Marketers to increase digital budgets by 17% as online channels gain more ground.

Companies will increase their digital marketing budgets by an average of 17% in 2010, according to research published by Econsultancy and ExactTarget.

The new report, Marketing Budgets 2010: Effectiveness, Measurement and Allocation, has found that digital marketing will account for 24% of overall marketing spend this year.

The research, based on a survey of more than 1,000 companies, found that 28% of firms are shifting at least some of their overall marketing budgets from traditional to digital channels.

Linus Gregoriadis, Econsultancy’s research director, said: “Companies are increasing their budgets for most digital channels. Social media marketing is the area where companies are most likely to be spending more money in 2010, but areas such as search engine marketing and email will remain buoyant.”

The outlook for offline marketing channels is much less favorable than for digital. Companies are more likely to be decreasing rather than increasing their budgets for direct mail, telemarketing, television, print media and radio.

Morgan Stewart, director of research and strategy at global digital marketing provider ExactTarget, said: “The shift from offline to online is in full swing as marketers look to measure direct increases in top-line sales, site traffic and improve overall marketing return on investment.”

He added: “Interestingly, brand reputation is becoming a more significant driver of the migration to digital marketing, particularly when it comes to social media.”

According to the research, paid search is the best digital marketing channel for being able to measure return on investment (ROI), with 54% of respondents indicating that they are “good” at measuring ROI for pay-per-click (PPC) search activity.

The majority of respondents are based in the US (45%) or UK (33%) but the survey is global.

Other key findings

– Just under half (46%) of companies say they are planning to increase their overall marketing budget, and a further 42% say they are planning to keep this budget the same as it was in 2009. Only 13% say they are planning to decrease overall marketing budget.

– 70% of responding companies are planning to increase their budgets for off-site social media (e.g. networking sites, Facebook and Twitter). For on-site social media (such as blogs or ratings and reviews), 64% of companies are planning to increase their budget.

– Search engine optimization (organic search) is also buoyant with the same proportion (64%) of companies planning to increase budgets in this area. This compares to 51% for paid search marketing.

– Similarly, more than half of companies are planning to increase their budgets for mobile marketing (56%), email marketing (54% of companies for both acquisition and for retention) and paid search (51%).

– The marketing channels that will be hit hardest are print media (newspapers & magazines) and radio. Only 17% of respondents say they are increasing their print media budgets, compared to 41% who are decreasing spending. Similarly, 15% of companies are increasing their radio budgets but 36% are spending less.

– Companies have more difficulty measuring return on investment from mobile marketing than for any other digital channel, with 43% of companies rating themselves as “poor” at measuring this. Similar percentages of respondents say they are poor at measuring social media ROI, both on-site (38%) and off-site (40%) activity.

– According to company respondents, the biggest barrier to digital marketing investment is restricted budget for all types of marketing, cited as a factor by 40% of company respondents. But according to agency respondents, lack of understanding about digital is the biggest impediment. Just under half (48%) of supply-side respondents cite this as the biggest problem.