Total spending among the 100 Leading National Advertisers reached a record $108.6 billion in 2013, passing the previous spending peak set in pre-recession 2007.
Still, this group remained careful with its dollars. Spending increased 4.4% last year and an average of 4.0% over the past three years.
These blue-chip marketers account for an outsize portion of advertising growth. Overall U.S. ad spending last year edged up just 2.7% and is on track to grow 4.6% in 2014, according to the average of the most recent forecasts from WPP's GroupM, Interpublic Group of Cos.' Magna Global and Publicis Groupe's ZenithOptimedia. Overall U.S. ad spending won't break its 2007 record until 2015, according to ZenithOptimedia's June 2014 forecast.
Ad Age this year has expanded the annual LNA report to include U.S. advertisers Nos. 101 through 200 (available to DataCenter subscribers at AdAge.com/lna2014). It's a diverse list of marketers that do everything from delivering content (Netflix) to packages (UPS), with companies ranging from luxe (Chanel) to in flux (struggling RadioShack Corp.). Total U.S. spending for the second 100 rose just 1.4% to $40.6 billion in 2013 -- big bucks, but less than the combined spending of the 17 biggest advertisers.
Total spending estimates consist of advertising in measured media -- traditional media and internet display ads -- from WPP's Kantar Media -- plus Ad Age's estimate of spending in unmeasured disciplines including various digital plays (paid search, online video, unmeasured forms of social media), promotion, experiential marketing and direct marketing. Ad Age estimates unmeasured spending to capture the difference between measured-media figures and the company's estimated U.S. total spending.
The 100 LNA accounted for about two-fifths (42.2%) of all U.S. measured-media spending in 2013. Measured spending for the top 100 rose 3.2% in 2013, outpacing the sluggish 0.9% increase for overall U.S. measured-media spending.
Unmeasured spending for the 100 LNA jumped 6.0% and represented 45.5% of those firms' U.S. total spending. Measured media accounted for the rest of the pie -- a 4.3% slice for internet display advertising and 50.2% for traditional media (TV, radio, print, outdoor).
Last year's 4.4% increase in total spending for the 100 LNA beat 2012's modest gain (2.8%) but came in below 2011 (4.8%).
Two-thirds -- 68 -- of the 100 LNA boosted total spending last year; 32 reduced ad outlays. Those proportions were nearly identical to 2012 and 2011.
Among the 100 LNA, 39 advertisers last year had total U.S. spending above $1 billion.
Total spending for the 100 LNA rose in every major industry in 2013. The biggest gains came from technology firms (up 26.0%), led by a 60.7% increase at Microsoft Corp. as it plowed an estimated $1.8 billion into advertising to promote Windows 8 software, Surface tablets and other products. Samsung Electronics Co. came in just behind Microsoft with estimated spending of $1.7 billion, up 20.8%.
It's not surprising to see big spending increases in rapidly growing and changing markets such as technology. What's more intriguing is the comparatively high spending growth -- 7.0% -- for LNA companies in a mature and slow-growing industry, food and beverages. Spending growth in 2013 for LNA's 10 food and beverage marketers was driven by unmeasured disciplines, with a focus on digital.
Nestlé, for example, reported a 16.3% increase in 2013 worldwide spending on consumer marketing -- including a 40% boost in digital spending. "We have embraced digital and what digital does in all aspects of our commercialization," CEO Paul Bulcke told analysts in February.
General Mills fired up digital spending for baking products to connect with consumers who want to go online for recipes and to share food ideas. "Our use of digital media is growing at a strong double-digit rate, and it … represents more than one-third of our [fiscal 2013] total media spending" for the baking division, Senior VP Ann Simonds told stock analysts in March. Including all divisions, General Mills said it allocated 17% of its fiscal 2013 U.S. media budget to digital, up from 8% in 2008.
Major advertisers are making the pitch to Wall Street that digital marketing is more efficient. Jon Moeller, chief financial officer at Procter & Gamble Co., told analysts in January that the company is "continuing to increase our presence in the digital, social and mobile spaces as it relates to marketing." While mix differs by category, P&G is "getting close to 30% of the spending being in those areas. It does offer, based on what we are seeing today, higher return potential, and that's why the shift is occurring."
Marketers like P&G are focused on spending smarter. Mr. Moeller told analysts in April that P&G, the world's and nation's largest advertiser, expects marketing costs for the fiscal year ending June 2014 to come in below the year-ago level "due to productivity improvements in non-working marketing and advertising costs," a bucket that includes agency fees, research and other non-paid-media costs. P&G spent an estimated $13.9 billion -- about 16.5% of sales -- on worldwide advertising and other marketing costs in the year ended June 2013.
For 2014, total spending growth for the 100 LNA is likely to remain in the low single digits amid generally positive signs for the economy -- growing employment, modest gains in income and a positive outlook for retail sales.
Regardless of their financial position, big advertisers are trying to get more out of their marketing dollars. Edward Lampert, chairman-CEO of Sears Holdings Corp., in May told investors the struggling retailer believes it can "significantly reduce our overall cost structure" by, among other steps, "shifting our marketing spend from mass to digital campaigns in a more accelerated way."
Estée Lauder Cos. is already delivering strong financial results with good sales growth, solid profits and a stock that this month reached an all-time high. But the beauty giant is working to become an even better marketer.
As part of an internal project that measures the rate of return on marketing investments, Estée Lauder has reduced some TV advertising activities and adjusted spending in other areas such as digital and print. President-CEO Fabrizio Freda last month told analysts: "This is about increasing rate of return on every single penny we spend."