£37 billion spent on digital advertising 'wasted', study estimates

14 July 2015

Up to 60 per cent of annual spend on digital marketing is wasted, according to procurement services provider Proxima.

In its report, The Digital Disconnect, Proxima says spend on digital marketing, such as on search engine optimisation, mobile apps and video-on-demand services, is failing to deliver results companies expect.

Proxima said 50 per cent of total advertising budgets in the UK, totalling around £7.9 billion, and around 30 per cent in the US, £32.9 billion, is spent on digital marketing, but brand and commercial content is not reaching the right audience.

It cited statistics from the Association for National Advertisers in the US that up to 35 per cent of all web activity was fraudulent or artificial, and the UK Interactive Advertising Bureau, which said 54 per cent of online adverts were not seen by a human.

Proxima estimated that up to 60 per cent of global spend on marketing, around £37 billion a year, was wasted.

John Butcher, marketing services director at Proxima, said there were several factors contributing to the gap between digital activity and commercial outcomes. These included action being driven by fear rather than rational thought, a generational gap within teams, measuring inputs versus true business outcomes, and the gap between what is known and what is unknown in digital marketing.

“All of these factors combined to create a lack of transparency and consequently, a lack of control over this significant area of business spend,” said Butcher.

“This opacity is resulting in ineffective digital marketing spend, fraud and wastage and because there is no “industry standard” approach, businesses do not have sufficient transparency, nor do they have sufficient capacity, to effectively control this area of significant investment. However, in such a turbulent environment, business can’t afford to get this wrong.”

Proxima said procurement could help companies pinpoint the effectiveness of digital marketing investment. It said companies needed to better understand how to buy digital marketing tools and channels and how to work with third party media networks. Butcher said good procurement could act as the ‘marriage counsellor’ between client and agency.

“Tasking procurement to lead cross-functional collaboration between all intermediaries frees marketing leaders to better engage with customers, focus on brand ambassadorship and ensure the marketing strategy is aligned to true commercial outcomes,” he said.

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