$1.54 billion spent on word-of-mouth, social media marketing in 2008
Spending on word-of-mouth marketing rose 14.2 percent to $1.54 billion in 2008, despite the worst economic recession in 70 years, according to recent research from PQ Media.
Spending on word-of-mouth marketing, which includes social media channels such as Twitter and Facebook, is on pace to grow another 10.2 percent this year, placing it among the fastest growing advertising and marketing segments, according to the research.
In comparison, advertising and marketing services are all expected to decline in 2009 for the first time since the Great Depression of the 1930s.
PQ Media defines WoM marketing as an "alternative marketing strategy" driven by "brand ambassadors" (cheerleaders or evangelists, if you will) online and offline.
(The company excludes viral, guerrilla and one-time stunt marketing, as well as underhanded tactics such as spam.)
"The most influential marketer in a consumer's life is someone they know and trust, such as a family member, friend or colleague," said PQ Media CEO Patrick Quinn in the statement.
(I assume each dollar spent consists of paying someone to utilize these services and methods, but I've placed a call to the study's authors for more information. I will update this post as necessary.)
Industry spending increased at a compound annual growth rate of 37.6 percent from 2003 to 2008. That can be attributed to the rise in popularity of blogs, social networks and online communities, which has led brands to shift dollars to word-of-mouth marketing as a part of their overall strategy to engage consumers.
Total spending on word-of-mouth marketing is expected to increase at a compound annual growth rate of 14.5 percent from 2008 to 2013.
Brand marketers accounted for nearly 30 percent of all word-of-mouth marketing spending in 2008.
Spending on word-of-mouth online communities increased 26.6 percent in 2008 to $119 million. It's the smallest component of word-of-mouth marketing at the moment, but is the fastest growing segment: spending is up 34.6 percent in 2008 to $109 million.
Most interestingly, word-of-mouth strategy and consulting remains the largest segment at $832 million in 2008, but year-over-year growth slowed to 7 percent. Word-of-mouth agencies grew 18.7 percent to $197 million in 2008, according to the data.
Which begs the question: Are firms paying millions for witch doctor marketing methods that have no way of proving their effectiveness?