With low-cost activities that have a relatively high rate of return, one can abandon budgets without abandoning financial sense.

The perfect example is paid search marketing. Instead of setting aside a budget for search, the marketer can set a desired rate of return — for example, 200%. As long as the activity exceeds the rate of return, the marketer should be able to increase the investment.

According to pure economic theory, this is how firms should and do behalf. The truth, however, is that most firms use bureaucratic tools like budgets to allocate resources internally across activities.

It's not surprising, then, that the organisations who are embracing this new approach tend to be young, small and rebellious, according to Elizabeth Miller and Richard Wassell, two representatives of 24/7 Real Media, a search and web marketing agency that I chatted with today at the ad:tech conference here in Sydney. Thanks for the tip guys!