What are chief marketing officers thinking?
The answer is obviously important to both media agencies and media companies. And here’s a hint: they’ve got digital media on their mind.
The good news for the advertising business is that CMOs are thinking about bigger budgets, according to Credit Suisse, which commissioned TNS Media Intelligence to regularly survey CMOs.
The fourth-quarter Credit Suisse survey found CMOs’ planning on an 8 percent increase in ad spending for the year, up slightly from the third-quarter survey.
“We are encouraged that ad budgets are indicating a sequential acceleration given that the U.S. economy is moving into potentially the weakest quarter of the year,” said Credit Suisse research analyst William Drewry.
With the economy as measured by gross domestic product expected to grow a paltry 1.8 percent in the first quarter, “we would have expected more cautiousness from advertisers in the Q4 survey,” he said. “But instead it appears advertisers are comfortable with their budgets for traditional media spending and incrementally allocate more dollars to new media or online platforms.”
The survey found that overall, the CMOs expected a decrease of 1 percent in spending on both broadcast television and cable television. While more CMOs actually indicated that they expected to increase their spending, those intending to make cuts planned deep cuts averaging more than 30 percent.
Mr. Drewry, however, wasn’t sure the year would play out that way. “We believe the final results could conceivably swing to the upside given the continuation of a healthy advertising environment and economy,” he said. “Bears will point to the slower-than-expected cable upfront as evidence of a slowdown, however, we believe the performance this year was more a result of a secular shift in ad dollars away from the upfront and into the scatter market.”
He noted that the scatter market has been healthy for the past two quarters, with prices above those of the upfront.
“We contend that as cable networks leverage their respective online properties there could be some share-shifting away from conventional cable advertising and into online advertising as networks continue to build out there Internet infrastructure and broadband channels,” Mr. Drewry said.
The reason there’s little if any growth in television and increasing demand for online advertising is that CMOs perceive a higher return on investment when buying ads on the Internet.
In the survey, 33 percent of the CMOs said that the Internet had the highest ROI of any advertising medium. Broadcast TV came in third of the seven media mentioned. For the broadcasters there was a bright spot in that the number of CMOs favoring their media rose to 15 percent from 11 percent in the third quarter. Cable finished fifth, named by just 9 percent of CMOs, unchanged from the prior quarter.
“Television, magazines and cable have been the main sources of advertising for many years now and have proved very successful to reach the mass consumer base,” Mr. Drewry said. “But with the continued growth in the use of the Internet for both utility and entertainment purposes, advertisers see the value created by shifting dollars online as well.”
Indeed, the CMOs surveyed said they plan to increase their Internet advertising by 12 percent. Search is likely to be the fastest-growing part of online spending. The share of spending going to branded ads is likely to fall to 62 percent from 63 percent in the Q3 study, while search-based ads are expected to get a 37 percent share, up from 33 percent.
Credit Suisse’s advice: buy stock in Google. But all is not lost for big media because Mr. Drewry estimates that the four largest media companies-Disney, News Corp, Time Warner and Viacom-will generate $1.5 billion in Internet advertising in 2007 and that that will increase over the next few years.
Local media will be little changed at best, with CMOs saying spending will be somewhere between down 1 percent and up 1 percent. Outdoor spending is also likely to be little changed.
This article is part of TVWeek.com’s Media Planner newsletter, a weekly source of breaking news, trend articles, profiles and data about media planning edited by Senior Editor Jon Lafayette.
Inside CMOs’ Minds
Jan 24, 2007 • Post A Comment
What are chief marketing officers thinking?