TNS Affirms Big Lift in Online Ad Spend

  |  December 6, 2006   |  Comments

Online ad spending grew by leaps and bounds this year, and is expected to maintain a slow-but-steady rate of increase in 2007.

Advertising expenditures on the Internet totaled $7.2 billion for the first nine months of 2006, a 17.9 percent lift over the year-ago period, according to TNS Media Intelligence. That puts the sector well ahead of a previously forecast 13 percent growth rate for the year.

Internet spending, excluding search, accounts for 6.6 percent of the total ad spend, up almost a full percentage point since last year. Dollar-wise, spending totalled $7.15 billion, compared with $6.1 billion in the first nine months of last year.

"The Internet continues to grow at very robust rates," TNS Media Intelligence President and CEO Steven Fredericks told ClickZ. "It's share of voice has gone from 5.8 percent last year to 6.6 percent this year. We think it's at the expense of newspapers and radio, primarily."

In a separate report issued yesterday, The Jack Myers Media Business Report predicts new media will enjoy 27 percent growth in 2007, while the total ad spend will increase just 3.7 percent. The new media sector -- which the report defines to include including online, branded entertainment, video games, satellite radio, cinema, and mobile advertising – will command a 6.8 percent share of estimated revenues for 2006.

"Search has become a fairly mature business," said Jack Myers, president of Myers Publishing. "While it's still robust growth, there are increasing concerns about click fraud and concerns about return on investment. The banner ad business has become fairly mature."

Online spending, including search, grew 26 percent this year to reach $13.9 billion, according to the report, but is projected to increase by a lesser 20 percent in 2007. Dollars spent online for advertising next year could total $16.7 billion. The report attributes a slowdown in Internet spending to marketer reluctance to buy on social media sites like MySpace and YouTube.

"It's happening, but they're not getting the benefit of the huge numbers they're generating," said Myers.

Marketers adjusting budgets for next year are not putting large commitments toward the Web -- not relative to this year anyway. About 4 percent of marketers expect to reduce online ad spending while 10 percent plan to maintain current expenditures; the remaining 86 percent plan increases for online ad spending. Of those, one-third of those expect to grow their online expenditures by 10 to 20 percent.

"The major national advertisers appear to be budgeting 15 percent increases, so strong growth in comparison to spending in other media, but it's not the 30 to 40 percent growth we've seen in the earlier part of the decade," said Myers.

Television media experienced 5.2 percent growth in ad spending, according to TNS, which Fredericks attributes the increase to the Olympics and elections. "Next year will be more interesting to watch in terms of TV relative to rich media, it's not going to have a specific event take place, that's where we may see some shift," he said.

Fredericks believes the two channels are blending more closely, which could cause a convergence from a consumer perspective. "If consumers don't distinguish any difference between television and Internet, what does this mean for the individual media?" he said. "We're going to have to start thinking about media a little differently. The silos we have aren't going to work anymore."

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Enid Burns

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