Total advertising expenditures in 2006 increased 4.1% to 149.6 billion as compared to 2005, according to data released by TNS Media Intelligence. Ad spending during Q4 '06 was up by 4.2% against the same period in 2005.
"Total advertising expenditures continue to expand slowly. Excluding the cyclical contributions from special events such as political elections and the Olympics, core growth is tracking in the range of 3%," said Steven Fredericks TNS CEO. "In the near-term, we foresee no significant changes to underlying fundamentals that would move the overall ad market onto a different track. Our most recent forecast of 2.6% growth for 2007, while conservative, still seems appropriate."
Ad spending by media
Internet display advertising registered a 17.3% increase to 9.76 billion as marketers continued to shift budgets towards targeted, digital media. Spot TV, boosted by record-setting levels of political advertising, was up 10.4% for 2006 to 17.23 billion. In Q4r, which contained the last five weeks leading up to Election Day, Spot TV expenditures jumped 20.7%.
Performance in other parts of the TV marketplace was muted by a second-half slowdown. Network TV finished 2006 with 22.88 billion in expenditures, an improvement of just 2.5% against 2005. Cable Network ad spend rose 3.4% to 16.75 billion. Syndication was virtually flat at 4.24 billion.
Radio experienced a Q4 uptick and moved into positive growth territory for the year with 11.05 billion in spending, a rise of 0.3%. Softening ad page counts for Consumer Magazines trimmed revenue growth to 4.6%, at 23.19 billion for 2006. Local Newspapers saw expenditures for their print editions fall by 3.3% to 24.06 billion.
Share of spending by media
Full year performance followed the same core patterns observed in recent quarters. Internet display advertising continues to increase its share, accounting for 6.5% of total ad spending, up from 5.8% a year ago. Television gained 0.5 share points on the cyclical surge in local market political advertising. Newspapers lost 1.2 share points during 2006 and finished at 18.7% of expenditures.
Ad spending by advertiser
The top 10 advertisers of 2006 spent a combined 18.73 billion, a reduction of 2.8% versus the prior year period as robust gains from leading telecommunications companies failed to offset automotive category cutbacks. Across the top 50 companies, which are a more diversified group of marketers, expenditures were down 1.5%. Beyond the top 50, a segment that accounts for approximately two-thirds of the ad market, spending advanced a crisp 6.9% during 2006.
Procter & Gamble (P&G) maintained its spot atop the rankings with 3.34 billion in spending, up 3.3% versus last year. In contrast, Johnson & Johnson reduced its advertising budgets by 19.8% and fell from the fourth position to ninth position in the rankings.
General Motors (GM) barely held onto the number two spot and finished the year with 2.29 billion in spending, a reduction of 710 million or 23.7% decrease versus 2005. To put this in perspective, only 29 advertisers spent more than 710 million in 2006. A year ago, GM was the second largest advertiser behind P&G by just 220 million. The gap between the two advertisers is now more than 1 billion.
Elsewhere in the auto industry, DaimlerChrysler reduced its advertising by 10.7%, to 1.42 billion while Ford Motor Company, despite flat budgets in the fourth quarter, increased its full year outlays by 8.5% to 1.70 billion.
Telecommunications companies continued their vigorous spending with AT&T up 30.8% to 2.20 billion and Verizon Communications up 10.4% to 1.94 billion.
Ad spending by category
Although its fourth quarter spending rate eased, Telecommunications was the top spending category in 2006 at 9.43 billion, finishing at a gain of 10.3%. Nearly half of the sector increase was attributable to AT&T. The intense competition in this arena is reflected in the double-digit growth rates of ad budgets at nearly all the key companies including AT&T, Verizon, Comcast, Deutsche Telekom and Vonage.
Foreign Auto claimed the second spot at 8.73 billion, a drop of 1.2% from 2005. Higher levels of factory and dealer ad spend behind the Toyota brand were offset by large reductions at Nissan and Volkswagen. Domestic Auto expenditures tumbled 11.7% to 7.62 billion due to GM and DaimlerChrysler cutbacks, pushing the category down to the number six position. Automotive advertising has now declined for six consecutive quarters.
The highest growth rate among the top 10 categories was registered by Pharmaceuticals which jumped 13.8% to 5.29 billion. This was due to the strength of Merck's marketing launch of an HPV vaccine and increased advertising activity at Pfizer and Astrazeneca.
Local Services & Amusements continued to expand, up 10.3% to 8.69 billion. This segment is a diversified mix of small advertisers outside the Top 500 rankings whose collective size and multi-media budgets have made it an important contributor to the overall advertising economy.
Financial Services (+2.0%) and Personal Care Products (+1.1%) eked out small gains.
Branded entertainment
In Q4 '06, an average hour of monitored prime time network programming contained 5 minutes, 10 seconds (5:10) of in-show Brand Appearances and 18:11 of commercial messages. The combined total of 23:21 of marketing content represents 39% of a prime time hour.
Unscripted reality programming had an average of 8:55 per hour of Brand Appearances as compared to just 2:34 per hour for scripted programs such as sitcoms and dramas. Late night network talk shows had even higher levels, averaging 10:17 per hour. The combined load of Brand Appearances and paid ad messages in these shows approached 33 minutes per hour, or 55% of total content time.
