Report: Interactive Leads Ad Growth in 2007; Other Media Remain Flat

Internet advertising increased 15.9 percent in 2007, while spending across all media grew at a rate of 0.2 percent compared to 2006, according to a report released by TNS Media Intelligence. Growth is attributed to budget shifts from blue chip advertisers.

Expenditures for the Internet totaled $11.31 billion, up from $9.75 billion in 2006. In terms of share, Internet accounts for 7.6 percent share of all advertising expenditures, up from 6.6 percent in 2006, and 5.8 percent the year before.

Newspapers and local TV lost share of ad spending between 2006 and 2007. Newspaper advertising went from 18.8 percent in 2006 to 17.7 percent in 2007. Local TV slipped from 12.5 percent in 2006 to 11.3 percent last year.

Dot-com companies lead spending in display advertising. The financial services sector was fairly robust, according to Jon Swallen, SVP of research at TNS Media Intelligence. “Financial services has been the number one ad category, apart from dot-coms, for about the last year and a half. Roughly one out of every eight dollars that’s spent on financial service advertising is going to Internet display,” he said.

Swallen predicted cutbacks to Internet spending in the financial sector wouldn’t mean doom and gloom for the Web, but “the difference between growth rates of mid-teens and low-teens.”

Growth in display advertising on the Internet, according to Swallen, is likely due to blue chip advertisers moving budget allocations from other media to the Web, or spreading budgets to integrated campaigns. “What we’ve seen in 2007, those top 50 advertisers as a group have been shifting money from offline media to online media at a faster rate than the rest of the advertising market.”

Up until 2007, blue chip advertisers had had been shifting money to the Internet at a slower rate than the rest of the market, he said.

Marketers use media mix modeling to plan budgets, according to Swallen. Not all dollars are going strictly to online, but are being planned strategically across all media. “Over time, I think marketers have become smarter about and more knowledgeable about what does or does not work within their marketing plans,” he said. “And their modeling work helps them fine tune their allocation. Return on investment and accountability helps favor the Internet as opposed to other media.”