Econometrics firm, Magic Numbers’s recent study shows that marketing’s increasing average return on investment (ROI) is due to an evolution in the technologies we use online.
Marketing is never effective if you do not see a return on your spending. Whether this is spending on Facebook ads, out-of-home billboards, a workshop or even sending goody bags to clients - you must see a return for it to be worthwhile.
According to the new findings, average ROI across big brand marketing has actually been dropping between the years of 2005 and 2016. To give you an idea, in 2016, ROI was a third of the 2005 levels!
Since then, however, the number has been steadily rising and in 2019 ROI had jumped up to 140% growth compared to 2005. Unwarded campaigns see a 3.8x ROI meaning they see £3.80 for every £1 spent on advertising - a return not to be sniffed at for brands with solid profit margins.
The report suggests that the evolution of online technologies in advertising (yes we’re looking at you programmatic and audience targeting) has had a significant impact on the ROI of campaigns.
Think back to 2005 (easier to do if you weren’t still running around the playground like most of us), Facebook had just started to become a real thing and we hadn’t even discovered the power of TikTok, right? There has been some incredible movement and seismic shifts in the way we market online, all in the name of being better and more profitable.
The report actually shows that a shift in the percentage of marketing budget spent online has also put a focus on effectiveness. In 2005, just 9% of most budgets were invested online. By 2016, this was 17%, almost double. This continued to rise to 35% in 2017 and has hovered around the 20-someting% ever since.
There is a general correlation between the percentage of budget spent online and the ROI of campaigns. Whilst some brands in industries such as e-commerce will be spending upwards of 60-70% of their budget online, many including the entertainment industry still prefer offline methods for a return on investment.
“While this dataset is not fully conclusive on the issue of whether there has been a more general crisis of effectiveness, we favour the explanation that effectiveness has been in flux,” the report concludes.
“Based on this dataset and our own experience we believe that in the last 15 or so years a lot of experimentation has been taking place, and that in the last five years the experimentation is starting to come to fruition, so we’re now seeing a more mature use of the newer channels and so better RROI.”
An incredible piece of insight when it comes to big brand spending, we definitely think that with the development of a metaverse and continued expansion of advertising methods on platforms such as TikTok, brands will find effectiveness to come more naturally online, if they have the money to spend.
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