Intel's Web Spend Mandate Could Mean Big Bucks for Online

It’s been established that consumers spend more time online than with other media, but most advertisers have yet to devote enough dollars to the channel to reflect that. Intel, which spent nearly $100 million on ads last year, recently announced it will shift half its marketing budget to the interactive channel by 2009. And it’s taking along big ad-spending partners like HP, Dell and Sony.

“We absolutely have been shifting our strategies more and more online,” said Intel Global Media Director Kathleen Malone. “As Internet consumption grows it really is a terrific opportunity for a technology company to be in the right place at the right time.”

Historically, Intel has spent roughly 15 to 20 percent of its advertising budget online, and plans to increase spending in the category to 35 to 40 percent in 2008, and 50 percent by 2009, according to Malone. While Intel wouldn’t discuss numbers, TNS Media Intelligence reports the chip manufacturer spent $98.2 million on all its U.S. advertising in 2006. Of that, it spent about $17 million or 17 percent on online display advertising. That doesn’t even factor in search marketing, an important element of Intel’s integrated strategy.

To follow Intel’s interactive directive, the chip manufacturer is mandating its partners spend a minimum of 35 percent of their program budgets online.

Intel faces a challenge when marketing, in that it doesn’t sell directly to consumers, but its processors are sold in computers as part of OEM (define) deals. The company tries to reach consumers in the research stage, when they may be considering what components they need in a new computer.

“There’s several ways we address that challenge,” said Malone. “At the highest level, making sure we are communicating technology leadership, [we] drive innovation for technology, and that it really resonates across our platform categories.”

Intel’s advertising responsibilities are divided among select agencies. The company uses McCann Worldwide for creative, Universal McCann for media, and SEMDirector to manage search campaigns.

Developing marketing campaigns about its processors is one part of Intel’s strategy. A second component is co-op advertising with OEM partners through the Intel Inside program, which began in 1991. When partners including Dell, Hewlett-Packard, Sony and Toshiba purchase Intel processors, they can draw from a marketing fund Intel sets aside for their advertising, events, and marketing efforts that promote the Intel brand.

As part of the new digital initiative, Intel created a third fund for online dollars. The 35 percent portion mandate is a minimum guidance; partners can exceed the allocation by drawing from the two other funds for online activities.

“Originally the program was very print focused,” said Rob Rollinger, worldwide online program manager of the Intel Inside program. “Several years ago we moved to broadcast media. What we’re doing now is a similar historic shift.”

Co-op ad partners may have a bit of retooling to do to accommodate Intel’s new online requirements. TNS reports HP put 23.6 percent of its $472 million ad budget online last year, or around $111 million. In 2006, Dell spent 18.9 percent of its $730 million ad budget, or $137.7 million, on Web ads. Toshiba spent 19.1 percent of its $42.8 million advertising budget online, or about $8 million.

One of its biggest-spending partners, Sony spent a mere 7 percent of its over $1 billion budget online.

Though it’s unclear how much of their ad budgets are used to cross-promote the Intel brand, those four partners alone (Intel has several more) spent over $2 billion on all U.S. advertising in 2006, according to TNS. Many of the partners’ operations include non-computer categories such consumer electronics and entertainment that wouldn’t be affected by Intel’s online requirement.

As a technology company, Intel sees the relevance of advertising on the Internet. The shift towards marketing and advertising online is the product of exhaustive research conducted by the company which recognizes “a shift in the marketplace, rampant adoption of broadband, and an always-on Internet,” said Rollinger. “We think this has changed how marketers conduct business with their consumers.”