Online Media Spend Predicted to Double by 2007

  |  November 8, 2004   |  Comments

Ad study also shows the majority of marketers are skeptical about alternative advertising tactics.

A survey from the American Advertising Federation reports that industry leaders expect online advertising to double by 2007.

The second annual AAF Survey of Industry Leaders on Advertising Trends surveyed 121 leading advertisers, 70 percent of whom have at least 15 years of industry experience.

In 2004, online advertising represented 8.35 percent of average media plan spending, a figure projected to hit 17 percent by 2007. The flip side of that statistic is the number of advertiser media plans that don't include online spending at all. In 2004, 17.5 percent of advertisers didn't include online media in their buys, a number projected to fall to 8.5 percent by 2007.

Percentage of Media Budget
Allocated to Online Ads
(average of all respondents)
Year Budget Allocated
To Online Ads
Median % Reporting
2001 5.25% 2% 25%
2004 8.35% 10% 17.5%
2007 17% 15% 8.5%
Source: 2004 AAF Survey of Industry Leadrs on
Advertising Trends

"Far from the over-hyped promises of the late '90s, there is now greater clarity about the real benefits of online," the AAF report states, "including its ability to complement and enhance the use of traditional media and its precision targeting."

The ability to complement and enhance the use of traditional media was flagged as an online advertising benefit by 95 percent of survey respondents. Meanwhile, 75 percent of respondents agreed they thought advertising has the ability to deliver a return on investment. More precise targeting of fragmented audience was noted as a benefit by 84 percent of respondents, while 62 percent said that new online ad formats grab attention and break though clutter.

Spyware and adware were either opposed or strongly opposed by 60 percent, with only 12 percent recorded as somewhat supportive. None of the respondents indicated strong support for spyware/adware, while slightly less than a third (29 percent) said they were unsure if they supported the tactic or not.

Benefits of Online Advertising
Benefits Agree
Ability to demonstrate a return on investment 30% 45% 17% 5% 4%
New ad formats can break through the clutter and grab attention 23% 39% 30% 7% 2%
More precise targeting of fragmented audiences 42% 42% 12% 2% 2%
Ability to complement and enhance the use of traditional media 48% 47% 2% 2% 1%
Source: 2004 AAF Survey of Industry Leadrs on Advertising Trends

Other alternatives to the traditional :30 TV spot didn't fair as well in the survey. The report notes a "healthy skepticism" to all alternatives except product placement. So-called advertainment, such as BMW's short online films, was rated as ineffective by 11 percent of respondents, while 50 percent called it somewhat effective. SMS (define) messaging, of the type used by AT&T Wireless' American Idol campaign, was noted as being not effective at all by 17 percent, while 45 percent believe it somewhat effective.

The :30-second spot itself was perceived to be impacted by the rise of the DVR. Seventy-six percent of respondents think DVR ad-skipping technology will have an effect on the TV advertising landscape. Some (21 percent) went so far as to say DVRs will herald the end of the traditional TV spot, and cause a dramatic transformation of the TV advertising paradigm.


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