Word of mouth, sometimes referred to as buzz marketing or viral marketing, was the fastest-growing slice of the $254 billion marketing industry last year, and is expected to account for more than $1 billion of ad spending in 2007, according to a report by PQ Media of Stamford, Conn., an alternative media researcher. That number is forecast to reach $3.7 billion by 2011, fueled in part by the eruption of blogs and the increasing popularity of social networking sites such as Facebook.

Word of mouth, paradoxically, is one of the oldest forms of advertising. As long as there have been brands, people have talked about them, both positively and negatively. Yet it is only in the past few years that a diverse range of marketers have begun to make it a regular staple of their brand strategies. For one thing, it is relatively cheap. More important, it is trusted.

“It totally outweighs all the other forms of advertising and marketing direct in terms of trust,” said Leo Kivijarv, vice president of research for PQ Media. A recent survey by A.C. Nielsen found that 78 percent of respondents viewed recommendations from other consumers as trustworthy. That compares with 63 percent for newspaper ads, the second most-trusted medium, and well above the 18 percent for text ads on mobile phones.

Trust, however, can be a double-edged sword. Nothing can kill a brand faster than bad word of mouth, precisely because feedback from other consumers is viewed more credibly than a conventional piece of advertising.

Value of Advertising in a Downturn“Planning is bringing the future into the present so that you can do something about it now. “ —Alan Lakein
While U.S. gross domestic product (GDP) rose 4.8% during 2007, advertising spending did not keep pace. In fact, the national Universal McCann forecast published last week put U.S. ad spending growth for 2007 at a truly disappointing 0.7%.

On the one hand, it’s flattering that our industry, advertising, is first in one area: as a leading indicator of the nation’s economic health. I only wish we didn’t owe that position to being first on the chopping block when our clients look for ways to improve a sagging bottom line.

More disturbing was a decrease in ad revenue for the second consecutive quarter—the first time that has happened since the 2001 recession.

One bright spot, however, is projected to be direct mail — especially data-base direct mail that drives viewers to personalized URLs (PURLS). Universal McCann recorded that 2007 national direct mail budgets grew by 7.5 percent, and direct mail is expected to be a growth media for 2008. A recent Pitney Bowes/International Communications Research study found that “73 percent of consumers prefer to receive product announcements and offers via US mail from companies they do business with.” And the Direct Marketing Association recently reported that nearly 40% of consumers prefer to respond to an advertisement online, making PURLs an area of deep interest for marketers. Other predicted bright spots in ad spending will be: outdoor, cinema and some newer media and event marketing.

Which brings me to the topic, “What Is The Value of Advertising During an Economic Downturn.” Read the uploaded file!