Online Shopping, Online Advertising Increasing

Shopping OnlineHoliday spending in the U.S. was up 5.5% this year compared to last, according to the SpendingPulse division of MasterCard Advisors, and online sales, specifically, were up 15%. A report from comScore indicates that U.S. online spending had already topped $30.8 billion this holiday season, a 12.8% increase from the same time period last year. Whether 12.8% or 15%, it’s still a noticeable difference.

“Online holiday spending has remained strong through Christmas,” said comScore chairman Gian Fulgoni. “For at least this holiday season, the American consumer has been able to shrug off the continuing economic challenges of high unemployment rates and depressed housing prices and spend at a rate that has been slightly stronger than we had expected. After the past few years’ struggles, it is gratifying to see e-commerce return to a state that can only be described as a very merry holiday shopping season.”

“With multiple ways to go online and with more activities once they get there, people spend more time online,” said eMarketer principal analyst David Hallerman. “Simply put, marketers increasingly know that to reach their target audience, they need to advertise more online and rely less on traditonal methods like Pole Banner Hardware.” Data from business information service eMarketer shows that online ad spending in the last quarter of 2010 was the second strongest yet since 1999.

Yahoo doubled its online ad earnings in the third quarter of 2010, and Google‘s third quarter earnings for online advertising topped $2.2 billion. In 2010, U.S. advertisers spent more on online ads — $25.8 billion — than on print newspaper ads for the first year ever. eMarketer predicts that online ad spending will break $40 billion by the time 2014 hits.

Jesse Thomas, CEO and founder of JESS3, a Creative Interactive Agency, compiled his “Top 6” predictions for digital advertising in the new year. Among Thomas’ predictions are that brands will become full-on media companies rather than relying on an outside PR machine to spread their message. “As brands become increasingly comfortable with social media on the whole, more budget and attention will be focused on high quality content created specifically for the social web,” writes Thomas. “We will see more Facebook Pages like Skittles that appear to employ comedy writers to keep the content fresh.” He also believes that Facebook “Likes” will be important to brands, and Facebook advertising will triple.

Not surprising, then, that Facebook is looking into ways to increase e-commerce tie-ins on its site, partnering with such companies as Delta Air Lines and J. C. Penney. Olga Kharif, a senior writer who covers technology for Businessweek, writes:

Facebook is adding e-commerce features to attract users, keep them logged-on longer, and generate higher advertising sales. The effort may turn the company into an online shopping alternative to retailers such as eBay (EBAY), says Sucharita Mulpuru, an analyst at Forrester Research (FORR). ‘It’s not natural to go to Facebook to shop—yet,’ says Mulpuru, whose firm is based in Cambridge, Mass. ‘But it’s not a long step.’

With a recent $500 million investment from Goldman Sachs and its partners, Facebook’s valuation has topped $50 billion, giving the social media giant even more resources to battle Internet titan Google. It appears that Google is also going after a bigger piece of the online shopping pie with its Boutiques.com.

E-commerce has taken over on a smaller scale, too. Several school districts are making the most of the online shopping increase to aid their fundraising campaigns. Shoppers visit websites called “furtals” and choose from partner merchants such as Amazon, Gap, Kohl’s, Barnes & Noble, Bass Pro Shop, Wal-Mart, Apple iTunes, Petsmart, Sears, Target, Macy’s, Office Depot, Expedia and K-Mart. The schools then benefit from cash back rewards given by the merchants.

Source: “Online holiday spending increases 13%,” Internet Retailer, 12/30/10
Source: “PULSE: U.S. holiday retail spending up 5.5%: report,” Morningstar, 12/28/10
Source: “Online Ad Spending Set to Break Records,” eMarketer, 01/03/11
Source: “Help schools by shopping online,” Daily Press, 12/24/10
Source: “DNS: Online Ads More Popular Than Newspapers Ads,” TMCnet, 12/22/10
Source: “6 Predictions for Digital Advertising in 2011,” Mashable, 12/21/10
Source: “Online Ad Spending Exceeds Print, Hitting $25.8 Billion,” Forbes blog, 12/20/10
Source: “Facebook Ramps Up Big E-Commerce Drive,” Businessweek, 12/20/10
Source: “Goldman Gives Facebook a $450M Lift,” E-Commerce Times, 01/03/11
Image by Gareth Saunders, used under its Creative Commons license.

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