Leading National Advertisers Report: Spending Up 3.1% to $105 Billion

Traditional Media Pinched as Largest Marketers Extend Reach Via Internet, Promotions

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CHICAGO (AdAge.com) -- The top 100 U.S. advertisers last year increased ad spending by a modest 3.1% to a record $104.8 billion. But most of that growth came from "unmeasured" disciplines. In a troubling sign for traditional media, the marketing leaders increased measured media spending by just 0.6%, the smallest gain since the 2001 recession.
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Media measured by ad-tracking services -- such as TV, print and some forms of internet advertising -- accounted for 58.2% of these top marketers' U.S. ad spending, down from 59.6% in 2005, according to Advertising Age's 52nd annual 100 Leading National Advertisers report. The rest of the spending came from unmeasured disciplines, primarily marketing services such as direct marketing, sales promotion and digital communications (including unmeasured forms of internet media such as paid search).

Case in point
Exhibit A: Procter & Gamble Co., the No. 1 advertiser. Ad Age estimates that P&G's unmeasured U.S. spending last year rose 15% vs. a 3.9% increase in measured media. The package-goods giant's shift toward unmeasured disciplines continues. The marketer's first-quarter measured spending fell 8.6%, according to TNS Media Intelligence.

P&G Chairman-CEO A.G. Lafley Jr. last month told analysts: "If you step back and look at our [marketing] mix across most of the major brands, it's clearly shifting, and it's shifting from measured media to in-store, to the internet and to trial activity [i.e., product sampling]." Mr. Lafley said P&G will put a big emphasis on such "nonmeasured media" in the fiscal year beginning July 1.

The shift from measured media mirrors what's happening in the agency business. Since 2005, U.S. marketing-communications agencies have generated more revenue from marketing services than from traditional advertising and media, according to Ad Age's DataCenter. Omnicom Group, the world's largest marketing organization, generated 57% of its revenue last quarter from marketing services.

Majority boost spending
Sixty-nine of the 100 marketers disclosed worldwide ad spending in their annual reports. They define "advertising" differently -- some include only media spending, while others factor in promotion -- but the figures provide a useful indicator of global spending trends. Among these companies, stated worldwide ad spending last year increased 3.5%, and revenue increased 7.3%.

As for U.S. advertising, 69 of the 100 LNA companies increased combined measured/unmeasured U.S. ad spending last year; 75 of the 100 increased measured media spending.

On Ad Age's list, the biggest cut in U.S. spending came at General Motors Corp., down a whopping $814 million or 19.8%. GM reduced spending for each of its brands, but its big spending cut reflected a pullback in corporate advertising.

GM's ad cuts moved the automaker down a notch to third place in the LNA ranking. AT&T grabbed the No. 2 slot as its estimated spending jumped 26% to about $3.3 billion. The company spent heavily to rebrand SBC as AT&T.

P&G tops list
The top advertiser is no surprise: Procter & Gamble, whose estimated spending last year rose 6.8% to $4.9 billion. P&G has been No. 1 or No. 2 for 50 of the 52 years that Ad Age has ranked Leading National Advertisers. P&G, following its 2005 Gillette acquisition, now appears to have a lock on No. 1; its '06 estimated spending was 46% higher than that of No. 2 AT&T.

The nation's top 100 advertisers last year accounted for 41% of U.S. measured spending. Their share varies by medium: The companies accounted for 67% of network TV advertising but only 34% of measured internet advertising.

The marketing leaders drive some ad categories. Measured spending in the biggest ad category, automotive, fell 5.7% or $1.2 billion, reflecting a pullback in Detroit. Telecom, the No. 3 category, rose 9.6% or $959 million. Last year's three most-advertised brands were all telecoms: AT&T/Cingular, Verizon and Sprint.

This year will be tougher. In the first quarter, six of the top 10 U.S. advertisers cut spending, according to TNS. This month, TNS cut its full-year U.S. ad growth forecast from 2.6% to 1.7%, the worst since 2001. That's bad news for traditional media. But there should be more opportunities for disciplines unmeasured by ad trackers. Just ask P&G.
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