CMOs’ Digital Spend Skews to Paid Over Owned or Earned Media

September 28, 2022

Marketing expenses account for more than one-eighth of companies’ overall budgets, according to the latest installment [pdf] of The CMO Survey. In fact, the 13.8% share of company budgets that CMO respondents estimated are devoted to marketing expenses represents the highest level in the survey’s history, and up from the 11.8% share in the previous survey (released in February).

At the same time, marketing expenses’ share of company revenues has declined to pre-COVID levels. In this latest edition marketers estimated that their expenses account for 8.7% share of revenues, down from 10.4% in the prior survey, and far below a high of 13.2% recorded in February 2021. Gartner recently came to a similar conclusion – with CMO respondents estimating that 9.6% share of their companies’ revenues were devoted to marketing – though in its survey this was down from pre-COVID levels.

The difference between marketing’s increasing share of company budgets and decreasing share of company revenues is attributed by The CMO Survey to “the soaring revenues that marketers report over the last year.” The report’s results also indicate that Product companies tend to devote more of their budgets and revenues to marketing than Services companies, with B2C Product companies allocating easily the highest share of both budgets (22.7%) and revenues (15.1%) to marketing.

Digital Marketing Budgets

Interestingly, digital marketing budget growth appears to have dropped off of late. After reporting a significant 20.2% digital marketing spending increase over the prior year in February, respondents in this latest edition say that digital marketing spending has grown by 15% over the previous year. Looking forward, they expect a relatively modest 10.1% hike in digital marketing spend in the coming year.

All told, respondents estimate that they spend 57.9% of their budgets on digital marketing, a figure again very close to what Gartner found (56%) in a recent survey. B2C companies tend to lean more heavily on digital than their B2B counterparts, and Product companies allocate slightly more to digital than their Services counterparts.

So how is the digital budget allocated? As it turns out, the largest portion (44%) of digital spending goes to paid media, including SEO, SEM, display, etc. This has been rising rapidly in recent years, with 2021 turning in the fastest growth in US digital ad spend in 15 years. Extrapolating this out, this suggests that if companies are spending 58% of their budgets on digital, and 44% of that is allocated to paid media, then paid digital media accounts for about one-quarter of marketing budgets.

The next-largest piece of the digital pie goes to owned media – at 34.4% share. This includes content marketing, email marketing and marketing automation, and post-sales digital support, among others.

By comparison, a relatively small amount of the digital budget – 11.2% share – is devoted to earned media, which includes digital brand media not under the firm’s control, such as reviews and user-generated content.

The remaining tenth (10.4% share) is allocated to any spending outside of paid, owned, and earned media.

An analysis of the results by primary economic sector reveals that B2C Product companies heavily weight their digital spending to paid media – at almost two-thirds of the digital budget – while B2B Services companies are unique in allocating more of their digital spend to owned than paid media.

Other Findings:

  • Overall, R&D budgets are 4.4% higher than marketing budgets, though that masks significant differences by economic sector. Both B2C Product (+15.5%) and Service (+16.1%) companies spend more on marketing than R&D, while the opposite is true for B2B Product (-18.4%) and Service (-18.8%) companies.
  • After predicting small amounts of growth in the past 2 editions of the survey, marketers now expect a slight dip (-0.7%) in traditional advertising budgets in the coming year.
  • Three-quarters of companies invested in optimizing their websites over the past year in order to improve the performance of their digital marketing activities.
  • Fewer respondents than in the previous survey said they invested in marketing technology systems or platforms to improve their digital marketing performance.
  • Digital marketing’s contribution to company performance has dipped over the past year, rated in this survey as an average of 4.7 on a 7-point level (where 7=contributed very highly in the past year), down from 5.0 in February and 5.5 in February 2021.

For more, check out the study here.

About the Data: The results are based on a survey of 273 marketers at for-profit companies, 95.6% of whom are VP-level or above.

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