Ad Declines in Mass Media Seen as More Than Just Economic

By NAT WORDEN

With dire forecasts, multibillion-dollar write-downs and widespread job losses piling up throughout the industry, media companies are watching their life blood -- advertising -- erode at a rate not seen in a generation.

And this week, titans of media acknowledged the possibility that when the economy finally recovers, advertising dollars may never return to major media outlets in full force as the rise of the Internet leaves audiences increasingly fragmented and less accessible to mass marketing.

For example, Walt Disney Co. Chief Executive Robert Iger told analysts Tuesday that some of the entertainment empire's businesses, like its broadcast television network, are feeling "signs of secular change as competition for people's time is increasing and the abundance of choice is allowing consumers to be more selective."

Mr. Iger's comments raised eyebrows because he was suggesting that something more than just the worldwide economic downturn was behind Disney's 32% drop in fiscal first-quarter earnings and 8.2% revenue slide. Media stocks, like other industries, are at multiyear lows, but Mr. Iger's comments -- echoed by others -- indicate the challenges facing media companies.

"We don't believe the changes we are seeing in consumer behavior can all be attributed to a weak economy, and we feel it is important for us to address them as more than just cyclical issues," Mr. Iger said.

His counterpart at News Corp., Rupert Murdoch, acknowledged the heightened threat posed to the ad business by digital distribution.

"I recognize that we may never return to record levels, but we do believe [News Corp.] can recapture a large percentage of the advertising that does return," Mr. Murdoch said. "It's why we continue to believe in newspapers and their brand extensions and television and film as mass media."

For that reason, News Corp. continues to invest in its businesses.

"We have never bought in to the pervasive fear that all is lost when the business hits a recession, that advertising is gone [and] never to return, that consumers won't pay for entertainment," Mr. Murdoch said. "Sure, there's reason to be concerned, and we are running our business to respond to that concern, but historically, every time we've seen a recession, mild or major, we've endured this panic and come out better."

News Corp.'s results underscored the reasons for concern. The company swung to a loss for the quarter totaling $6.4 billion thanks in part to an asset impairment charge of $8.4 billion stemming from the 70% drop in its stock price over the last two years. Its revenue was down 8.1%.

"Despite management's optimistic view of the earnings recovery potential, we believe the challenges News Corp. is facing are secular," JPMorgan analyst Imran Khan said.

"The company's management believes that newspaper and television earning power will return after the economy bottoms," Mr. Khan said. "We, however, think that advertising-supported industries are undergoing a structural shift and, as such, think that newspapers and local TV revenue base will continue to face significant challenges."

News Corp. wasn't the only media company to record massive impairment charges. Time Warner Inc., with its stock down 56% over the last two years, logged a $16 billion quarterly loss on Wednesday with asset write-downs totaling $24 billion as its magazine publishing and online media segments suffered sharp declines.

CBS Corp., which will report its fourth-quarter earnings on Feb. 18, recorded a $14.1 billion charge in November amid an ongoing slump at its broadcast radio and television businesses. Its shares are down 73% over the past 12 months.

Analysts say the big write-downs reflect poor capital allocation on the part of media companies over the last decade and a recognition that declines in the value of their businesses are likely permanent.

Recently, media companies have invested heavily in digital media assets to keep pace with technology, but most of these deals have yet to bear financial fruit and some have been disastrous.

Most notable is Time Warner's infamous merger with AOL, which is still plaguing the company as it struggles to unload the shrinking Internet business. Meanwhile, Google Inc. is trying to cash out of its AOL investment, having written down its 5% position by more than 70%.

News Corp.'s Murdoch conceded that players in the Internet search advertising business, like Google, are "on to a very good thing," and he noted the difficulties facing News Corp.'s digital media business, comprised mostly of the social networking site, MySpace, which focuses on display advertising.

MySpace was the toast of the traditional media industry when News Corp. acquired it for $580 million in 2005 to be its new media growth engine. In its latest quarter, however, ad revenue at Fox Interactive Media, which includes MySpace, was flat, and its division posted an operating loss of $38 million.

News Corp. also owns Dow Jones & Co., publisher of The Wall Street Journal.

JPMorgan's Khan said he expects more headwinds for MySpace amid increasing competition from sites like Facebook, making it "more difficult to reach meaningful profitability." He also sees trouble for MySpace when its search deal with Google ends next year, "creating additional pressure on profitability."

Sites with user-generated content -- like MySpace, Facebook and YouTube -- are struggling to drive advertising revenue growth for their owners despite rapid audience growth. Mr. Murdoch said News Corp. has adopted an "underlying philosophy" that online media businesses will shift to subscription models, but outside of a few notable exceptions, like Apple Inc.'s iTunes, a culture that demands free access to information and entertainment dominates the Web, leaving advertising as the key revenue source.

"The problem is that there's an almost infinite increase in inventory for Web sites and for display, so there's constant downward pressure on the [ad] rates you can get," Mr. Murdoch said. "We have to find new ways to monetize our huge audiences."

Search Advertising Runs into the Recession

By Jessica E. Vascellaro

On Thursday, the public will find out how online search advertising – the biggest chunk of the Internet ad market – weathered the rocky fourth quarter when Google reports its results for the period.

The signals from one study, set to be released Tuesday, aren’t pretty.

U.S. search advertising spending fell 8% in the fourth quarter of 2008 from the same period in 2007, according to a new study from search advertising firm Efficient Frontier, which had been tracking mostly flat growth for 2008. The study — which covers an undisclosed portion the $750 million in annual spending the company manages globally — marks the first quarter of negative annual growth in the several years Efficient Frontier has been gathering such data, says James Beriker, president and CEO of the firm.

It’s difficult to predict exactly what the study might mean for earnings reports from Google and other tech giants that sell search advertising, like Yahoo and Microsoft. Google held its 76% market share from the third quarter, while Yahoo increased its market share during the quarter half a percentage point to 20%, Efficient Frontier found. Microsoft Live Search’s share dropped from 4.9 percent to 4.2 percent.

Analysts, who have been slashing their estimates, are still predicting that Google notched double-digit revenue growth in the fourth quarter. Industry research firm eMarketer recently projected that, despite the recession, U.S. search advertising will still grow 14.9% in 2009, down from a 2008 growth rate of 21.4%.

The Efficient Frontier study also found that retail marketers increased their spending 9% in the fourth quarter, compared to 2007, lending support to Google’s theory that some customers will respond to the recession by leaning more heavily on search advertising, widely considered one of the most cost-effective advertising methods.

Mr. Beriker says it is tough to predict whether next quarter will be better or worse but said there are some encouraging signs. He notes that many clients cut their budgets during the beginning of the fourth quarter after noticing fewer ads were converting to sales.

But he says spending started to pick up again towards the end of the quarter after clients adjusted their bidding strategies, modifying how much they were bidding for certain words and when. The last quarter “reconditioned the way advertisers think about the channel,” he says. “It could have been much worse.”

Some other highlights from the study:

Advertisers who spend less than $50,000 on search ads cut their spending by 23% year-over-year, while advertisers that spend more than $200,000 on search per month cut spending by 9% during that time. Purchases by advertisers who spend between $50,000 and $200,000 were relatively flat.

Finance and automotive advertising continued to deteriorate. Search-ad spending among financial advertisers fell 20% compared to the fourth quarter of 2007. Search spending from automotive advertisers declined 15% during that period.

Online Ad Spend up 21% in UK; Could Overtake TV by '09

Internet ad spending in the UK grew to £1,682.5 million in the first half of 2008, a 21% year-over-year increase, according to the latest figures from the Internet Advertising Bureau (IAB-UK) in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Center (WARC), writes MarketingCharts.

The biannual internet advertising spend study found that the total advertising market was £8982.5 million, down 0.7% year-over-year, during the period from January to June 2008. The advertising market would have experienced a 4.6% decline without the internet’s growth.

In real terms, internet advertising added £348.2 million to its bottom line when compared with the same period in 2007. Online spending exceeded expectations to increase its market share by four points to 18.7%, only 0.6% behind total press display (19.3%) and 3% behind TV (21.7%).

The study suggests strong advertiser confidence in online media - including search, classifieds, rich media and video - at a time when TV, print, outdoor and radio, are experiencing declines.

Online formats surpassed expectations

• Paid search spending grew 28% year-over-year and was worth £981 million in the first half of 2008, with its market share marginally up to 58.3% of total online advertising (57.8% in first half of 2007).
• Total internet display advertising spending rose 16.3% year-over-year to £333.8 million. This was boosted by a 36.6% increase in spending on embedded formats such as banners, rich media and video. Internet display ads are still the only major display medium to be growing.
• The majority of online display ad spending is still via major portals and online publishers, but sales networks - representing thousands of smaller sites - have increased their volumes and account for 41% of all display expenditures. Sales houses and networks are growing the 'long tail' of internet advertising - smaller and niche websites - and offer advertisers a streamlined 'quick sell' for direct response campaigns.

Technology, finance and entertainment & media top categories

• In terms of revenues for specific sectors, technology is the top category with a 17.3% market share, followed by finance at 11.9%, entertainment & media at 10.7% and Recruitment at 9.9%.
• Classifieds grew by 30.2% year-on-year to £361.6 million as recruitment, property, automotive and small ads continued their migration to the internet from print classifieds, which declined 10% year-on-year.

Key growth drivers:

Advertising networks: The rapid rise of advertising networks as efficient, streamlined warehouses that sell display advertising to the internet's 'long tail' are opening up the internet to more advertisers.

Online audiences: The online population now reflects the demographic make-up of the UK as a whole, with a 52%/48% male/female split. 21% of internet users are 25 to 34 years and at the other end of the spectrum, the over-50s now represent 30% of total time spend online.

3G, wireless and inexpensive laptops: Wireless and laptops are no longer a luxury item or confined to business. Mobile network '3' sells more 3G dongles than mobile phones, T-Mobile offers a £10 per month 3G dongle, which coupled with a powerful inexpensive laptop, substitutes for a traditional broadband contract on a fixed-based PC. In Q1 2008, 6% of adults used mobile broadband and in the five months from February 2008, 511,000 mobile broadband connections were sold by the UK's five mobile network operators. 75% of those with access to mobile broadband use it at home, 18% do so at work and 27% while elsewhere/on the move.

Broadband as commodity: Faster, cheaper broadband, with deals as low as £4.50 per month from Virgin Media are attracting more people online. The proportion of homes taking broadband services grew to 58% by Q1 2008, a rise of six percentage points on a year earlier. By the end of 2007, 58% of UK households had a broadband connection, up from 52% a year previously and from 41% two years ago.

Catch-up TV: Launch of services such as BBC iPlayer and Channel 4’s 4oD are breaking the barrier between video entertainment and the internet as a communications or shopping tool. The Beijing Olympics was the tipping point for BBC iPlayer with a broader demographic profile using the online service. Consumers are responding to this increased supply. Some 27% of those age 15-24 claim to use the internet for watching TV programs in 2008, up by 17 percentage points in 12 months. 45% used it for watching video clips/webcasts, also up by 18 percentage points over the same period.

Social networking websites: Social media continues to have a large impact on the market, especially as an audience driver, the research said. In the first half of 2008 ad spending for this area was relatively low and coming off a small base, but is expected to grow steadily in the coming years. CPM values for user-generated content are lower in this sector and they are generally bought through networks. However, the premium channels such as MySpace Music and MySpace Film are sold at a higher CPM rate.

"Online is not immune from the economic downturn, but while other sectors see falls in expenditure the internet is still experiencing an incredible increase and is propping up the entire advertising market," said Guy Phillipson, CEO of the IAB UK. "The growth in internet advertising spend is beating all expectations as advertisers look to maximize their budgets, and take advantage of new display advertising formats such as video. They are also increasing their investment in paid-for search marketing because it delivers measurable returns on investment."

Is Online Safe from the Meltdown?

OCTOBER 9, 2008

The economy and online ad spending

Online ad spending data from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) for the first half of 2008 is in.

The numbers seem generally strong, showing double-digit growth compared with the first half of 2007 in several categories: search, display—which includes banners, rich media and video—and e-mail ad spending. And the total US online ad growth rate of 15.2% is nearly the same as eMarketer’s 17.4% projection for all of 2008.

Yet online classified ad spending was down by more than 5% and may turn out to be a canary in the coal mine, showing the first signs of dizziness in an increasingly toxic environment.

“The negative growth for classifieds closely reflects economic weakness,” said David Hallerman, senior analyst at eMarketer. “Whether used on eBay to sell products, on job sites by employers, or for real-estate sales, classified ad buys tend to be short-term purchases with short-term objectives.

“In contrast, most display-related ads, such as banners or video, are contracted ahead of time. For that reason, they are less of a mirror of the current state of online advertising than classifieds,” Mr. Hallerman continued.

The problem is not that banks spend so much on ads themselves. In a recent MediaPost article, ZenithOptimedia said, “The bank failures will have a fairly small direct effect on ad expenditure, since financial advertising contributes only about 4% of global ad expenditure, but fears for the future will cause consumers to cut their spending, while companies carefully inspect their budgets to find cost savings.”

Jack Myers also noted that the ad industry was undergoing a major transformation even before the crisis hit.

“The danger of ascribing downward spiraling economics of ad spending to the economy alone is that it camouflages several more endemic causes for ad spending declines,” Mr. Meyers wrote earlier this week. “The media marketplace is transitioning from one in which demand has exceeded supply (even as supply has grown exponentially)...to a marketplace in which the availability of supply is outpacing demand.”

The IAB does not forecast the future, but many companies that do have recast their numbers in recent months.

As paidContent.org detailed in a recent roundup:

• Barclays changed its US online ad forecast for 2008 through 2012 to $24.79 billion (+16.9%), below its previous forecast of $26.17 billion (+23.4%), in May. They expect online advertising to rise at a 14.3% three-year compound annual growth rate (CAGR), resulting in the Web accounting for 13% of total US ad dollars by 2011.
• J.P. Morgan lowered its 2008 US display market estimate to $8.2 billion from $8.6 billion. MediaPost said that represented 14% year-over-year growth, compared with its previous estimate of 20% growth. J.P. Morgan now expects online display to reach $9.4 billion in 2009, down from its previous estimate of $10.0 billion (16% growth compared with a previous estimate of 17%).
• Cowen said in July 2008 that 2008 US online ad market growth would be 16% year-over-year, a drop from its previous estimate of 19%.
• MAGNA also reduced its 2008 online ad spending estimates in July 2008 to 12% growth, down from the 16.5% it predicted in December 2007.

eMarketer estimated in August 2008 that online ad spending would reach $24.9 billion this year, down slightly from its March forecast. That still represents 17.4% growth over 2007.

Online TV, Automakers and Buyers

JULY 11, 2008

Will Detroit meet the buyers of its dreams on the Web?

Rising fuel prices have made 2008 a tough year so far for automakers in the US. As they examine every possible method to reach potential buyers, online television may benefit, according to J.D. Power and Associates' "2008 Power Auto Online Media Study."

Nearly seven out of 10 new-vehicle buyers surveyed said they went online to find information on TV shows. CNN.com was their top destination, followed by MSNBC and ESPN.

Arianne Walker, director of marketing at J.D. Power, told eMarketer that although survey participants were not asked about specific activity at those sites, they were asked if they watched TV content online—so it was logical to assume that some of them were watching shows and clips at the top sites, rather than just looking for information about programs and actors.

"As new-vehicle sales shrink, understanding which advertising mediums will provide the best balance of audience reach and composition is absolutely critical," Ms. Walker noted. "As more new-vehicle buyers seek information regarding television shows on the Web, advertisers can benefit from increasing their focus on this medium."

J.D. Power said that buyers of premium-brand vehicles were more likely to look online for TV content than average new-vehicle buyers.

More than three-quarters of buyers of midsize premium utility vehicles, compact premium crossover utility vehicles (CUVs) and midsize premium CUVs said they watched online TV.

For premium new-vehicle buyers, the online video connection makes sense, since Internet users tend to have higher incomes than non-Internet users. For automakers, a focus on online video viewers is practical because the group's population is growing. In the US alone, 190 million people are predicted to watch online video in 2012.

Moreover, an increased online presence by automakers is almost inevitable. Despite the auto sales slump in the US, the industry is not about to let up on online ad spending. Automakers are predicted to spend $5.61 billion on online ads in 2012, up from $2.98 billion this year.

Online Ad Spending in Europe Maturing

The UK, France and Germany still account for the bulk of spending

Online advertising spending in Europe continued double-digit growth in 2007, according to recently released data compiled by the Interactive Advertising Bureau Europe (IABEurope) and analyzed by PricewaterhouseCoopers (PwC).

Online ad spending growth averaged 40% for the 16 countries covered. In comparison, online ad spending in the US grew by 26% during the same period, according to the IABEurope.

Advertisers in Europe spent €11.19 billion ($15.3 billion) online in 2007, up from €7.21 billion ($9.1 billion) in 2006.

The IABEurope said that the UK, Germany and France accounted for two-thirds of all online ad spending in Europe.

The European per-person online advertising spending average was €81 ($110) in 2007. Advertisers in Norway spent the most, at €133 ($183) per person, followed by those in the UK at €121 ($166) and Denmark at €110 ($150). In the US, advertisers spent €92 ($126) per person in 2007. The IABEurope said that advertisers in more mature markets put a higher value on Internet users.

"The development of the more mature markets in Europe is a sign that they are seeing increasing amounts of investment from a wider range of advertisers than ever before," said Nicki Lynas, senior manager at PwC, in a statement.

Although the IABEurope does not make online ad spending projections, Carat predicted in March 2008 that growth would slow both this year and next.

In comparison, eMarketer predicts that online ad spending growth in the US will slow to 22.7% in 2008 and 15.8% in 2009.

Despite slowing online ad spending growth in Europe, the medium will still nearly double as a percentage of total ad spending by 2012, according to Screen Digest.

Ad data from PubMatic

Metrics: Trouble in Online Adland


PubMatic, a Palo Alto, Calif.-based startup focused on online advertising, just released its PubMatic AdPrice Index based on data from over 3,000 publishers and billions of ad impressions. The findings of this month’s report: The U.S. economic slowdown is beginning to impact online advertising in a big way, with overall monetization dropping by 23 percent — 38 cents eCPM in March vs. 49 cents eCPM in March. Not a big surprise since housing related advertising was big on the web. Even electronics retailers are feeling the pinch and cutting back.

* eCPMs for large web sites (more than 100 million page views per month) dropped dramatically by 52 percent from 38 cents in March to 18 cents in April 2008.
* Medium web sites (1 million to 100 million page views per month) were nearly flat, with monetization dropping from 34 cents in March to 33 cents in April.
* Small web sites managed to improve their monetization, increasing from $1.17 in March to $1.29 in April.

The overall trends you pick up from the report are not that surprising. For instance, the improved monetization of small web sites is because they have more focused content, which presents more targeted advertising opportunity. Again, no surprise that Social Networking led the plunge, with monetization dropping 47 percent to 19 cents in April from 37 cents in March, below January lows of 22 cents. Too much damn inventory. You can get the full report here:

The PubMatic AdPrice Index is a broad-based measure of ad network pricing information. It is based on anonymous data from over 3,000 publishers who work with PubMatic for ad network and layout optimization services.

PubMatic AdPrice Index

The PubMatic AdPrice Index revealed surprising weakness in monetization for the vast majority of Web sites. Large Web sites fared the worst while Small Web sites managed to maintain their monetization rates. eCPMs for large Web sites (more than 100 million page views per month) dropped dramatically by 52 percent from 38 cents in March to 18 cents April. Medium Web sites (1 million to 100 million page views per month) were nearly flat, with monetization dropping from 34 cents in March to 33 cents in April. Small Web sites managed to improve their monetization, increasing from $1.18 in March to $1.29 in April.
Segment Definitions

* Small Web site segment: Less than 1 million page views per month.
* Medium Web site segment: Between 1 million and 100 million page views per month.
* Large Web site segment: Over 100 million page views per month.
* Aggregate Index: Data for All Web sites is computed using a weighting of 65% large Web sites, 20% Medium Web sites, and 15% Small Web sites based on an estimate of overall traffic in the online publishing market.
* Note: The pricing data reflects net publisher monetization via ad networks and excludes ad networks' share of ad spends as well as inventory sold directly by publishers to ad agencies or advertisers.

Key Findings

* On average, Web site monetization dropped by 23 percent from 49 cents in March to 38 cents in April.
* Among the verticals, Social Networking led the plunge with monetization dropping 47 percent, from 37 cents in March to 19 cents in April, below January lows of 22 cents. Entertainment monetization dropped 17 percent from 40 cents in March to 33 cents in April. Gaming and Sports were down marginally (4 percent and 5 percent, respectively). Technology remained relatively flat at 83 cents in April vs. 82 cents in March, but is still off January highs of 92 cents.

Additional Findings

* eCPMs dropped significantly in most categories and verticals. However, Small Web sites, consistent with earlier findings, continued to outperform medium and large Web sites.
* In April 2008, 77 percent of Small Web sites garnered net publisher eCPMs from ad networks of under $1.00, compared with 95 percent of Medium Web sites and 100 percent of large web sites.
* Across all Web sites, the range of eCPMs was $0.002 to $18.45.

Methodology

The PubMatic AdPrice Index is a broad-based measure of ad network pricing information based on anonymous data from over 3,000 publishers who work with PubMatic for ad network and ad layout optimization services. Approximately 85% of these publishers are based in the US.


* The pricing data reflects the pricing of text and banner inventory sold to ad networks only, and does not include inventory sold directly to advertisers.
* The pricing data reflects net publisher monetization, not gross advertising spend or the money paid by the advertiser to an ad network.

The PubMatic AdPrice Index is prepared by leading independent statisticians and industry experts:

* Albert Madansky, Ph.D. is the H.G.B. Alexander Professor Emeritus of Business Administration at the University of Chicago Graduate School of Business, and was the recipient of the 2005 American Statistical Association Founders Award.
* Michele Madansky, Ph.D. is a media and market research consultant and former VP of Global Market Research for Yahoo!

World Ad Spending Growing Faster Than U.S. in 2008

According to a new study from GroupM, Advertising spending in US measured media is expected to increase almost 4% in 2008 compared with 2007, when spending was up about 3%. Worldwide spending is expected to go up 7% in 2008, after an anticipated 6% increase in 2007.
US advertising spending is expected increase 3.7%, to $168.6 billion, in 2008. Spending in 2007 is expected to come in at 2.8% higher than in 2006. Worldwide spending is expected to go up 6.8%, to some $479 billion















Source: GroupM, This Year Next Year, December 2007
Television and the internet are the primary engines of global ad growth, with 50% and 30%, respectively, of additional new investment in 2008, according to GroupM Futures Director Adam Smith. He also said spending on marketing services, such as sponsorships and public relations, is growing at a faster rate than for traditional advertising.
Smith reported that 5% of global ad investment is expected to shift from developed to emerging economies in 2008, the largest such shift ever recorded:
The main geographic contributors to growth next year are predicted to be China, with 21% of all new money.
Russia and Brazil will each contribute 6%.
India will account for 3%.
The US remains the second-highest contributor at 20% of all new money.
The 2008 spending expectations largely reflect the Olympics and the US election, says the report:
The Games are forecast to bring $1 billion in ad spending to national TV and $200-$300 million to local broadcast
The election is even more important to local broadcast and is expected to inject nearly $2 billion in 2008 before facing a tough adjustment in 2009
Internet ad spending is expected to exceed 10% of global ad investment in 2008 for the first time ever
Search will comprise 65-70% measured online advertising in 2008, up from 50% in 2005.
Another first, in one country, Sweden, Online advertising is expected to be the largest single medium. The UK and Denmark are likely to be the next in line
Advertising spending in newspapers is expected to continue to suffer, and new softness is already evident in some large categories such as automotive, airlines, and retail. The continued heavy loss of classified advertising to the internet continues to do the most serious damage
For the complete release from GroupM, please visit here.

Ad Spend Will Bloom In ‘08

There is no worry on the growth rate of online ad budgets for next year, despite the future of the economy. Emarketer reports that online advertising will increase by 29% in 2008. Reports suggest that online advertising will maintain its strength due to the need for ads with a “quantifiable value,” according to Marketing Shift.

Emarketer also claims that advertising on social networks will increase by 61%, with a major bloom in contextual advertising on these sites. There is also the prediction that social networking tools such as widgets and user profiles will become a standard feature on sites across the Internet.

Communications Spend to Reach $1 Trillion in '08;

Internet to Surpass All Ad Segments in 2011

Total communications spending increased 6.8 percent to a record $885.2 billion in 2006, having expanded at a compound annual growth rate (CAGR) of 5.9 percent from 2001 to 2006 (and exceeding GDP growth in both periods), according to exclusive data released today by Veronis Suhler Stevenson (VSS), MarketingCharts reports.

Communications spending growth accelerated in 2006, outpacing nominal GDP for the fourth time in five years, while consumer media usage declined following two consecutive years of decelerating growth, according to the VSS Communications Industry Forecast 2007-2011.

The VSS forecast tracks, analyzes and forecasts spending, usage and trends in all 19 segments and more than 100 sub-segments of the US media industry, including alternative advertising and marketing data licensed exclusively from PQ Media.

According to the VSS data and forecast:

• The communications industry is on pace to grow 6.4 percent in 2007 and post a CAGR of 6.7 percent in the 2006-2011 period, making it the third-fastest-growing sector of the US economy.
• Communications spending will top $1 trillion for the first time in 2008, with growth driven by strong gains in the alternative media and institutional end-user sectors.
• Total communications spending is forecast reach $1.222 trillion in 2011.
• In what would be a watershed moment in communications history, internet advertising - including pure-play websites and digital extensions of traditional media - will replace newspapers as the largest ad medium in 2011.
• For the first time since 1997, consumers spent less time with media in 2006 than they did the previous year: Media usage per person declined 0.5 percent to 3,530 hours, due to changing consumer behaviors and digital media efficiencies.
• Consumers are also migrating away from advertising-supported media, such as broadcast TV and newspapers, to consumer-supported platforms, such as cable TV and videogames: Time spent with ad-supported media declined 6.3 percent from 2001 to 2006.
• However, media usage by institutional end-users grew 3.2 percent, to 260 hours per employee, in 2006, according to the first-ever analysis of business and government media usage included in this year's VSS Forecast.

MarketingCharts has more data from the VSS forecast.

Insurance Brands Will Spend $980 Million Online: eMarketer

by Tameka Kee, Thursday, Aug 9, 2007 6:00 AM ET

THE BRAND WARS ARE ALIVE and well for insurance companies, according to a new eMarketer report--and while their online ad spending will continue to grow, TV still remains the dominant advertising medium. Life, home and auto insurance brands are slated to spend some $980 million in online advertising this year, according to eMarketer--with about half of that budget going to search, 30% being split between broadband video and other rich media formats, and less than 20% to display. Insurance companies will continue to increase their online ad spend -- with the figure reaching almost $2 billion by 2010. In the past five years they have launched a myriad of interactive campaigns, from the Caveman's Crib microsite by Berkshire Hathaway's GEICO, to Allstate's broadband and mobile Web sponsorship tie-ins to the BCS College Football Championship. But despite that growth, TV continues to be the dominant ad channel for insurers of all types, as insurance is a mature market, and according to eMarketer's Lisa Phillips, senior analyst and author of the report, the need to "build brand awareness and explain a complex product in simple terms" is better served by large-scale broadcasts. In the race to grab both consumer mindshare and sales acquisitions, GEICO, Allstate, Progressive and State Farm Mutual Auto Insurance together spent over $1.37 billion in advertising last year--with almost 67% of those dollars going to TV. TV's share of total insurance ad spending actually increased from 2004-2006, and according to Phillips, "there are good reasons for insurers' continued love of television. Insurance ads on TV move consumers to act." Indeed, the report found that some 59% of respondents would go online first after seeing a TV ad for an auto insurance company, either to visit the Web site specified in the ad, to visit the company's corporate site or to use a search engine to find a site for the company. In contrast, only 13% of viewers would call a toll-free number if one were specified in the TV ad. Phillips added, "for the insurance industry, at least, it seems that the combination of TV and the Web delivers a powerful one-two punch. And in that order."

Online Ad Sales Growing, But Not At 'Premium' Sites

Written by Josh Catone / August 7, 2007 / 0 comments

According to an article in the Financial Times today, online ads are expected to outsell those in print newspapers in the US by 2011. A study by Veronis Suhler Stevenson (VSS), FT reports, predicts ad spending online will grow to $62 billion over the next three years, compared to $60 billion for newspapers.

The bad news for American newspaper publishers, though, is that Internet ad growth at traditional media outlets is also slowing -- so they're being squeezed on both sides. Separately today, the New York Post is reporting that the New York Times, the Washington Post, CNET, and other premium web publishers have all seen slowing ad sales over the past year. "Online ad growth at the Washington Post fell to 11 percent in the second quarter, compared with 36 percent a year earlier," writes the Post's Holly Sanders.

"People are still buying display ads, but they are buying them elsewhere and for less than if they bought them from AOL or Yahoo!," said Jupiter Research analyst David Card.

This shift is benefiting newcomers - such as social networking sites like Facebook, MySpace and YouTube - at the expense of more established rivals that were once considered "must buys."

"We have a lot more choice and a lot more options out there," said T.S. Kelly, head of research at Media Contacts, the interactive arm of media buying firm MPG.

What does this mean? It means two things. First, this is likely great news for Google. Google's Adsense program is the du jour method of advertising for small, long tail web sites. Cheap opportunities for advertisers to spread their ad dollars to many smaller, perhaps more targeted sites, instead of large ad buys on major mainstream content producers and portals, means great news for Google and smaller ad networks like Burst Media and Gorilla Nation, who handle the advertising on many of those sites.

Second it means we should get ready for the bubble talk. A lot of people will likely point to the online advertising collapse of the 1990s where CPM rates tumbled as a result of too much inventory. Take this from Silicon Alley Insider, for example:

"The situation is also reminiscent of the late 90s, when freely flowing venture capital created so much online inventory so fast that prices collapsed, driving a whole generation of start-ups out of business. The problem now is not VC money; it's the ease with which new online media businesses can be established. But it will likely lead to the same result."

(Emphasis mine.)

The VSS report mentioned above indicates that online ad spending is increasing overall, however, so it doesn't appear there is any problem of excess inventory -- it is just a shift in where that inventory is located. As the New York Post article notes, the recent consolidation in the online ad industry is partly the result of the large sites like AOL and Yahoo! wanting a piece of non-premium ad sales action. So while this may be bad news for premium content producers like newspapers, it is good news for whoever is controlling the sale of these so-called non-premium ads.

Coen Downgrades '07 U.S. Ad Spend Forecast by $8 Bil.

John Consoli

JUNE 26, 2007 -

Media advertising forecaster Bob Coen, senior vp at Universal McCann, said he significantly overprojected advertising spending for 2007 last December in his semi-annual forecast and today (June 26) revised his totals, saying combined national and local ad spending will total $290.3 billion, $8 billion less than his original forecast. But national ad spending will still be up in 2007 over 2006.

Coen said national ad spending in 2007 will be $190 billion, up 4.2 percent over 2006. In December he had forecast national spending in 2007 would be $195.6 billion, up 5.9 percent. Local ad spending, Coen predicts, will now reach $100.2 billion in 2007, up 1.7 percent. Last December, he projected it would be $103.1 billion, up 2.7 percent.

Coen said 2006 turned out not to be a very good year for ad spending, despite it being an Olympics and election year. He said that has carried over into this year.

In a usual Olympics and election year, he said, ad spending usually rises by close to 6 percent overall, but 2006 finished with only a 3.9 percent increase to $281.6 billion. That impacted his projections for this year.

This year has also not started off very well as far as ad spending goes. Coen said in the first quarter of this year, major ad categories like automotive and telecommunications are down 11 percent and 14 percent, respectively, in national television, and other categories like soft drinks and airlines are down 17 percent and 24 percent respectively in national TV spending.
On the local side, classified advertising in newspapers is down significantly, with that category projected to be off 13.2 percent for 2007.

“The outlook for advertising this year is not very good,” Coen said. “In odd-numbered years there is a significant fall-off in political advertising from the levels of the even-numbered years when all members of the House of Representatives and one-third of the Senate are involved in election contests,” Coen said.

Coen said right now it is “wishful thinking” that any significant ad revenue will be gained from presidential primary campaigns or that traditional media will gain huge amounts of new ad revenue for their online services.

For 2007, Coen projects that the Big 4 broadcast TV networks will take in $17.1 billion in ad revenue, up 3 percent over 2006. Other Coen projections: All of cable TV, he said, will take in $20.1 billion, up 4.5 percent. Magazines will bring in $13.5 billion in ad revenue, up 4.0 percent. Syndication TV will bring in $3.6 billion, down 2 percent. National radio will take in $4.5 billion, up 2.5 percent; and newspapers will bring in $7 billion, up 1 percent. Internet advertising, Coen projects, will be up 17 percent to $10.6 billion in 2007.

Coen’s also made local projections for 2007: newspaper advertising woulc be down 1.5 percent to $38.8 billion; local TV, up 8 percent to $15.3 billion; and local radio up 2 percent to $15.5 billion.

Emerging media, although a growing ad category percentage wise within itself, will have little overall impact on traditional media in the near future, according to Brian Wieser, senior vp, director industry analysis, at Magna Global, the media buying negotiator for Universal McCann and other Interpublic media agencies.

Wieser said contrary to what many believe, younger audiences are not abandoning television for emerging media. To the contrary, he said, younger audiences are actually watching more television in addition to using emerging media. He said video viewing online is less than 1 percent of total traditional television viewing right now. Online video advertising will total $365 million this year, he said. Other forms of emerging media advertising like video-on-demand will bring in $160 million in 2007, mobile wireless advertising will total $100 million, and in-game advertising will reach $216.9 billion.