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June 2016 Vol. 15, No. 3

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Pharma Marketing Network®

Estimating Pharma’s Digital Ad Spending Elusive Data Wrapped in a Mystery Inside an Enigma Author: John Mack

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Pharma Marketing News Vol. 15, No. 3: June 2016 PMN1503-02

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very year I get a call from a market analyst asking me what the trend is for digital marketing spending in the pharmaceutical industry. He wants to know if the profits of

health websites, which depend on drug display ads, will increase or decrease next year.

Who am I to judge?

I only report the data I glean from various sources. Specifically, I have tried to determine what portion of pharma's total marketing budget is devoted to digital and if that portion is increasing.

Various sources look at various channels and vari-ous digital formats targeted to different audiences and it's not easy to compare data from one source to data from another source.

Trade publications further muddy the waters by using misleading headlines that imply the data refer exclusively to the pharmaceutical industry when in fact most of the time the data include the entire healthcare sector.

The Bogus $3 Bn Figure In April, 2016, for example, FiercePharma Marketing claimed that data from the Interactive Advertising Bureau’s annual ad revenue report prepared by PricewaterhouseCoopers showed that the pharma industry's digital ad spending in 2015 was “about $3 billion” (see Figure 1). The headline was “Mobile ad spending up, but pharma’s share remains small.”

But the data really applied to “Pharma and Health-care,” which includes “pharmaceutical products, facilities, services, researchers, and biological products” and “comprises establishments providing healthcare and social assistance for individuals as well as personal care, toiletries, and cosmetic products.”

Considering that “personal care, toiletries, and cosmetic products” are in the mix, I estimated the pharma Rx ad spend was just 50% of $3 billion, or about $1.5 billion (read “Did Pharma Really Spend $3 Billion on Internet Advertising in 2015?”; http://bit.ly/3BnAdSpend).

Figure 1. IAB/PWC Ad revenue Report. Source: http://sco.lt/6FGKen

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What eMarketer Says Another source of healthcare and pharma digital ad spending is eMarketer. Klick Wire published charts from a March, 2016, eMarketer report, which seem to verify my estimate (see Figure 2).

Figure 2. US Healthcae & Pharma Industry Digital Ad Spending, 2014-2020. Source: eMarketer via Klick Wire (http://bit.ly/25c2TOY).

Again, the pharma trade publication that published this chart—Klick Wire—said the data refer to “US pharma ad spend,” so one would assume pharma spent $1.67 billion on digital advertising in 2015, which is close to my $1.5 billion estimate derived from the IAB data. But is that true and what forms of advertising are actually included in eMarketer’s estimate?

Digital Ad Spend By Format eMarketer breaks down the digital ad spending as shown in the table in Figure 3. Although these are 2016 data, we see that eMarketer’s numbers include search, whereas the IAB data do not. eMarketer data also includes other “healthcare” digital ad spending—including marketing of “over-the-counter products, facilities, services, research, healthcare profession-als, hospitals and biological products, as well as establishments providing healthcare services and social assistance for individuals”—and not just pharma Rx ad spending, which is the holy grail I am seeking. In any case, about 44% of the total ad spend is for search, which is close to my 50% estimate.

Figure 3. US Healthcae & Pharma Industry Digital Ad Spending, by Format, 2016. Source: eMarketer via Klick Wire (http://bit.ly/25c2TOY).

Pharma Digital Ad Spend Let’s say 44% of the $1.67 billion digital spend in 2015 was also devoted to search. That leaves just $0.73 billion for display and other digital advertising for the entire healthcare industry (which includes pharma Rx drug advertising). Again, assuming 50% of that is for toiletries, cosmetics and such, that leaves only about $0.36 billion for pharma Rx drug ad spending in 2015.

The skeptic in me thinks that’s too low an estimate. Also, does this estimate only include digital adver-tising aimed at consumers and not physicians?

Let’s assume it only refers to consumer ads. It is estimated that the pharma industry spent a total of about $5.4 billion on direct-to-consumer (DTC) advertising in 2015 (see “Annual Spending on Direct-to-Consumer Drug Advertising Ties an All-Time High”; http://bit.ly/DTCspendHigh). If pharma spent $0.73 billion on digital advertising (excluding search) and all of that was focused on consumers, then, at most pharma spent only 1.4% of its DTC ad budget on digital advertising to consumers in 2015. At worst, less than 1%. Double those numbers if search is included.

According to Nielsen measured media audits pharma spent an average of $0.68 billion on digital adver-tising (i.e., display ads) from 2011 through 2013. Assuming no big increase in spending, that is in the same ballpark as the eMarketer estimate, which may include media spending not included in Nielsen's numbers. See Figure 4, page 3, for Nielsen’s estimate of the DTC spending media mix for 2013.

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Figure 4. Nielsen Measured Media DTC Ad Spend 2013. Source: http://bit.ly/1i0EWjj

Other Formats The data summarized above are focused on the U.S. consumer market and cover traditional digital ads—mostly web-based display ads. Not included in these data are drug.com websites, e-mail marketing, e-de-tailing, and social media. Cegedim Strategic Data (CSD)—a provider of healthcare promotional audits —includes these formats.

According CSD, in the last 6 months of 2013, the global pharma industry spent nearly $2.5 billion on all digital channels including U.S. DTC advertising (see Figure 5). That works out to be approximately 6% of the total audited marketing expenditure, which includes “traditional, personal promotional channels;” i.e., sales reps.

Figure 5. Total Digital Promotion Worldwide, July-December, 2013. Source: Cegedim Strategic Data (CSD)

Glass Half-Full vs. Half-Empty It doesn’t matter that we are talking about 2013 or 2015 numbers or if we are talking about consumers or physicians or display ads only or search or U.S. or global. The data consistently show that the digital

Figure 6. Source: http://bit.ly/skewedmeida

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percentage of pharma’s advertising/marketing bud-get ranges between 1% and 6%, which is much less than other industries.

Is the Mix Out of Whack? When you compare the percent of its advertising budget that pharma spends on various media vs. the time consumers spend accessing these media it seems that pharmaceutical marketers spend WAY too much on print advertising and TV and not enough on Internet, radio, and mobile advertising (see Figure 6, page 3).

But what seems to be a misalignment of advertising budgets may actually make sense if you consider the typical target demographic of the pharma industry—older folk and mostly women. Obviously, the older you are the more likely you are to suffer from some medical condition for which pharma has a pill. And

we all know that women are the caregivers and tend to visit the doctor much more often than do men.

These same demographics tend to watch more TV—especially nightly news programs and daytime talk shows—and read more magazines. Hence, the focus of pharma advertising is on these media.

TV has become so dominate in pharma DTC advertising that Bob Ehrlich, Chairman of DTC Perspectives, decided that the next DTC National conference will focus exclusively on TV. “While drug marketers are anxious to learn the latest on new media, there is a lot that can be improved in the meat and potatoes category,” said Ehrlich (read “DTC National Sees No Future in Digital or Social or Mobile & Will Focus Solely on TV & Print Ads”; http://sco.lt/4o235F).

Pharma Marketing News

Notes About Nielsen Data Here's how Rich Meyer, author of DTC Marketing Blog, summarizes the limits of Nielsen data: • Nielsen is reporting “paid media” only such

as banner ads. Some health websites such as WebMD that accept pharma advertising offer more than that with integrated content, sponsorships and min-sites within it’s property. This is not part of the Nielsen numbers.

• Many pharma organizations are now using one media buying company for all their media. This in turn could lead to bundled deals that comprise on and off-line media. This means that media dollars are under reported in some cases.

• The Nielsen numbers do not reflect spending on developing online websites. This is usually a separate budget from media and although some brand managers have flexibility they can’t easily move dollars around from building a website to media without a lot of approvals.

• The Nielsen numbers do not reflect DTP (direct-to-physician) online media spending including online CME’s or details on websites like Medscape.