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THE US HEALTHCARE & PHARMACEUTICAL INDUSTRY 2013Digital Ad Spending Forecast and Key Trends

OCTOBER 2013

Victoria Petrock

Contributors: Christine Bittar, Tobi Elkin, Cindy Liu, Martín Utreras

Read this on eMarketer for iPad

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THE US HEALTHCARE & PHARMACEUTICAL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 2

CONTENTS2 Executive Summary

3 Digital Ad Spending Forecast

9 Direct Response vs. Branding: A 54-46 Split

16 Mobile Investments Poised to Accelerate

18 Budget Pressures, Quest for ROI Shift Focus to Digital

20 Conclusions

20 eMarketer Interviews

21 Related eMarketer Reports

21 Related Links

21 Editorial and Production Contributors

EXECUTIVE SUMMARY

Advertising spending in paid digital media by the

US healthcare and pharmaceutical industry will

hit $1.18 billion in 2013 and rise to $1.47 billion by

2017. Though spending is growing quickly in some

less-regulated sectors of the healthcare industry,

continued privacy concerns, regulatory uncertainty

around prescription medicines and patent expirations

for blockbuster drugs will continue to put a damper

on pharmaceutical-related investments.

This year, eMarketer has taken a deeper dive into paid digital spending to determine how much marketers in vertical industries are investing in ad tactics primarily focused on obtaining sales or leads vs. those designed to drive favorable opinion about a brand. We estimate that healthcare and pharmaceutical marketers—including marketers of prescription and over-the-counter products, facilities, services, research, healthcare professionals, hospitals and biological products, as well as establishments providing healthcare services and social assistance for individuals—will invest 54% of their paid digital dollars in direct-response efforts this year. The remaining 46% will be invested in branding-focused campaigns. Search and display will command the largest chunks of digital spending, with growth expected in the areas of mobile, local, video and native advertising.

KEY QUESTIONS ■ How much will healthcare and pharmaceutical

marketers spend on paid digital advertising in the

next five years?

■ How much of their digital budgets are healthcare

and pharma marketers spending on direct response

vs. branding initiatives?

■ How are online and mobile platforms changing

the way the healthcare and pharma industry

approaches advertising?

billions, % of total digital ad spending and % change

US Healthcare & Pharma Industry Digital AdSpending, 2011-2017

20110

$1.02

3.2%

-11.9%

2012

$1.10

3.0%

7.8%

2013

$1.18

2.8%

7.2%

2014

$1.24

2.6%

4.9%

2015

$1.31

2.5%

5.7%

2016

$1.38

2.4%

4.8%

2017

$1.47

2.4%

7.1%

Digital ad spending % of total digital ad spending % change

Note: CAGR (2012-2017)=5.9%; includes advertising that appears ondesktop and laptop computers as well as mobile phones and tablets, andincludes all the various formats of advertising on those platforms; datathrough 2012 is derived from IAB/PwC dataSource: eMarketer, Aug 2013162036 www.eMarketer.com


DIGITAL AD SPENDING FORECAST

As one of the most conservative business segments

when it comes to digital advertising, the US

healthcare and pharmaceutical industry invested

$1.10 billion in paid online and mobile media in 2012

and will spend an estimated $1.18 billion this year.

This figure will grow to $1.47 billion by 2017. Between

2012 and 2017, industry spending will see only

5.9% compound annual growth, the lowest among

individual industries tracked by eMarketer.

As patents for blockbuster drugs continue to expire in unprecedented numbers, pharma marketers are reducing overall advertising spending. They are shifting media buys from mass-audience broadcast and print channels to more targeted, smaller-scale online and mobile venues in an effort to create more personal, one-to-one connections with desired audiences, including both healthcare professionals and consumers. And while industry executives are optimistic that this “smaller” digital marketing can both lower marketing costs and increase return on investment (ROI), significant obstacles and uncertainty remain. In short, though they have begun to “talk the talk,” they have yet to fully “walk the walk.”

billions, % of total digital ad spending and % change

US Healthcare & Pharma Industry Digital AdSpending, 2011-2017

20110

$1.02

3.2%

-11.9%

2012

$1.10

3.0%

7.8%

2013

$1.18

2.8%

7.2%

2014

$1.24

2.6%

4.9%

2015

$1.31

2.5%

5.7%

2016

$1.38

2.4%

4.8%

2017

$1.47

2.4%

7.1%

Digital ad spending % of total digital ad spending % change

Note: CAGR (2012-2017)=5.9%; includes advertising that appears ondesktop and laptop computers as well as mobile phones and tablets, andincludes all the various formats of advertising on those platforms; datathrough 2012 is derived from IAB/PwC dataSource: eMarketer, Aug 2013162036 www.eMarketer.com

Among industries individually tracked by eMarketer, the healthcare and pharma industry spends the least on paid online and mobile media, and growth is expected to remain sluggish over the next several years. eMarketer’s current forecast anticipates that the healthcare and pharma vertical will remain in last place when ranked by digital ad spending per industry through 2017.

billionsUS Digital Ad Spending, by Industry, 2012-2017

Retail

Financial services

Automotive

Telecom

CPG & consumerproducts

Travel

Computing products &consumer electronics

Media

Entertainment

Healthcare & pharma

Other

Total

2012

$8.2

$4.6

$4.3

$4.3

$3.0

$2.9

$2.8

$1.8

$1.7

$1.1

$2.1

$36.8

2013

$9.4

$5.2

$5.1

$4.8

$3.5

$3.4

$3.2

$2.2

$1.9

$1.2

$2.2

$42.3

2014

$10.5

$5.9

$5.9

$5.3

$4.0

$4.0

$3.6

$2.7

$2.2

$1.2

$2.3

$47.6

2015

$11.6

$6.5

$6.6

$5.8

$4.5

$4.4

$4.0

$3.0

$2.5

$1.3

$2.4

$52.5

2016

$12.6

$7.0

$7.3

$6.3

$5.0

$4.8

$4.4

$3.4

$2.8

$1.4

$2.5

$57.3

2017

$13.5

$7.5

$7.9

$6.7

$5.4

$5.0

$4.7

$3.6

$3.0

$1.5

$2.6

$61.4

CAGR(2012-2017)

10.5%

10.2%

13.1%

9.2%

12.6%

11.3%

10.5%

14.6%

12.2%

5.9%

5.1%

10.8%

Note: includes advertising that appears on desktop and laptop computersas well as mobile phones and tablets, and includes all the various formatsof advertising on those platforms; data through 2012 is derived fromIAB/PwC data; numbers may not add up to total due to roundingSource: eMarketer, Aug 2013161990 www.eMarketer.com

Moreover, eMarketer expects the healthcare and pharma industry’s share of total US digital advertising to fall from 2.8% in 2013 to 2.4% by 2017.

% of totalUS Digital Ad Spending Share, by Industry, 2011-2017

Retail

Financial services

Automotive

Telecom

CPG & consumer products

Travel

Computing products &consumer electronics

Media

Entertainment

Healthcare & pharma

Other

2011

22.4%

12.6%

11.3%

12.3%

7.8%

7.5%

7.8%

4.5%

4.4%

3.2%

6.2%

2012

22.3%

12.5%

11.6%

11.7%

8.1%

8.0%

7.7%

4.9%

4.6%

3.0%

5.6%

2013

22.3%

12.4%

12.1%

11.4%

8.3%

8.0%

7.6%

5.3%

4.6%

2.8%

5.2%

2014

22.1%

12.4%

12.3%

11.2%

8.4%

8.3%

7.6%

5.6%

4.7%

2.6%

4.8%

2015

22.1%

12.3%

12.5%

11.1%

8.5%

8.3%

7.6%

5.8%

4.8%

2.5%

4.5%

2016

22.0%

12.2%

12.7%

11.0%

8.7%

8.3%

7.6%

5.9%

4.8%

2.4%

4.4%

2017

22.0%

12.2%

12.9%

10.9%

8.8%

8.2%

7.6%

5.8%

4.9%

2.4%

4.3%

Note: includes advertising that appears on desktop and laptop computersas well as mobile phones and tablets, and includes all the various formatsof advertising on those platforms; data through 2012 is derived fromIAB/PwC data; numbers may not add up to 100% due to roundingSource: eMarketer, June 2013; confirmed and republished, Aug 2013157350 www.eMarketer.com


eMarketer’s US Digital Ad Spending Forecasts: Scope and Definitions

eMarketer’s US digital ad spending estimates for the years up to and including 2012 are benchmarked against data from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers. Estimates for years subsequent to 2012 are eMarketer’s own projections. Estimates are based on the analysis of reported revenues from major digital ad-selling companies; estimates from other research firms; consumer internet usage trends; and eMarketer interviews with executives at ad agencies, brands, digital ad publishers and other industry leaders.

eMarketer’s digital ad spending figures include advertising that appears on desktop and laptop computers as well as mobile phones and tablets and include all the various formats of advertising on those platforms: banner ads (static display), classified ads, email (embedded ads only), mobile messaging (SMS, MMS and peer-to-peer [P2P] messaging), rich media, search ads (including contextual text links, paid inclusion, paid listings and search engine optimization [SEO]), sponsorships, lead generation (referrals) and video (including in-banner, in-stream, in-text).

eMarketer’s breakouts of direct response vs. branding spending are based on overall estimates of spending by media from the IAB; analysis of third-party industry ad spending data; and in-depth interviews with healthcare and pharma brand marketers, agency media planners and other industry marketing strategists.

OVERALL SPENDING TAKES A HIT eMarketer’s forecast of slowing digital spending growth for the US healthcare and pharma industry is consistent with average or below-average growth in overall global healthcare and pharma marketing. In stark contrast with other industries that are ramping up spending as the US economy improves, pharma marketing remains closely tied to industry dynamics, patent cycles and regulatory actions that have had a chilling effect on marketing investment.

In 2012, Forrester Research reported that business-to-business (B2B) pharma, medical device and biotech companies in North America and the EU experienced an average 3% decline in marketing budget in 2011 and that those companies planned only a 2% increase in 2012.

Average Change in Marketing Budget According toB2B Companies in North America and the EU, by Industry, 2011 & 2012

High-tech services17%

9%

Finance and insurance8%

5%

High-tech products6%

7%

Manufacturing4%

7%

Business and professional services4%

7%

Pharma, medical devices and biotech-3%

2%

2011 2012

Note: 2011 n=448; 2012 n=864; at companies with 100+ employees; readchart as finance and insurance companies plan to increase their marketingbudget by 5% in 2012 vs. 8% in 2011Source: Forrester Research, "B2B Marketers Must Focus on Partnershipand Experimentation as 2012 Budgets Rise" as cited by MarketingProfs,May 9, 2012150291 www.eMarketer.com

In February 2013, Cegedim Strategic Data reported that US pharma marketers slashed their year-over-year promotional spending to $27.35 billion in 2012, an 8% cut.

millions and % change vs. same period of prior year

US Pharmaceutical Promotional Spending, by Marketing Channel, 2012

Clinical trials

Detailing

DTC

Mailing

Meetings

Print advertising

Samples

Total

Spending

$133.3

$14,997.6

$3,101.9

$1,164.5

$2,143.4

$91.8

$5,722.2

$27,354.7

% change

-13%

-5%

-22%

16%

-2%

-44%

-9%

-8%Source: Cegedim Strategic Data, "2012 US Pharmaceutical PromotionSpending," Feb 15, 2013152649 www.eMarketer.com


Furthermore, a significant 25% of pharmaceutical companies surveyed in April 2013 by Medical Marketing & Media and Ogilvy CommonHealth anticipated a decrease in their marketing budget this year. This compares with 24% of biotech companies and 13% of device marketers. The average marketing budgets for these types of businesses in 2013 were forecast at $23.0 million for pharmaceutical companies, $14.4 million for device makers and $7.7 million for biotech firms.

% of respondents

Change in Marketing Budgets in 2013 According to USHealthcare Marketers, by Company Type

Biotech66% 21% 13%

Devices64% 12% 24%

Pharmaceuticals58% 17% 25%

Total63% 16% 21%

Increase Stay the same Decrease

Source: Medical Marketing & Media and Ogilvy CommonHealth,"Healthcare Marketers Trends Report 2013," May 31, 2013160957 www.eMarketer.com

An analysis by Gartner found that marketing budgets for US companies in the more broadly defined healthcare industry were expected to grow just 5% in 2013, a figure still below average among industries studied.

% change

Average Growth in Marketing Budget in 2013 AmongUS Companies in Select Industries

Media 10%

Retail 7%

Financial services/insurance 6%

Healthcare 5%

High-tech 4%

Manufacturing 4%

Total 6%

Source: Gartner, "US Digital Marketing Spending Report 2013," March 13,2013153636 www.eMarketer.com

As DTC Falls, Spending Focus Shifts to HCPs Drastic cutbacks in direct-to-consumer (DTC) advertising are largely responsible for drops in pharma company ad spending. As a long list of once-profitable prescription drugs loses patent protection and pharma companies divert more money to R&D and innovation, they are investing less in reaching consumers with big-budget, shotgun approaches. Cegedim reported an overall 22% year-over-year drop in pharma firms’ DTC promotional spending in 2012, while Nielsen found that, excluding digital tactics, pharmaceutical DTC ad spending fell from $3.9 billion in 2011 to $3.4 billion in 2012.

billions

US Pharmaceutical Direct-to-Consumer (DTC) AdSpending*, 2008-2012

2008

$4.3

2009

$4.3

2010

$3.9

2011

$3.9

2012

$3.4

Note: *excludes digitalSource: Nielsen as cited by Medical Marketing & Media, April 1, 2013154951 www.eMarketer.com


Spending cuts by many of the largest DTC pharmaceutical marketers have been precipitous. For example, Pfizer’s DTC spending fell 30% from 2011 to 2012, while AstraZeneca saw a 38% drop.

millions and % change

Top 20 Pharmaceutical Companies Ranked by USDirect-to-Consumer (DTC) Ad Spending*, 2012

DTC ad spending*

1. Pfizer $622.0

2. Eli Lilly $433.5

3. Abbott $301.1

4. Merck $285.7

5. Amgen $229.5

6. AstraZeneca $209.2

7. Allergan $185.7

8. Boehringer Ingelheim $174.7

9. GlaxoSmithKline $171.8

10. Otsuka $115.1

11. Novo Nordisk $81.2

12. Novartis $72.7

13. Bristol-Myers Squibb $60.8

14. Johnson & Johnson $58.3

15. Teva $49.8

16. Sumitomo $47.8

17. Roche $46.9

18. Sanofi $38.3

19. Astellas $30.8

20. Shire $26.1

% change

-30%

-3%

65%

53%

63%

-38%

16%

-8%

-16%

-15%

12%

-27%

-28%

4%

64%

-36%

-27%

-13%

-28%

-21%

Note: *excludes digitalSource: Nielsen as cited by Medical Marketing & Media, April 1, 2013154949 www.eMarketer.com

Pfizer, however, did manage to make Kantar Media’s “Top 10” list of advertisers in Q2 2013, with a 54% jump in ad spending compared to the corresponding quarter of 2012 due mostly to mass-media TV and print purchased to promote two newly approved prescription products: anticoagulant Eliquis and Xeljanz for rheumatoid arthritis.

millions and % change

Top 10 US Companies, Ranked by US Ad Spending, Q2 2012 & Q2 2013

1. Procter & Gamble

2. AT&T

3. L'Oréal

4. Comcast

5. General Motors

6. Verizon Communications

7. News Corp.

8. Time Warner Inc.

9. PepsiCo

10. Pfizer

Total

Q2 2012

$595.0

$376.6

$380.5

$476.0

$295.7

$331.7

$298.1

$295.4

$264.6

$197.3

$3,511.0

Q2 2013

$804.8

$501.8

$397.9

$393.2

$378.6

$335.1

$322.5

$316.0

$308.5

$303.9

$4,062.3

% change

35.3%

33.2%

4.6%

-17.4%

28.0%

1.0%

8.2%

6.9%

16.6%

54.0%

15.7%

Note: excludes FSIs, house ads and public service announcement (PSA)activity; numbers may not add up to total due to roundingSource: Kantar Media as cited in press release, Sep 9, 2013163701 www.eMarketer.com

But with fewer blockbusters anticipated from pharma’s new product pipeline, an overall trend of contraction in DTC spending is expected to continue indefinitely. A June 2012 study by KPMG found that only 24% of pharma and biotech companies planned to increase direct-to-patient advertising in the next five years, while 30% planned to decrease it.

% of respondents

Promotional Methods that US Pharmaceutical/Biotechnology Companies Plan to Implement, June 2012

Mobile applications

Patient assistance programs

Edetailing

Social media with patients

Patient registries for specificdiseases or devices

Product websites for consumers

Product websites for physicians

Social media with physicians

Medical/science liaisons

Promotion of clinical guidelines as standard of care

Sponsored symposia atmedical conferences

Direct-to-patient advertising

Call centers

Local media educational events

Sales representatives

More

53%

48%

48%

43%

42%

41%

41%

41%

39%

33%

30%

24%

24%

24%

23%

Same

13%

34%

15%

7%

28%

43%

46%

11%

41%

30%

36%

21%

41%

33%

19%

Less

4%

7%

3%

4%

9%

9%

8%

4%

11%

15%

32%

30%

11%

7%

57%

Not sure/decline to

answer

30%

11%

34%

46%

21%

7%

6%

44%

9%

22%

3%

25%

23%

36%

2%

Note: n=54; in the next five years; numbers may not add up 100% due toroundingSource: KPMG, "Transforming Healthcare: From Volume to Value," Nov 8,2012147924 www.eMarketer.com


At the same time, however, pharma marketing targeted to healthcare professionals is on the rise. An April 2013 survey of US healthcare marketers from Medical Marketing & Media and Ogilvy CommonHealth found that an average of 75% of healthcare marketing budgets were allocated to reaching healthcare professionals; only 25% were aimed at consumers. The same study found that 40% of respondents planned to increase marketing targeted at physicians in 2013, compared with 36% who planned to increase patient-focused spending.

% of respondents

Change in Marketing Budgets in 2013 According to USHealthcare Marketers, by Audience Targeted

Physicians40% 48% 12%

Patients36% 44% 20%

Payers33% 55% 12%

NPs/PAs24% 60% 16%

Advocacy groups17% 62% 21%

Pharmacists16% 67% 17%


Note: n=200Source: Medical Marketing & Media and Ogilvy CommonHealth,"Healthcare Marketers Trends Report 2013," May 31, 2013160959 www.eMarketer.com

DIGITAL SPENDING VARIES AS PERCENTAGE OF TOTAL Though there has been some digital innovation—especially in the less regulated healthcare sectors—the US healthcare and pharmaceutical industry in general is widely viewed as a digital laggard. “Pharma trails other industries by about three to five years in its adoption of new marketing channels,” according to Bruce Grant, senior vice president of business strategy at Digitas Health. In July 2012, Capgemini Consulting and MIT Sloan Center for Digital Business deemed only 7% of pharmaceutical companies to be “digirati”—i.e., companies at the highest level of digital maturity. At the other end of the scale, nearly one-third were classified as “beginners.”

% of total

Digital Maturity* of Companies in Select IndustriesWorldwide, July 2012

High tech38% 25% 21% 17%

Banking35% 23% 23% 19%

Insurance33% 33% 13% 21%

Travel and hospitality31% 19% 50%

Telecom30% 17% 48% 4%

Retail26% 30% 17% 26%

Consumer packaged goods24% 16% 28% 32%

Pharmaceuticals7% 17% 43% 33%

Digirati Conservatives Fashionistas Beginners

Note: read as 26% of retail companies are classified in the digirati categorybased on senior executives' survey responses; numbers may not add up to100% due to rounding; *a quality that describes a firm's current approachtoward using new technologies such as mobile, social media and analytics,and the potential the firm has for using new technologies to enhancecustomer engagement, internal operations and business modelsSource: Capgemini Consulting and MIT Sloan Center for Digital Business,"The Digital Advantage: How Digital Leaders Outperform Their Peers inEvery Industry," Nov 5, 2012153165 www.eMarketer.com


A 2012 analysis by Gartner found that healthcare companies spent 2.2% of total revenues on digital marketing (only a portion of which was paid advertising), with digital representing nearly 24% of total marketing outlay. The percentage of revenue spent on digital marketing was the lowest among the industries in the study.

% of revenues

Digital and Total Marketing Budgets in 2012 AmongUS Companies in Select Industries

Media3.9%

12.7%

Manufacturing2.8%

10.6%

Retail2.5%

10.6%

Financial services/insurance2.4%

10.6%

High-tech2.3%

9.1%

Healthcare2.2%

9.2%

Total2.5%

10.4%

Digital Total

Note: read chart as saying media companies spent an average of 12.7% oftheir company revenues on total marketing and 3.9% on digital marketingSource: Gartner, "US Digital Marketing Spending Report 2013," March 13,2013153635 www.eMarketer.com

Despite the current situation—and a majority of DTC spending still being pumped into broadcast and print media—most studies indicate that US advertising and marketing execs in the healthcare and pharma industry are more bullish on increases in digital advertising than on traditional tactics. A fall 2012 study by Advertiser Perceptions asked a sampling of these professionals whether they planned to increase or decrease their ad spending in specific media in the next 12 months and then calculated the difference between percentages. The study’s resulting “optimism index” showed the highest numbers for most digital media, indicating more intent to increase spending. Indexes for traditional print media, such as magazines and newspapers, were negative.

optimism index*

Pharmaceuticals and Remedies Ad Spending Outlookof US Advertisers, by Media, Fall 2012 & Spring 2013

Fall 2012 Spring 2013

Mobile 57 53

Digital video 57 52

Digital search 48 47

Digital display 44 41

Cable TV 5 3

Magazines -17 -2

Broadcast TV 17 -8

National newspapers -25 -9

Advanced/interactive TV 23 -

Note: includes client-side marketers and agencies; *difference betweenthe percent of respondents increasing and those decreasing their adspending in the next 12 monthsSource: Advertiser Perceptions, "Advertiser Optimism Index AdvertiserIntelligence Reports (AIR) Wave 18, Fall 2012" and "Advertiser OptimismIndex Wave 19, Spring 2013," March 14, 2013 & Sep 24, 2013156595 www.eMarketer.com

Through a series of conversations with high-level marketers in early 2013 representing both healthcare and pharma brands and the agencies that work with them, eMarketer found that industry firms can spend anywhere from 10% to 70% of a paid ad budget on digital media.

This wide variation exists because spending levels are highly dependent on product and service type, competitive landscape, target audience and place in patent lifecycle. In other words, the marketing mix depends on what’s being advertised. “If it is a drug that’s new to market, early in its lifecycle, it has been approved by the FDA and we want to generate immediate awareness and quick script lift trial, then those tactics may look different than if it’s, for example, a brand that is later in its lifecycle and we’re trying to just further increase or maintain script lift,” said Robert Allen, director of digital marketing at AstraZeneca.

In general, experts agree that digital spend as a percentage of total marketing dollars tends to be lower when an advertiser is running TV ads, usually promoting a product targeted to a large percentage of the population or to audiences that skew heavily toward TV viewership. For consumer healthcare products (e.g., for allergies, flu, asthma), digital spends may be in the range of 10% to 20% of total outlays.


This share is often higher for more specialized products—such as “orphan” drugs and other offerings aimed at smaller slices of the population that can be “surrounded” more cost effectively online—and can be in the 30% to 70% range. “Increasingly, instead of the traditional model of broadcasting a new drug, brands can ‘microcast’ to a very niche audience through search, display, social, mobile and online video,” said Ryan Olohan, national industry director for healthcare at Google.

Generally, there is a sense that digital budgets are rising, even as overall budgets drop. “I think overall we see total budgets have been shrinking, and sometimes as they shrink, channel budgets shrink in equal proportion,” said Larry Mickelberg, chief digital officer and partner at Havas Health. “But with some clients, the overall pie is shrinking while the digital share is growing. Many of our clients are spending far less on TV but they’re spending more on digital as a whole.”

In fact, smaller pipelines and fewer blockbuster drugs are giving marketers new impetus to leverage digital marketing. “When you’re talking about smaller disease-state populations and smaller physician bases, you don’t need a huge sales force to communicate to those folks,” said AstraZeneca’s Allen. “You need very targeted tactics, and digital marketing can provide you with that.”

DIRECT RESPONSE VS. BRANDING: A 54-46 SPLIT

This year, eMarketer has taken a closer look at

paid digital spending in the US to determine how

much marketers in vertical industries are investing

in ad tactics primarily focused on obtaining sales

or leads vs. those designed to drive favorable

opinion about a brand. As a result of this analysis,

eMarketer estimates that the US healthcare and

pharma industry will spend 54% of its digital

advertising dollars, or about $640 million, on

direct-response tactics in 2013. eMarketer’s definition

of direct response includes paid search, classifieds,

online directories, and paid ads embedded in

email messages.

The remaining 46%, or $540 million, will be invested in brand-focused digital formats, including online and mobile banner ads, rich media, online video, paid social placements, in-game ads, content sponsorships and native ads.

millions and % of total

US Healthcare & Pharma Industry Digital Ad Spending,by Objective, 2013

Direct response*$0.64 (54%)

Branding**$0.54 (46%)

Note: includes advertising that appears on desktop and laptop computersas well as mobile phones and tablets, and includes all the various formatsof advertising on those platforms; *includes classifieds & directories, email,lead generation, mobile messaging (SMS, MMS and P2P messaging) andsearch; **includes banner ads, rich media, sponsorships and videoSource: eMarketer, Aug 2013162110 www.eMarketer.com

Total=$1.18


SEARCH IS ‘LOW-HANGING FRUIT’ Because search is a critical discovery tool for all types of health-related information, search engine marketing (SEM) is the backbone of healthcare-related digital direct-response efforts. It is often the first step for healthcare advertisers who are dipping their toes into digital waters or those with limited budgets looking to drive the most qualified traffic in the most cost-efficient way. “Search continues to be core to DTC advertising because people continue to turn to the web to find information related to health issues,” said Google’s Olohan.

eMarketer estimates that healthcare marketers spend 40% to 50% of their digital budgets on online and mobile paid search advertising and SEO. Again, this percentage varies by product or service type.

An October 2012 study by the nonprofit think tank Digital Health Coalition found that health and pharma executives anticipated increasing their search marketing investments in the 12 months subsequent to the study.

% of total

Expected Change in Search Marketing BudgetsAccording to Health and Pharma ExecutivesWorldwide, Oct 2012

Paid search56% 30% 15%


Note: over the next 12 months; numbers may not add up to 100% due toroundingSource: Digital Health Coalition, "Executive Landscape Study 2012," Nov 1,2012152855 www.eMarketer.com

Search marketing strategies63% 33% 4%

Search optimization strategies56% 41% 4%

Consumers’ heavy use of search to find health-related information means that advertisers see value in search advertising and are willing to pay the relatively high cost per click (CPC) that healthcare search terms can command.

A Marin Software analysis of paid search CPCs in late 2011 and 2012 found that healthcare CPCs were surpassed only by those for the education industry during the majority of the study’s measurement period.

US Paid Search Cost per Click, by Industry, Q4 2011-Q4 2012

Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Education $4.26 $4.64 $4.52 $4.56 $3.93

Healthcare $1.98 $1.84 $1.78 $1.90 $2.47

Finance $1.60 $1.57 $1.82 $1.89 $1.84

Auto $1.27 $1.21 $1.24 $1.30 $1.39

B2B $0.67 $0.69 $0.75 $0.79 $0.78

Travel $0.57 $0.54 $0.57 $0.59 $0.60

Retail $0.44 $0.40 $0.42 $0.43 $0.49

Note: data is for enterprise-level clientsSource: Marin Software, "Global Online Advertising Trends:October-December 2012," Jan 10, 2013150977 www.eMarketer.com

Providers Turn to Local Search With the advent of more sophisticated targeting options, local search campaigns—especially for healthcare providers and other health services companies—are contributing to overall digital ad growth and becoming more important to the direct-response mix.

In a Q3 2012 study by YP, dentists (third on the list) and physicians and surgeons (fourth on the list) were among the top local search categories ranked by ad spend on the Yellow Pages Local Ad Network. The same study also found that pharmacies, medical services and physicians and surgeons experienced notable year-over-year growth as leading US local search categories.

% change vs. same period of prior year

Leading US Local Search Categories, Ranked byGrowth, Q3 2012

1. Pharmacies 144%

2. Grocery stores 102%

3. Bus lines 102%

4. Funeral supplies & services 86%

5. Medical services 83%

6. Utilities 81%

7. Secondhand stores 75%

8. Physicians & surgeons 70%

9. Shoe stores 66%

10. Automobile parts & supplies 64%

Note: on the Yellow Pages Local Ad NetworkSource: YP, "Local Insights Digital Report Q4 2012," Dec 17, 2012150490 www.eMarketer.com

And a similar December 2012 study by comScore, Neustar and 15miles found that local searches for pharmacies and doctors and hospitals topped the list in terms of specific local business searches. Dentists also ranked highly.


An AdMall poll of US local media managers found that 69% reported increases in healthcare-related local ad revenue growth in 2013 vs. 2012, the highest percentage across industries studied.

% of respondents

Change in Local Ad Revenue Growth for Select Industries According to US Local Media Sales Managers, 2013

Healthcare69.0% 23.5% 7.5%

Increase About the same Decrease

Note: vs. 2012; numbers may not add up to 100% due to roundingSource: AdMall, "2013 Local Advertising Sales Forecast," Jan 23, 2013150961 www.eMarketer.com

Automotive58.8% 35.3% 5.9%

Retail55.1% 40.6% 4.3%

Restaurants & food service46.0% 49.2% 4.8%

DISPLAY ADS ANCHOR DIGITAL BRAND CAMPAIGNS While US healthcare marketers use direct response to drive leads and conversions, they find other types of value in various forms of display advertising—including banner ads, rich media, online video, paid social placements and sponsored content—to raise brand and product awareness, build credibility and help educate target audiences.

Investments in display on both advertiser-owned sites and publisher sites are growing modestly as newer formats—including online video, native ads and dynamic ads—and more sophisticated targeting and personalization become available. The Digital Health Coalition’s October 2012 research found that 41% of health and pharma executives anticipated increases in their display advertising budget in the coming 12 months. This compared with 41% who saw no imminent change in budget, and 19% who expected decreases.

% of total

Expected Change in Select Digital Marketing BudgetsAccording to Health and Pharma ExecutivesWorldwide, Oct 2012

Online communities for consumers with specific conditions52% 44%

Display advertising41% 41% 19%

Product sites (brand.com)30% 52% 19%

Increase Stay the same Decrease Don't know


Email marketing35% 46% 15%

4%

Disease or unbranded sites (disease.com)30% 59% 7%

4%

Data from comScore Ad Metrix found that between 2.7 billion and 4.6 billion display ads for drugs and medications were delivered in the US each month between August 2012 and April 2013 and, despite some month-to-month fluctuation, the numbers were on the rise. In the period from April 2012 and April 2013, the display ad volume for drugs and medications grew 21%, comScore reported.

millions

Number of US Drug and Medication Display Ads, Aug 2012-April 2013

Aug

2,743

Sep

3,095

Oct

3,174

Nov

3,379

Dec

4,583

Jan

2,786

Feb

3,373

Mar

3,656

Apr2012 2013

2,852

Source: comScore Ad Metrix, June 20, 2013161778 www.eMarketer.com


Pharma companies are still facing challenges, however, with display advertising. A study of clickthrough rates in North America by industry found that ads in the more general “healthcare” category achieved double the CTRs as those categorized as “pharmaceutical.”

Clickthrough Rate of Online Display Ads Viewed inNorth America, by Industry, 2012

Apparel manufacturers 0.43%

Books, magazines and publications 0.24%

Computers & technology 0.22%

Entertainment 0.17%

Consumer goods manufacturers 0.14%

Sports & fitness 0.14%

Restaurants & food service 0.11%

Healthcare 0.11%

Nonprofit organizations 0.10%

Manufacturing 0.10%

Travel & tourism 0.09%

Retail 0.08%

Advertising/branding/marketing 0.08%

Automotive 0.07%

Food & beverage manufacturers 0.07%

Finance 0.07%

Insurance 0.05%

Telecommunications 0.05%

Pharmaceutical 0.05%

Consumer electronics manufacturers 0.05%

Note: for campaigns served over the PointRoll networkSource: PointRoll, "2012 Benchmark Report," June 13, 2013159078 www.eMarketer.com

A HEALTHY OUTLOOK FOR VIDEO Among branding tactics, video advertising—which is seeing leading-edge growth in other vertical industries—holds particular promise for healthcare and pharma. Spending growth in this area is often coming at the expense of standard banner advertising, which is on the decline.

Digital video ads have proven particularly useful as complements to, if not outright replacements for, DTC television campaigns. While TV advertising still commands the lion’s share of DTC budgets, many pharma marketers now find it cost-prohibitive to buy the longer TV spots needed to present FDA-mandated safety language. Pre-roll video placements on sites such as Hulu and other over-the-top video services are also helping advertisers achieve more precise targeting that was not previously possible with TV and mass-market print.

As a result, online video investments are rising. The October 2012 Digital Health Coalition survey found that health and pharma executives worldwide expected significant increases in online video aimed at both consumers and health professionals in the coming year.

% of total

Expected Change in Video Marketing BudgetsAccording to Health and Pharma ExecutivesWorldwide, Oct 2012

Consumer video for disease education and outreach69.2% 30.8%

Consumer video for branded products66.7% 33.3%

Video targeted for health professionals57.7% 42.3%

Increase Stay the same

Note: over the next 12 monthsSource: Digital Health Coalition, "Executive Landscape Study 2012," Nov 1,2012152854 www.eMarketer.com


Q2 2013 statistics from Videology showed that healthcare services advertisers represented 6% of video advertisers on its network, up from 4% in Q1 2013 and 2.2% in Q4 2012. Pharmaceutical advertisers represented 3% of the total, down from 4.2% in Q4 2012.

% of total

US Digital Video Advertiser Share, by Industry, Q2 2013

Consumer goods35%

Automotive13%

Restaurants9%

Retail9%

Healthcare services6%

Financial services5%

Travel5%

Educational services4%

Entertainment4%

Pharmaceuticals3%

Telecom3%

Business products1%

Other3%

Source: Videology, "US Video Market at a Glance Q2 2013," Aug 2013162262 www.eMarketer.com

Overall, online video metrics appear favorable for health-related video advertising. A VideoHub study from Q2 2012 found that online pre-roll video ads in the “health and lifestyle” category had a click rate (0.84%) that was well above average. Such ads also had a higher-than-average completion rate (72.34%).

Completion and Click Rate of US Online Pre-Roll*Video Ads, by Industry, Q2 2012

Food and drink

Business and finance

Entertainment

Automotive

CPG

Computing/tech

Health and lifestyle

Travel

Telecom

Retail

Consumer electronics

Total

Completion rate

78.18%

77.79%

75.50%

73.95%

73.03%

72.66%

72.34%

69.41%

67.51%

60.47%

53.22%

71.65%

Click rate

0.48%

0.82%

0.75%

0.77%

0.51%

0.80%

0.84%

0.71%

1.20%

1.12%

0.56%

0.71%Note: *includes both pre-roll and interactive pre-roll video adsSource: VideoHub, "Performance Replay Report: Q1 2012," Oct 1, 2012146366 www.eMarketer.com

A PointRoll study published in May 2013 had similar findings for in-stream video ads. It found that healthcare-related in-stream video ads also had a CTR of 0.84%, the fourth highest among industries in 2012. The video ad completion rate—which some industry experts view as a better measure of success—was also fourth highest, with 74.5% of healthcare ads achieving a 100% completion rate.

Nielsen research commissioned by the IAB also showed strong results for online video when compared with TV advertising. Both pharmaceutical and health and beauty-related online video ads outscored TV commercials for those product segments by a large margin when it came to general recall, brand recall and message recall.


% of respondents

Ad Recall of US TV vs. Online Video Advertising, by Industry, Jan 2011-March 2012

General recall Brand recall Message recall

Finance

Retail

Restaurants

Hospitality

Pharmaceuticals

Telecom

Food & beverage

Health & beauty

Technology

Automotive

71%

67%

65%

65%

63%

62%

61%

61%

60%

60%

50%

47%

47%

45%

45%

51%

46%

37%

46%

44%

53%

53%

53%

55%

49%

44%

50%

45%

44%

42%

30%

30%

32%

26%

26%

26%

30%

19%

24%

23%

43%

44%

45%

44%

36%

36%

40%

35%

32%

34%

21%

23%

24%

19%

18%

21%

23%

13%

18%

17%

Note: ages 18+; online and TV data based on responses up to 1 day post-adstream; limited to the same brands that streamed online and aired on TVduring the same periodSource: Nielsen, "A Comprehensive Picture of Digital Video and TV Advertising: Viewing, Budget Share Shift and Effectiveness" commissioned by Interactive Advertising Bureau (IAB), Feb 25, 2013153982 www.eMarketer.com

Online video ads in full episode players

TV commercials (broadcast & cable)

PAID SOCIAL FACES UPHILL CLIMB The short-term outlook for paid display spending in social media—especially by pharma companies—is not as rosy. Paid display ads on social media sites—a tool often used in other industries to complement owned and earned content—make up a minuscule portion of pharma and healthcare advertising budgets.

Not surprisingly, health and pharma executives perceive significant barriers to using more social media. In Digital Health Coalition’s survey of industry execs about social media challenges, 78% said they were challenged by measurement and ROI issues, and the same percentage cited regulatory concerns. Legal concerns were close behind at 74%.

% of respondents

Leading Concerns and Challenges of Using SocialMedia Marketing According to Health and PharmaExecutives Worldwide, Oct 2012

Measuring the effectiveness and ROI of social media78%

Regulatory concerns78%

Legal concerns74%

Need to educate staff about the effective use of social media70%

Compliance concerns67%

Responding to customer comments in social media52%

Integrating the data/analytics from social media into existingdecision support and ROI

48%

Staying up-to-date on the latest technology trends and changes44%

Adverse event reporting41%

Lack of strategy specific to social media41%

Source: Digital Health Coalition, "Executive Landscape Study 2012," Nov 1,2012152859 www.eMarketer.com


Not only do fears related to adverse-event reporting, fair balance and other regulatory and legal concerns continue to hamper many health and pharma companies’ quests to make full and meaningful use of social media, many healthcare and pharma marketers do not philosophically see social media as a promotional channel. “We view social as a great way to listen and build a relationship within the online communities we serve,” said Dennis Urbaniak, vice president of US diabetes at Sanofi US. “But we have a policy and I have a very, very strong bias that those channels are not advertising channels.”

Indeed, because of this overall “culture of caution,” healthcare as an industry lags far behind others in the area of paid social advertising. A study by Cegedim Relationship Management found a higher percentage of pharma and life science companies reporting a smaller percentage of budget being devoted to social media initiatives in 2012 compared with 2011. Half of US pharmaceutical and life science companies reported allocating less than 5% of their sales and marketing budget on social media, up from 29% in 2011. On a slightly more positive note, the study also found that fewer companies (25% in 2012 vs. 37% in 2011) reported that they didn’t know how much they spent on social media. Overall, however, results from this study reflect the healthcare industry’s continued inertia and uncertainty around social media marketing.

% of respondents

Percent of Sales/Marketing Budget Allocated toSocial Media Among US Pharmaceutical and LifeSciences Companies, 2011 & 2012

<5%29%

50%

5%-10%20%

21%

11%-20%9%

4%

20%+5%

1%

Don't know37%

25%

2011 2012

Note: numbers may not add up to 100% due to roundingSource: Cegedim Relationship Management, "2012 US Pharma Insights,"Dec 3, 2012148630 www.eMarketer.com

Some pharma industry experts report that they have tried paid social advertising, but with only limited success. “We’ve dabbled in it a little bit, but it is very restrictive,” said Michael Baliber, senior vice president and director of media strategy at ID Media. “For [one of our clients], we realized that Facebook had a lot of scale and would be a great environment to test in. We also wanted to be able to optimize creative on the fly. But since the pharmaceutical industry is so regulated in their creative approval and what has to run next to each other, it limited our ability to do what we wanted to do. We have since moved away from that.”

Some studies, however, have found that the number of pharma/biotech companies planning to use social media promotional methods is growing. More than four in 10 respondents in a June 2012 KPMG study said they planned to use more of such tactics with patients and with physicians. But an even larger number reported being not sure or declined to answer the question.

With patients With physicians

% of total

US Pharmaceutical/Biotechnology Companies thatPlan to Implement Social Media Promotional Methods,June 2012

Less4%

Not sure/decline to answer46%

More43%

Same7%

Less4%

Not sure/decline to answer44%

More41%

Same11%

Note: n=54; in the next 5 yearsSource: KPMG, "Transforming Healthcare: From Volume to Value," Nov 8,2012154022 www.eMarketer.com

Some less-regulated sectors of the industry, including hospitals and health systems, have recently begun more aggressive social advertising initiatives. For example, the University of Pennsylvania Health System turned to Facebook ads in 2011 to raise awareness of its lung transplant program, according to The Philadelphia Inquirer. The same Inquirer article also noted how Inova Health System successfully targeted Facebook ads by geography and age for its weight-loss programs. While this type of advertising continues to draw mixed reviews from the healthcare community, it nonetheless represents experimentation and progress.


Statistics show that when health-related companies do advertise on Facebook, they see fairly good results. TBG Digital’s Q2 2012 analysis of global Facebook Marketplace CTRs found the health category had an average CTR of 0.064%, the highest of any industry tracked.

Clickthrough Rate for Facebook Marketplace AdsWorldwide, by Industry, Q2 2012

Health 0.064%

Pets & animals 0.060%

Not for profit 0.056%

Entertainment 0.054%

Food & drink 0.048%

News 0.044%

Beauty & fitness 0.044%

Retail 0.039%

Computers & electronics 0.036%

Home & garden 0.036%

Note: figures are based on 71 billion impressions served betweenApril-June 2012Source: TBG Digital, "Global Facebook Advertising Report Q2 2012," July 18,2012143185 www.eMarketer.com

For more detailed information about how healthcare marketers are using social media, see eMarketer’s April 2013 report, “Social Media and Healthcare: Challenges for Pharmaceutical Marketers.”

MOBILE INVESTMENTS POISED TO ACCELERATE

While most industry experts believe mobile

advertising holds extreme promise for both

direct-response and branding initiatives, the

healthcare and pharma industry is behind the curve

when it comes to mobile marketing sophistication.

But with rapid consumer and provider adoption

of mobile devices—including smartphones and

tablets—to access health information, marketers

now have no choice but to get up to speed. “There’s

a very significant opportunity in mobile because it’s

so immediate, and it’s so personal,” said Erin Byrne,

executive vice president, managing partner and chief

engagement officer at Grey Healthcare Group.

Medical Marketing & Media and Ogilvy CommonHealth’s April 2013 study found that 49% of US healthcare marketers viewed mobile devices as a leading health-industry opportunity.

% of respondents

Leading Health Industry Opportunities According toUS Healthcare Marketers, April 2013

Pipelines 58%

Emerging markets 58%

Time-to-market 50%

Mobile/tablets 49%

Customer behavioral change 48%

Social media 46%

Payer pressure 44%

The economy 41%

Mergers and acquisitions 40%

Big data 39%

Note: n=200Source: Medical Marketing & Media and Ogilvy CommonHealth,"Healthcare Marketers Trends Report 2013," May 31, 2013160966 www.eMarketer.com

http://totalaccess.emarketer.com/Reports/Viewer.aspx?R=2001083



In fact, the mobile channel is already being used for a variety of health-related marketing initiatives. The Mobile Marketing Association (MMA) and mLightenment predicted that healthcare and social assistance marketers would collectively spend $265 million on US mobile marketing in 2013, up significantly from the $164 million spent in 2012. Between 2012 and 2015, spending is expected to more than triple.

millionsUS Mobile Marketing Spending, by Industry, 2010-2015

Finance, insurance, real estate

Retail trade—otherManufacturing—other

Information

Professional, scientificand business services

Manufacturing—consumer packaged goods

Retail trade—consumerpackaged goods

Government

Transportationand warehousing

Wholesale trade

Accommodationand food services

Healthcare andsocial assistance

Resources (agriculture,mining, utilities,construction)

Educational servicesArts, museums, sportsand recreation

Other

Total

2010

$470

$397$269

$240

$152

$139

$107

$116

$93

$72

$68

$56

$42

$20$17

$145

$2,405

2011

$784

$648$471

$389

$245

$227

$171

$179

$156

$119

$110

$95

$74

$36$27

$227

$3,957

2012

$1,332

$1,082$842

$648

$407

$382

$281

$294

$266

$202

$181

$164

$132

$64$44

$371

$6,693

2013

$2,080

$1,676$1,373

$991

$632

$597

$433

$432

$422

$322

$281

$265

$218

$105$67

$562

$10,456

2014

$3,032

$2,425$2,023

$1,401

$903

$867

$625

$622

$612

$473

$403

$396

$323

$156$95

$807

$15,162

2015

$4,017

$3,164$2,691

$1,778

$1,163

$1,123

$804

$771

$814

$630

$512

$539

$446

$204$120

$1,028

$19,806Note: includes mobile media advertising, mobile-enhanced traditionaladvertising and mobile CRM; numbers may not add up to total due toroundingSource: Mobile Marketing Association (MMA) and mLightenment, "MobileMarketing Economic Impact Study" in partnership with IHS Global Insight,May 9, 2013157001 www.eMarketer.com

Though the MMA’s definition of mobile marketing is broader than just paid advertising, the numbers illustrate the potential that healthcare marketers envision for the mobile platform.

Tata Consultancy Services projects that by 2015, 32.7% of marketing campaigns by large healthcare services companies in North America will be designed exclusively for mobile consumers, up from 16.3% in 2012.

Percent of Marketing Campaigns Designed Exclusively for Mobile Consumers According to Large Companies in North America, by Industry, 2012 vs. 2015

Projected(2015)

Telecom services 51.8%

Travel, hospitality and leisure 47.8%

Airlines 50.0%

Automotive manufacturing 44.3%

Energy and utilities 36.5%

Retail 41.5%

Industrial manufacturing 36.5%

Media, entertainment and sports 35.8%

Computer (hardware and software) 32.9%

Government (federal, state, local) 35.0%

Banking/financial services/insurance/private wealth management

34.1%

Transportation logistics 31.2%

Consumer products manufacturing (food, beverages and durables)

33.3%

Healthcare services 32.7%

Pharmaceuticals 29.1%

Other 25.1%

Average

Current(2012)

35.0%

29.1%

27.3%

27.1%

26.3%

23.2%

20.9%

20.0%

19.9%

18.9%

18.0%

17.3%

17.2%

16.3%

15.0%

13.4%

21.4% 36.9%Source: Tata Consultancy Services, "The New Digital Mobile Consumer: How Large Companies Are Responding" conducted by Research Now, Sep 26, 2012145893 www.eMarketer.com

As part of these larger mobile marketing efforts, eMarketer sees mobile advertising—primarily search, display and in-app formats—becoming a standard element in healthcare and pharma digital media plans.

Other research supports this. The Digital Health Coalition’s October 2012 study found that nearly three-quarters of health and pharma executives worldwide planned to increase their mobile advertising budgets over the coming 12 months.


% of total

Expected Change in Mobile Marketing BudgetsAccording to Health and Pharma ExecutivesWorldwide, Oct 2012

Mobile advertising74.1% 25.9%

Increase Stay the same Decrease Don't know


Mobile content for tablet96.3%

3.7%

Mobile content for smartphone88.9% 7.4%

3.7%

Mobile app48.0% 36.0% 12.0%

4.0%

Search is currently the mobile tactic of choice for healthcare marketers. Publicis Health Media President and Global Chief Media Officer Matt McNally estimated that mobile search accounts for approximately 70% of today’s healthcare mobile ad spending.

To that point, Neeraj Kochhar, managing director at Reprise Media, explained: “Desktop [spending] is flattening out, in fact dropping a few percentage points, and tablet is definitely gaining.” Indeed, the percentage of paid search clicks coming from tablets grew between Q2 2012 and Q2 2013, according to a study by The Search Agency.

% of total

US Healthcare Paid Search Click Share, by Device, Q2 2012-Q2 2013

Q2 201282.4% 11.1% 6.5%

Q3 201286.2% 7.2% 6.6%

Q1 201381.9% 9.6% 8.5%

Q2 201383.4% 6.8% 9.8%

Desktop Smartphone Tablet

Source: The Search Agency, "State of Paid Search Report - Q2 2013," July 18, 2013161157 www.eMarketer.com

Q4 201287.0%

5.9%

7.1%

Other research indicates that some healthcare marketers are still on a learning curve when it comes to carefully evaluating their mobile programs and making sure they achieve desired results. While the spending for the “health: fitness and wellness” category on Millennial Media’s mobile ad network grew 281% in 2012, a January 2013 study by Mojiva placed pharmaceuticals dead last on the list of categories to which US tablet owners were most likely to respond.

% of respondents in each group

Tablet Advertiser Categories to Which US TabletOwners Are Most Likely to Respond, by Demographic,Jan 2013

Food/restaurants

Apparel

Leisure activities/events

Beauty

Travel

CPG

Auto

Education

Finance

Liquor

Insurance

Telecom/cable provider

Pharmaceutical

Male

43%

29%

27%

14%

32%

25%

29%

20%

27%

17%

13%

16%

7%

Female

52%

40%

32%

37%

25%

21%

10%

15%

10%

11%

6%

5%

6%

18-24

32%

30%

20%

22%

21%

12%

13%

14%

14%

12%

17%

7%

5%

AgeGender

25-34

52%

40%

34%

35%

32%

25%

20%

22%

21%

15%

10%

13%

5%

35-44

65%

44%

40%

32%

31%

31%

17%

14%

13%

14%

7%

5%

5%

45+

69%

41%

37%

28%

31%

34%

17%

11%

13%

9%

7%

6%

11%

Total

49%

37%

31%

29%

28%

23%

17%

17%

16%

13%

9%

9%

6%

Note: n=1,000Source: Mojiva, "Tablets Rule: A Consumer Snapshot on Tablet Use andTablet Advertising," April 10, 2013155437 www.eMarketer.com

“This year I think mobile will make up a steady 5% of the typical digital budget, and as much as 7% for more progressive marketers,” said Publicis’ McNally. “It’s not growing that quickly because the industry is not yet sophisticated enough to understand what mobile is as a utility. I think we first jumped to mobile as ‘OK, well let’s put banner ads on the mobile device.’ But that’s not what someone is looking for, specifically in healthcare.”

For more detailed information about healthcare practitioners’ use of mobile devices, see eMarketer’s November 2012 report, “Take Two Apps and Text Me in the Morning: How Smartphones and Tablets Are Changing the Way Healthcare Practitioners Work.”





BUDGET PRESSURES, QUEST FOR ROI SHIFT FOCUS TO DIGITAL

To date, the healthcare and pharma industry has only

scratched the surface in its use of digital advertising.

But the combination of mounting budgetary

pressures and an incessant quest for ROI will slowly

but surely turn the tide in digital’s favor.

Despite sluggish overall spending, healthcare marketers increasingly report that they are turning to digital and multichannel marketing, increasing their use of targeting and fine-tuning their analytics and measurement programs. While reducing costs remains top of mind for senior executives at US pharma companies, a 2013 survey by Accenture found 70% had prioritized the mastery of multichannel marketing, and 60% said the same about improving their use and effectiveness of digital marketing.

% of respondents

Top 5 Business Priorities of US PharmaceuticalCompanies in 2013

1. Reducing costs83%

2. Mastering multichannel marketing70%

3. Improving use and effectiveness of digital marketing60%

4. Harnessing analytics to drive improved ROI/customersatisfaction

56%

5. Improving sales force effectiveness52%

Note: n=200 senior executivesSource: Accenture, "Life in the New Normal: The Customer EngagementRevolution," March 25, 2013154433 www.eMarketer.com

In this drive toward efficiency, audience targeting and the use of Big Data are gaining favor with marketers, who are better leveraging technology to deliver messages that are more personal, relevant and actionable. “We’re talking to a lot of third-party data providers now about helping us dimensionalize consumers better to create those unique experiences they expect from digital,” said Publicis’ McNally. As an example, an analysis by Jumptap showed that the use of third-party targeting data in the mobile ads it served increased CTRs more than 37% for the pharma vertical in July 2012.

Increase in Clickthrough Rate (CTR) from UsingThird-Party Targeting Data in Mobile Ads Served byJumptap, by Vertical, July 2012

Travel 72.03%

Automotive 68.75%

Pharma 37.45%

Finance 35.27%

Retail/CPG/QSR 32.28%

Insurance 30.15%

Technology 24.72%

Source: Jumptap, "Simple Targeting and Audience Trends (STAT)," Aug 7,2012143964 www.eMarketer.com

In addition, third-party data providers are also working with healthcare and pharma advertisers to validate campaign placements and improve the transparency of where, when and how ads are appearing. This due diligence—which increases pharma marketers’ comfort with digital advertising—ensures that an ad won’t show up next to contradictory or objectionable content.

Measurement models are similarly being fine-tuned and optimized. Accenture’s research found that 87% of pharma executives polled planned to increase their use of analytics to target spend and drive improved ROI as part of a push to cut costs in 2013.


% of respondents

Top 5 Strategies of US Pharmaceutical Companies toMeet Cost Reduction Goals in 2013

1. Increase use of analytics to target spend and drive improvedROI

87%

2. Increase use of digital and multichannel interactions83%

3. Increase use of third-party service providers72%

4. Spend less on meetings & events55%

5. Consolidate agencies, decouple digital content production andstreamline globally

23%

Note: n=200 senior executivesSource: Accenture, "Life in the New Normal: The Customer EngagementRevolution," March 25, 2013154434 www.eMarketer.com

“It’s all about accountability in the digital space,” ID Media’s Baliber said. “With today’s technology, there should be no excuse for marketers, agencies or brands not to be able to tie analytics back to precise placements or precise keywords or precise tactics such as email vs. banner.”

CONCLUSIONS US healthcare and pharma industry digital ad spending is growing, but only slowly. Patent expirations and an uncertain regulatory climate have put a damper on overall advertising spending. While marketers are using more digital tactics, conditions in the industry are not yet favorable to large spending increases.

Marketers are “talking the talk” but barely “walking the walk.” While most industry marketers realize digital’s potential and have plans to increase spending, they have not yet fully realized these intentions.

Mobile advertising is an increasingly critical part of the mix. Consumers’ growing use of smartphones and tablets to access information—and increasingly as medical devices in their own right—is forcing healthcare marketers to accelerate plans for reaching target audiences through mobile channels.

Budget cuts and increased focus on ROI is helping digital take root. Budget cuts are prodding marketers to get smarter about their use of highly measurable digital tactics. They are increasingly using digital for more effective targeting and measurement and to more definitively show ROI from campaigns.


EMARKETER INTERVIEWS

Mobile is the ‘Remote Control’ for Online Health Information

Erin Byrne Executive Vice President, Managing Partner and Chief Engagement Officer

Grey Healthcare Group

Interview conducted on January 18, 2013

Michael Baliber Senior Vice President, Director of Media Strategy

ID Media Interview conducted on April 29, 2013

Bruce Grant Senior Vice President, Business Strategy

Digitas Health Interview conducted on February 22, 2013

Matt McNally President and Global Chief Media Officer

Publicis Health Media Interview conducted on January 9, 2013

Larry Mickelberg Chief Digital Officer and Partner

Havas Health Interview conducted on May 1, 2013

Ryan Olohan National Industry Director, Healthcare

Google Interview conducted on February 26, 2012

Dennis Urbaniak Vice President, US Diabetes

Sanofi US Interview conducted on March 4, 2013

Robert Allen Director, Digital Marketing

AstraZeneca Interview conducted on April 29, 2013

Neeraj Kochhar Managing Director

Reprise Media Interview conducted on January 23, 2013

RELATED EMARKETER REPORTS

Social Media and Healthcare: Challenges for Pharmaceutical Marketers

Take Two Apps and Text Me in the Morning: How Smartphones and Tablets Are Changing the Way Healthcare Practitioners Work

Online Health Information Seekers: Internet Use Grows, But Doctors’ Orders Still Apply

Physicians and the Internet: Where They Go and What They Do Online

US Ad Spending: Mid-2013 Forecast and Comparative Estimates

Buying Online Video Advertising: Making the Most of Your Budget

RELATED LINKS

Accenture

AdMall

Advertiser Perceptions

Capgemini

Cegedim

comScore, Inc.

Digital Health Coalition

Digitas Health

Forrester Research

Gartner

Google Think Insights

Grey Healthcare Group

Havas Health

ID Media

Interactive Advertising Bureau (IAB)

Jumptap

KPMG

Kantar Media

Marin Software

Medical Marketing and Media

Millennial Media

MIT Sloan Center for Digital Business

Mobile Marketing Association

Mojiva

Nielsen

http://totalaccess.emarketer.com/Interview.aspx?R=6000975

http://totalaccess.emarketer.com/Interview.aspx?R=6000975














http://www.accenture.com

http://www.admall.com

http://www.advertiserperceptions.com

http://www.capgemini.com

http://www.cegedim.com

http://www.comscore.com

http://digitalhealthcoalition.org

http://www.digitashealth.com

http://www.forrester.com

http://www.gartner.com

http://www.google.com/think/industries/healthcare.html

http://www.ghgroup.com

http://www.havashealth.com

http://www.idmediaww.com

http://www.iab.net

http://www.jumptap.com/

http://www.kpmg.com

http://www.kantarmediana.com

http://www.marinsoftware.com

http://www.mmm-online.com

http://www.millennialmedia.com

http://ebusiness.mit.edu/

http://www.mmaglobal.com

http://www.mojiva.com

http://www.nielsen.com


Ogilvy CommonHealth Worldwide

PointRoll

Publicis Health Media

Reprise Media

Tata Consultancy Services

TBG Digital

The Search Agency

VideoHub

Videology

YP

EDITORIAL AND PRODUCTION CONTRIBUTORS

Cliff Annicelli Senior EditorKaitlin Carlin Copy EditorJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistDana Hill Director of ProductionNicole Perrin Associate Editorial DirectorHeather Price Copy EditorAllie Smith Director of Charts

http://www.ogilvy.com/About/Network/Ogilvy-CommonHealth-Worldwide.aspx

http://www.pointroll.com

http://www.publicishealthcare.com/en/network/publicisHealthMedia.aspx

http://www.reprisemedia.com

http://www.tcs.com

http://tbgdigital.com

http://www.thesearchagency.com

http://www.videohub.com

www.videologygroup.com

http://www.yellowpages.com