Survey Finds They Expect to Increase Interactive Ad Budgets By 30%

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NEW YORK ( -- Nearly half of the chief marketing officers at Fortune 500 companies said they plan to increase their online advertising budgets by 30% this year.
Overall online advertising spending is expected to increase 32% over last year to $16.6 billion for 2006.

In a survey conducted quarterly by TNS, 100 CMOs were asked how they were planning to divide their ad dollars in 2006. Results of the last survey, which was taken in November, were released in a report by Credit Suisse First Boston. The CMOs said online advertising as a percentage of projected ad budgets had risen from 17% when the survey was conducted in September, to 23% when the CMOs were questioned again in November.

$16.6 billion in Web spending
The survey results contributed to Credit Suisse revising its estimates for its online ad spending forecast for next year. Overall online advertising spending is expected to increase 32% over last year to $16.6 billion for 2006. Credit Suisse had predicted online ad growth to be 21% to $14.9 billion.

The growth in projected spending is a result of online being viewed as a preferable ad channel because it is accountable. “The largest number of survey participants believe that Internet advertising methods have the highest perceived return on investment, significantly ahead of any other category,” the report said. It is also the result of top advertisers following behind the behavior of their customers.

“The average consumer spends about 30% of their media time online -- that’s why you’re seeing all that catch-up spending,” said Heath P. Terry, CFA, research analyst, at Credit Suisse.

Rest of ad market lags behind
While major brands plan to increase their online spending, the entire ad market is still spending only 5% of budgets in online advertising. Credit Suisse projected that the overall percentage to increase to 6.5% in 2006.

Why is that so much lower than the survey participants’ estimates? Because that overall ad spending estimate encompasses all advertisers, including local advertising, classified and yellow pages, which is a huge chunk (about 30%) of the advertising market. And the survey focused on just the largest brands, which buy far less local advertising.

“If their consumers are spending 30% of their media time online, and they are only spending 5% of their ad dollars online, advertisers need to be spending that many dollars online,” Mr. Terry said.

Newspapers up, TV down
The CMOs surveyed said they expected to spend more on newspaper advertising, and less on broadcast and magazine ads. They revised up their projected newspaper spend from 12% in September to 16% in November. For broadcast TV, their September estimate was 18%, but dropped to 16% by November. And their projected magazine ad spend fell from 22% in September to 15% in November.

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