I understand that in the world of the big corporates this kind of flexibility is almost impossible to achieve, but they need to be aware of smaller companies out there who have adopted this flexible CPA model. This means that when those big brands ‘run out of budget’ the small fish are left to soak up all the sales!

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