Study predicts rising ad spending

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Schonfeld & Associates Inc. released last month the 24th edition of its annual report, "Advertising Ratios & Budgets," which seems a rather lackluster name for such an overwhelmingly optimistic survey.

The survey predicts, as it has for the past few years, that most vertical industries in both consumer and b-to-b areas will enjoy growth in advertising spending in 2001.

"There's an incredible amount of money out there," said Carol Greenhut, owner of Riverwoods, Ill.-based Schonfeld, who explained that the virtually across-the-board increases in ad budgets are driven by--what else?--the Internet.

Schonfeld completes its "Advertising Ratios & Budgets" study primarily by analyzing the 10-K filings of more than 6,500 companies in about 320 industry sectors. Not only are more companies spending money to promote their Web sites, but they are classifying the money spent to build and maintain a Web site as marketing dollars, according to Greenhut.

In several key economic sectors, advertising spending, much of it aimed at b-to-b targets, is expected to grow substantially next year, according to the Schonfeld survey. Computer and software manufacturers are expected to spend $21.7 billion on ad spending in 2001. PC manufacturers plan to increase spending by 13.2% over 2000.

Similarly, prepackaged software providers will increase spending by 12.3%. Additionally, ad spending by semiconductor manufacturers is expected to jump 8.2% and spending by computer communication equipment manufactures will leap 14.1%.

Telecom ad spending up

The telecommunications industry will show similar increases in 2001, according to Schonfeld's findings. Telecom service providers are expected to spend more than $20 billion on advertising next year, 7.1% more than in 2000. Ad spending on wireless services will lead the charge, with spending up 14.1% next year to $4.2 billion.

Another key sector that will boost ad spending in 2001 is the pharmaceutical industry, which will reach $21.8 billion, an increase of 8.8% over 2000. "It's very hard to find an industry where advertising spending is going down," Greenhut said. "It's only in industries where it's being regulated, like in cigarettes." The agricultural industry, beset by a recession in crop prices, also reduced ad spending in several key areas, according to the Schonfeld survey.

The survey also provides data on ad spending as a percentage of sales and as a percentage of margin in more than 300 vertical industries, categorized by SIC code. The data is used by marketers to gauge the budgets of their competitors and by advertising agencies--often as ammunition to encourage their clients to spend more.

"We use this kind of data as a benchmark, particularly in pharmaceuticals," said Harlan Schwarz, senior VP-director of media planning at Universal McCann, the media arm of McCann-Erickson World Group.

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