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Online advertising continues phenomenal climb

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OUTLOOK 2007
Marketers' influence grows even as customers demand more control of the message
Online Advertising continues phenomenal climb
Budgeting for 2007
Marketing Plans and Priorities for 2007
Marketer Roundtable
 
Ad industry prognosticators agree: Online advertising remains the sweet spot for the media industry.

Four of the most-recognized ad industry prognosticators?three media agencies and an analyst?released advertising spending predictions for 2007 last Monday, and online was the clear winner.

Media agency ZenithOptimedia predicted online ad spending will grow seven times faster than offline advertising in 2007. Global Internet ad spending is expected to grow 28.2%, while spending on other media will see 3.9% growth. ZenithOptimedia predicted Internet spending will overtake outdoor advertising this year and is poised to overtake radio spending in 2009.

Two other forecasters came out with numbers similar to those ZenithOptimedia presented.

WPP Group's GroupM, a London-based media agency, also predicted 28% ad spending growth online in 2007 in its "This Year Next Year Worldwide" report, while Merrill Lynch forecast 22.9% growth.

Universal McCann's Robert J. Coen, senior VP-director of forecasting, said U.S., Internet spending will grow 15% next year.

While Internet advertising still makes up less than 10% of marketers' total budgets, it continues to grow in total dollars and as a percentage of the total marketing budget.

ZenithOptimedia said the Internet's share of total ad spending will increase from 5.8% this year to 8.6% in 2009. In fact, the Internet already attracts more than 10% of ad spending in Norway, Sweden and the U.K.

GroupM estimates the Internet's share is already 6% of all global advertising and, if search is included in that number, it is at least 8%.

Meanwhile, JupiterResearch projects that U.S. Internet ad spending will reach $17.70 billion in 2007, up 12.7% over this year. By 2011, Internet ad spending will total $25.90 billion, JupiterResearch predicted. The firm said Internet advertising will make up 7.2% of the total marketing budget in 2007 and grow to 8.6% by 2011.

JupiterResearch also looked at the distribution of ad dollars spent on search, display advertising and classified ads.

Next year, search will make up 42.9% of marketers' total online ad budgets, followed by display advertising (35.6%) and classified ads (21.5%).

Within display advertising, static ads and text ads will each make up 31.7% of the budget, followed by rich media ads (28.6%) and online video ads (8.0%).

Overall ad spending growth numbers are muted compared with the online success story. ZenithOptimedia said total global advertising spending will rise 5.3% to $446.30 billion in 2007, a slower pace than this year's 5.9% growth.

Universal McCann said total worldwide spending will increase 5.3% to $631.40 billion.

GroupM predicted global ad growth at 5.0% next year, compared with 5.3% growth this year.

ZenithOptimedia projected that TV will make up 37.5% of total advertising spending next year, followed by newspapers (28.5%), magazines (12.8%), radio (8.2%), Internet (7.0%), outdoor (5.6%) and cinema (0.4%).

B-to-b marketers have also weighed in with their own spending forecasts. B-to-b marketers said they will increase their advertising and marketing budgets by an average 5% to 10% in 2007, depending on the industry, according to various studies from several research companies.

In the technology space, according to research company IDC, companies will increase marketing spending an average 7.5% next year. The forecast comes from IDC's "Tech Marketing Benchmark" study, which was released in August and was based on interviews with 95 senior tech marketing executives.

"Tech marketing spending will continue to outpace global IT spending in 2007," said Michael Gerard, research director at IDC's CMO Advisory Research.

IDC projects that global companies will increase their IT spending by 6.6% in 2007.

Beyond corporate marketing

"Going into 2007, companies will continue to move beyond corporate marketing and will look more at product marketing and field marketing," Gerard said.

He predicted that, based on IDC research, tech companies will invest in developing lead management processes, performance measurement systems, organizational alignment and brand awareness initiatives in 2007.

"There will also be increased investment into newer-generation marketing channels," Gerard said, including search marketing technologies and hiring search engine experts.

Another report, issued by research company Schonfeld & Associates, provides a breakdown of estimated ad spending by industries for 2006 and 2007.

"Automotive will be the biggest spender in 2007, followed by food and kindred products," said Carol Greenhut, president of Schonfeld & Associates.

The Schonfeld report, which tracks ad spending data for more than 5,400 companies across more than 300 industries, was released in June.

B-to-b industries, including telecommunications and computers, will also increase spending in 2007, the report found.

Automotive is expected to be the highest-spending industry next year, increasing spending by 5.3% to $30.60 billion.

Pharmaceutical companies will increase ad spending 10.5% next year to $24.90 billion, Schonfeld said. Ad spending by telecommunication service companies will be up 6.6% to $24.20 billion, while ad spending for wireless communications services will rise an estimated 8.5% to $12.40 billion.

Prepackaged software companies will boost ad spending by 9.1% to $4.50 billion, while PC manufacturers will increase ad spending by 5.3% next year to an estimated $2.40 billion. M

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