TNS: 2006 Web Spending Up Strongly, Ad Business Flat Overall

Spending on interactive display advertising jumped 17.3 percent to $9.8 billion last year, increasing online share of all ad spending from 5.8 percent to 6.5 percent. This according to year-end figures from TNS Media Intelligence.

The sharp growth rate was unique among media. Overall ad spending was a mushy 4.3 percent, and would have been even lower (approximately 3 percent) without the aid of political and Olympics advertising.

Mid-sized companies set the most aggressive pace with online budget increases, according to TNS Senior VP of Research Jon Swallen. He said spending by the top 50 advertisers, representing about 1/3 of total ad dollars, lagged the market average by about 2 percentage points; the market average was about 6.5 percent, whereas the biggest advertisers contributed a share of their budgets in the range of 4 percent.

One reason blue-chip advertisers spend less online is it’s hard to find inventory to spend more on, Swallen believes. “Part of it is scale. For Procter & Gamble to put 6.5 percent of its marketing budget into the Internet, they’d change the name from Google to Procter & Gamble,” he said.

Network television advertising spend was $22.9 billion last year, just over twice that of Internet spending, but grew only 2.5 percent above what it drew the previous year. Cable showed a slightly higher growth rate of 3.4 percent, to $16.8 billion.

The well-documented decline of local newspaper revenues is also reflected in the report. Local newspaper spending shrank 3.3 percent, whereas national newspapers gained the same amount. Newspaper media collectively saw billings atrophy by 2.4 percent.

TNS believes the Web properties run by papers are only partially making up the difference. For every $1 lost in ad revenue, Swallen said, the Web comes up with about $.50.

Other growth categories include magazine media (all categories but B2B, which shrank 2.7 percent); national spot radio media, which saw a tiny increase; Spanish language TV, up an astounding 13.9 percent; Spanish language newspapers, up 8.5 percent; and outdoor, which grew by 8.6 percent.

The top 10 advertisers, including P&G, GM, AT&T and Verizon, spent a combined $18.7 billion, down 2.8 percent since 2005. P&G held onto the top slot with $3.3 billion in spending outlays; and AT&T implemented the biggest increase in spending, growing its media investment by 30.8 percent to $2.2 billion. Among the top 10 ad categories, pharmaceuticals, telecom and local services registered the biggest increases. Automotive, not surprisingly given DaimlerChrysler’s cutbacks, shrank by 11.7 percent.

TNS estimates online ad spending by working backwards from ads it observes on approximately 3,000 Web sites. Its spidering technology trolls pages and examines HTML code to identify what elements on the page display advertising. It then retrieves images and compares them to a library of iconography that helps identify the brand advertised. TNS uses rate card data to assign cost estimates to each ad.

The sites it measures include portals and other major content sites, as well as local newspaper and local TV sites, but not blogs. TNS Media Intelligence reports on display advertising only. Search and e-mail are not included.

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