During the recent tough economy, many companies will start deciding if they should cut their advertising and promotion budgets, but recent reports on Google have shown otherwise with an increase in advertising spending in 2010. That decision distinguishes a business from others, and promotions build morale within the company.

Online on the rise

Online advertising spending is expected to grow by nearly 11 percent in the United States this year, according to a recent prediction published by eMarketer. In May, this market research firm revised its original estimate of a 5.5 percent increase up to a 10.8 increase in online ad spending, due to a surprisingly strong showing in the search and banner marketing categories.

“As Google makes gains, so does a large portion of online advertising,” says David Hallerman, Senior Analyst for eMarketer. “When Google reported a 21 percent jump in net U.S. ad revenues for the first quarter of 2010, compared with a mere 5.3 percent increase in last year’s Q1. That was a key signal that the tide was turning.”

First to go

Advertising  budgets and giveaways are the first to get cut and the last to get reinstated. It’s common to have a knee-jerk reaction and cut advertising and promotion budgets. It is often difficult for Senior Managers to relate advertising expenses to any specific revenue gains. Cuts in advertising budgets take time to affect revenues and become easy targets in tough times.

But even though money is tight, some advertising budgets are starting to return.

“I’m actually surprised that these increases are this low – it’s so easy for companies to get new clients on the Internet, “says Rob Knaszak, President of PDS Corporate Sales. eMarketer expects the search market to increase 15.7 percent in 2010 helping to boost the online ad sales market to $25.1 billion for the year, up from the $22.7 billion eMarketer predicted in December of last year.

Similar increases are expected in spending on employee incentive programs. Many business owners have been heard to say, “I have to get my people some new shirts to boost morale and appearance.”

Employee incentives are more than morale boosters. In many businesses, such as retail and service companies, customers often see your employees as the difference between your firm and your competitors. Companies that spend the money to distinguish themselves from their competitors find this spending is justified on their bottom lines.

Tough call

It’s a tough decision to increase advertising and promotional budgets in a recession, but it’s critical to stay competitive. Companies have to start making those hard decisions to reinstate advertising budgets and employee incentive budgets to grab re-emerging business before it goes elsewhere.

If you don’t, fighting through the recession may leave you out of business during the recovery.