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Some Sanity Comes to the Hype Cycle

The PQ Media forecast of the size of Word Of Mouth Marketing injects some needed discipline into the crazy projections floating around about the growth of WOM. Putting this study side-by-side with some other reports and it becomes clear that social media is about a $1 billion industry.

My post about whether social media is climbing the hype curve brought Paul Chaney by who wanted to stir up more discussion about the state of adoption of these new tools.

There have been a plethora of studies on how much money marketers are spending in these emerging areas which are zeroing in on the billion-dollar number.

There may be some definitional differences between "word of mouth", "social media" and "conversational" marketing in these studies. But let's set those aside for the moment and try to triangulate these different data points to get close to a real number.

  • PQ Media says marketers will spend $1.35 billion on WOM this year. Disclosure: I'm on the Board of the Word of Mouth Marketing Association which participated in the PQ Media study.
  • An eMarketer report quoted by Jim Tobin on his Ignite Social Media blog says that "social media marketing" is 7.8% of online marketing spending. eMarketer's online advertising report pegs spending at $21.4 billion -- so social media's 7.8% share of this equals $1.67 billion.
  • Forrester pegs online advertising at $18.4 billion and social media at $600 million.

While the range from $600 million to $1.6 billion might drive the statistical purists crazy, as an ex-analyst I look at it and say it's all in the same ballpark. The differences are likely due to 1) the different definitions that I set aside 2) the emerging nature of the market which makes it devilshly hard to come up with any numbers 3) different assumption each analyst necessarily makes. 

So, let's call the size of social media marketing spending a billion. As Everett Dirksen was famous for saying, "A billion here, a billion there, pretty soon you're talking real money."

Social media is reaching the point of being a real item in the marketing mix. I'm willing to accept this wide range of numbers because that high-level conclusion jibes perfectly with my experience in talking to our clients and sales prospects.

And as I said in this post, marketers need to keep their eyes on consumers, not the VC world, and gear their spending accordingly.

Posted by Jim Nail on November 20, 2007 at 12:54 PM | Email this post Permalink
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