Nearly half the chief marketing officers at Fortune 500 companies have said that they plan to increase their online advertising budgets by 30 per cent this year.
In a survey conducted quarterly by TNS Media Intelligence, 100 CMOs were asked how they were planning to divide their ad dollars in 2006. Results of the last survey, which was taken in November, were released in a report by Credit Suisse First Boston. The CMOs said that online advertising as a percentage of projected ad budgets had risen from 17 per cent, when the survey was conducted in September, to 23 per cent when the CMOs were questioned again in November.
$16.6 billion in Web spending
The survey results contributed to Credit Suisse revising its estimates for its online ad spending forecast for next year. Overall online advertising spending is expected to increase 32 per cent over last year to $16.6 billion for 2006. Credit Suisse had predicted online ad growth to be 21 per cent to $14.9 billion.
The growth in projected spending is a result of online being viewed as a preferable ad channel because it is accountable. “The largest number of survey participants believe that Internet advertising methods have the highest perceived return on investment, significantly ahead of any other category,” the report said. It is also the result of top advertisers following behind the behaviour of their customers.
“The average consumer spends about 30 per cent of their media time online – that’s why you’re seeing all that catch-up spending,” said Heath P Terry, CFA, research analyst, at Credit Suisse.
Rest of ad market lags behind
While major brands plan to increase their online spending, the entire ad market is still spending only 5 per cent of budgets in online advertising. Credit Suisse projected that the overall percentage to increase to 6.5 per cent in 2006.
Why is that so much lower than the survey participants’ estimates? Because that overall ad spending estimate encompasses all advertisers, including local advertising, classified and yellow pages, which is a huge chunk (about 30 per cent) of the advertising market. And the survey focused on just the largest brands, which buy far less local advertising.
“If their consumers are spending 30 per cent of their media time online, and they are only spending 5 per cent of their ad dollars online, advertisers need to be spending that many dollars online,” Terry said.
Newspapers up, TV down
The CMOs surveyed said that they expected to spend more on newspaper advertising, and less on broadcast and magazine ads. They revised up their projected newspaper spend from 12 per cent in September to 16 per cent in November. For broadcast TV, their September estimate was 18 per cent, but dropped to 16 per cent by November. And their projected magazine ad spend fell from 22 per cent in September to 15 per cent in November.