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« While Yang Won the Battle, Yahoo's Losing the War | Main | Microsoft to acquire Powerset but is this the right move? »

June 23, 2008

Economy, Shifts to Online Create Drag on Mainstream Media Advertising

Adage The top 100  U.S. advertisers increased their ad spending by just 1.7% in 2007, according to the latest Ad Age 100 Leading National Advertisers report. That’s lower than the 2.2% inflation rate.

The only strong growth category among the 100 LNA was online advertising.  Online display advertising grew 33% among the 100 companies, increasing by more than $1 billion to $4.185 billion.  That billion dollars came right out of traditional media coffers; newspaper advertising dropped $674 million while television advertising fell more than $400 million.

You can see the path of the dollars directly with some of the advertisers. General Motors cut their television spending by nearly $175 million, while increasing their Internet ad spend by $93 million.  Ford spent an additional $64 million online, while cutting their TV budget by roughly the same amount.

LNA-Automotive

And it’s likely that the trend will accelerate in 2008.  Automotive slipped to #2 in total ad spending (behind retail) in 2007, but still accounted for $18.7 billion out of the $149 billion for the 100 LNA.  Struggling US automakers General Motors, Ford and Chrysler account for a quarter of that total.  And that was before $4 gas prices. I don’t imagine we’ll see huge ad spends for Hummers and F150 pickups the rest of this year or in the foreseeable future. The Olympics and the elections may soften the blow somewhat for television but that's not enough to reverse the trend.

Meanwhile, the online segment seems to be holding its own for now.  The Internet Advertising Bureau’s Q1 numbers showed an 18% year-over-year gain, though the total spend of $5.8 billion was slightly lower than the record $5.9 billion for Q4 of 2008. (Note: the IAB figures include all web advertising, while the Ad Age/TNS numbers are for display ads only and exclude search advertising). While I expect the online display advertising growth rate to slow during 2008, it’s measurability and adaptability suggest that advertisers will shift more of their total spend to online in this tough economy. And that can't be good news for the newspaper and television industries.

LNA-by Medium

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