Web Investment Metrics - How Much Should I Spend on my Web

Tom Snyder photo by Tom Snyder on Aug 10, 2008

While some businesses make their Web site an IT expense, many others prefer to make it part of their advertising budget. While technology is involved, it really makes better sense to have your marketing department determining the direction strategy and implementation of this important public extension of your brand.

Most businesses base their advertising budget on a percentage of sales, usually 3% to 10%, with 20% of that ad budget used to establish their Web initiative, and 10% to maintain and promote it. Within individual industries these percentages are fairly constant. You can find out what your competitors are spending by checking trade publications and associations and through financial institutions like Dun & Bradstreet or NCR Business Ratio or the table below.

Advertising Budgets by Industry

The following numbers represent national average advertising expenditures as a percentage of their gross revenue.

Typical initial Web site budgets are 20% of the total annual advertising budget, with 5% of that budget each allocated to ongoing maintenance and promotion after the initial site launch.

Decorating and Paint Retailers2.5%
Discount Stores2.4%
Educational Services4.7%
Furniture Stores7.1%
Hotels and Motels3.5%
Theaters and Entertainment4.1%
Nutrition/Health Food3.0%
Photo Studios2.4%
Retail Stores3.5%

According to this formula, a manufacturing company with $5 Million in annual sales will typically spend $175,000 total on promotion, marketing and advertising. $35,000 of that will go for their Web presence. Subsequent maintenance and promotion of the Web site would each be $8,750 per year.

-Tom Snyder

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