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Word-of-Mouth Posts Big Gains

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August 11, 2009

Marketers are slashing many ad budgets in the downturn, with eMarketer predicting an 8.2% decline in US total media ad spending in 2009, after a 3.6% decrease last year.

Some channels continue to grow, however, including word-of-mouth. According to PQ Media, much this growth is due to the rise of new media channels, such as blogs, social networks and other online communities.

The research firm found that US word-of-mouth spending on online communities increased 26.6% in 2008 to $119 million.

Further, after 37.6% compound annual growth from 2003 to 2008, PQ Media predicts total US word-of-mouth marketing spending will keep climbing, albeit at a slower pace. They estimate word-of-mouth dollars will rise 14.5% compounded annually between 2008 and 2013.

US Word-of-Mouth Marketing Spending, by Segment, 2008 & 2009 (millions, % change and % share)

Total word-of-mouth spending for 2009 is estimated at more than $1.7 billion, a 10.2% year-over-year increase.

“Despite impressive growth in the industry, word-of-mouth remains just a fraction of the overall advertising and marketing landscape,” said Patrick Quinn, president and CEO of PQ Media, in a statement. “But double-digit growth in this economic environment is a strong sign of an increasingly prevalent role in the future.”

Consumer goods firms were the biggest spenders on word-of-mouth in 2008, with a 17.4% share of the total. The food and beverage industry contributed 12.2% of spending. Other shares were below 10%.

US Word-of-Mouth Marketing Spending Share, by Industry, 2008 (% of total)

“The most influential marketer in a consumer’s life is someone they know and trust, such as a family member, friend or colleague,” said Mr. Quinn.

Data from Mintel supports that assertion. Among US Internet users who bought a product based on a recommendation, 34% said that recommendation came from a friend or relative. One-quarter followed the advice of a spouse or partner. (For more information, see “Whose Word-of-Mouth Matters?”)

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