June 17th, 2011

TV Spots Resist Flow of Dollars to Web

The Wall Street Journal

Despite the torrent of dollars marketers are pouring online, big advertisers aren’t expected to cut back their television budgets anytime soon.

Even as Americans watch less TV and spend more time on the Web, mobile phones and other entertainment options, marketers are investing more money than ever on television ads.

New forecasts call for the $59.7 billion U.S. television-advertising market to grow steadily for the next half decade and continue to capture a dominant share of total U.S. ad spending.

“Television is going to play a very prominent role well into the future,” said Joel Ewanick, global chief marketing officer at auto maker General Motors Co., the second-largest advertiser in the country by spending.

Advertisers are expected to boost their spending on TV by 3.3% this year, with the medium capturing a 34% share of the total U.S. ad market, according to data released Thursday by Interpublic Group of Co.’s Magnaglobal, in one of Madison Avenue’s most closely watched forecasts.

The ad-buying firm says that, by 2016, TV’s share of the advertising market is expected to increase to 38%, or $81.3 billion.

For years Internet executives have been cranking out online videos and big, splashy ads in attempts to grab ad dollars away from the tube. Yahoo Inc. Chief Executive Carol Bartz often has said that Yahoo’s biggest competitor isn’t Google Inc., but rather TV.

In a presentation to investors Wednesday, AOL Inc.’s president of advertising, Jeff Levick, struck a similar chord. “The big bet is this major amount of spend that is still stuck in offline channels is going to come online,” he said, pointing to a chart comparing consumers’ time and ad dollars spent on various media like TV and the Web. The pace of growth in online advertising, however, has lagged behind the growth in time consumers spend online.

Though the Web has stolen share from print advertising, which is expected to continue its decline, marketers say television continues to dominate because of its wide reach and the story-telling potential of TV spots.

Major marketers, including GM, insurer Aflac Inc., and online brokerage E*Trade Financial Corp., are increasing their spending on both TV and the Web, trying to figure out how ads in the two mediums can best complement each other. During the next several years, TV and online advertising are expected to evolve into the two major hubs of ad spending.

“We have this two-tiered advertising society now. With TV and the Internet on the fast track, and the other media on the slower track,” says Jon Swallen, senior vice president of research at ad giant WPP PLC’s Kantar Media Intelligence NA.

While the local TV-ad market isn’t growing as fast as the national market in the wake of the economic downturn, broadcast TV networks were able to command sharply higher prices for ad spots in negotiations with advertisers for the coming season.

Marketers are expected to rev up their online-ad spending 16% in 2011 to $30.1 billion, with the Internet ranking as the second largest ad-supported medium, accounting for a 17.3% share of the total U.S. ad market, Magnaglobal says. The Internet’s share of the ad market is expected to increase steadily to 22% by 2016 to $47.4 billion.

By contrast, newspaper-ad spending is likely to drop by 8.6% this year to $20.8 billion, and magazine ad spending by 2.1% to $15.2 billion. By 2016, newspaper advertising is expected to have an 8.2% share of the U.S. ad market, down from 12% this year, and magazines 6.2%, down from 8.8% this year.

As a whole, Magnaglobal expects the ad market to increase 1.6% this year to $173 billion, a slight retreat from its earlier growth forecast of 1.8% growth, as the weakness of the economic recovery continues to weigh on marketers.

Major marketers say they continue to devote the majority of their ad budgets to TV, even as ad rates for commercial time become more costly, largely because they know it works. While online advertising is growing, it has been damped partly because the process of buying such ads can be a logisitcal headache, requiring marketers to cobble together ad slots across thousands of websites in order to reach mass audiences.

Even though the total number of people tuning into television has shown declines, TV commercials remain the most effective way to broadcast ad messages to large pools of consumers at any given time, especially as audiences splinter across media, ad executives say.

“Video is still an unbelievable medium that combines sight, sound and motion in a way that print and other static mediums do not,” said Michael Zuna, chief marketing officer at Aflac, which uses statistical models to determine how to allocate its ad dollars based on various sales data, brand reports and other business metrics.

Read more: http://online.wsj.com/article/SB10001424052702304186404576389972147887678.html?mod=WSJ_Tech_LEFTTopNews


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