B2B Beat: Why Digital Marketing Transformation Is Like an Iceberg

March 29, 2015

Welcome to B2B Beat, a new weekly series in which our resident B2B expert, Sean Callahan takes a close look at the most important trends and issues facing B2B marketers today.

This is a tale of two studies, both of which were recently released and both of which show how marketing and advertising are undergoing a massive transformation and becoming increasingly digital.

In the first study, media-buying giant Carat projected that 2015 global advertising spending will reach $540 billion, 4.6 percent growth over last year. That growth stems in large part from a 15.7 percent growth in digital, which is driven by surges in mobile and online video spending, as Advertising Age detailed in this story.

This Carat report is valuable for marketers, but, because it focuses on above-the-waterline media, the report only sees the tip of the digital iceberg that is transforming marketing. To identify all of the major trends that are transforming their discipline, marketers, especially B2B marketers, must dive deeper.

And there is a report that just does that -- it looks at the entire iceberg, even below the waterline. This report is Outsell Inc.'s Annual Advertising and Marketing Study, which projects that combined spending on advertising and marketing, just in the United States, will reach $452 billion this year, which is a 4.6% increase over 2014. Digital spending (both advertising and marketing), according to Outsell, will grow 9.3% to $198 billion in 2015.

The Outsell report shows that much of the digital transformation is difficult for outsiders to see or measure in the same way that media spending can be measured. For instance, the Outsell report found that the top three areas of spending for marketers are, in descending order: websites, TV advertising, and email marketing. Of those three, only TV advertising is above the waterline.

Today, most of the digital transformation of marketing occurs in the data-driven, technologically focused spending inside of organizations, where marketers are investing in marketing automation software, analytics tools and other technologies. The Outsell report notes that B2B marketers are driving the spending increases in these marketing technologies. This spending is big and getting bigger.

How much bigger?

Ashu Garg, general partner at Foundation Capital, answers that question in his recent ebook, MarTech and the Decade of the CMO. “We expect technology spending by CMOs to increase 10x in the next 10 years, from $12 billion to $120 billion.”

The growth in above-the-waterline digital ad spending goes hand-in-hand with below-the-waterline investment in marketing technology. Marketers spend more on digital advertising, in part, because their marketing automation and analytics tools integrate with digital advertising to help enable personalized messaging, lead tracking, and ROI measurement.

And a recent Forrester Research report illuminated just how big digital advertising is poised to become. Forrester analyst Shar VanBoskirk projected that U.S. digital ad spending will eclipse TV spending in two years and surpass $100 billion by 2019. By then, digital spending will total $13 billion more than TV spending.

Furthermore, a recent survey from the Information Technology Services Marketing Association analyzed the makeup of a complete B2B marketing budget – not just the advertising segment. The survey found that the lion’s share – 42 percent -- of a B2B marketing budget was allocated to personnel. About 28 percent went toward programs and campaigns, and 15 percent funded content marketing, a remarkable figure for a relatively new concept.

The ITSMA also found that just 5 percent of the budget was dedicated to “tools” – that is, marketing technology. But that spending figure will likely grow if Garg’s “Decade of the CMO” comes to pass. (An indication of the CMO’s growing budget power is that 79 percent of respondents to the ITSMA survey said they had access to funds outside of their budgets).

In addition to altering their spending on technology, Garg anticipates that marketers will continue to change the way they buy media and gravitate toward outlets that enable increased use of targeting. The trend away from content buying and toward buying audiences (using data to target individuals based on their demographics and their behavior) will continue to grow. “The value attributed to content, and therefore to media, will decline,” Garg writes. “Super Bowl ads will cost half as much in a decade.”

Perhaps then it will make more sense for a B2B marketer to buy a spot on the Super Bowl in 2025. In the meantime, their investments in below-the-waterline marketing technology and all things digital will continue to accelerate.

B2B Career Move of the Week:

Mini Peiris was named CMO of OpenGov, which markets cloud-based software to state and local governments. Peiris was most recently Vice President of Global Marketing at NetSuite and previously worked at Interact Commerce Corp.

B2B Resource of the Week:

LinkedIn unveiled The Sophisticated Marketer's Crash Course in Full Funnel Marketing. The short ebook outlines the basics of full funnel marketing -- why it's a necessity in the digital age, how to navigate the two-stage funnel, and what goals, tactics, and metrics are right for the upper and lower stages of the funnel. Download the ebook today: