US advertisers boost spending on WOM

31 July 2009

STAMFORD: Expenditure levels on word-of-mouth marketing increased by 14.2%, to $1.54 billion (€1.09bn; £933m), in the US last year, and will continue to enjoy double-digit growth over the period to 2013, according to figures from PQ Media.

Recent research from the Keller Fay Groupfound that "approximately 20% of WOM refers to paid advertising in media", while different "kinds" of word-of-mouth are also argued to be of varying levels of value to brand owners.

PQ Media defines the aim of word-of-mouth marketing as being to encourage "consumers to dialogue about products and services through various online and offline tactics, often facilitated by brand ambassadors."

The company estimated that spending through this channel registered a compound annual growth rate of 37.6% between 2003 and 2008, boosted in particular by the rise of tools such as blogs, social networks and online communities.

The strategy and consulting segment of the word-of-mouth industry recorded revenues of $832m in 2008, an annual uptick of 7%, while WOM agencies saw billings improve by 18.7%, to $197m.

Expenditure on developing online communities rose by 26.6%, to $119m, while word-of-mouth media was up by 34.6%, to $109m.

Consumer packaged goods firms were responsible for around 17% of all outlay, with food and drink brands on 12%, and finance, electronics and retail all taking a share of between 9% and 10%.

It is also predicted that total category revenues will expand by 10.2% this year, making WOM "among the fastest growing advertising and marketing segments."

For the period to 2013, PQ Media further forecasts that word-of-mouth's CAGR will reach 14.5%, taking it to a total value of $3.04bn, "as more brands include WOM in their media mix and ROI metrics improve."

John Bell, president of the board at WOMMA, argued that "recession or not, our research and our experience clearly tells us that marketers see word-of-mouth marketing and social media marketing as essential. Done well and ethically, the trust, credibility and impact it builds is unsurpassed."

Data sourced from PQ Media; additional content by WARC staff