June 11, 2006

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Advertising Leaders Question Corporate America's Ability to Maximize Effectiveness of Digital Media

Despite Concerns, Ad Industry Leaders Forecast Expanded Budgets Across Online Media


SAN FRANCISCO, CALIF.—The AAF Survey of Industry Leaders on Digital Media Trends, released today by the American Advertising Federation (AAF), reveals that while there is strong belief among industry leaders in the effectiveness of digital marketing, there is lesser confidence in Fortune 500 companies' ability to capitalize on online advertising. Sixty-three percent believe that Fortune 500 companies are "generally behind the curve when it comes to online ad strategy." There is also a wariness of advertising executives regarding their own ability to keep pace with the changing digital environment. Fifty-eight percent said that they personally are "struggling simply to manage existing online efforts, let alone stay ahead of the curve."

However, an overwhelming majority of those surveyed recognize the effectiveness of digital marketing, with 91 percent citing the online media environment as "empowering to advertisers, allowing the ad industry to shape its own development." Digital media's high ROI was also recognized by those surveyed, with 42 percent citing paid search as offering the highest ROI platform.

But there are risks associated with particular areas of digital marketing. Advertising executives find blogs a riskier, less effective advertising vehicle than user-generated content sites such as MySpace, YouTube, Facebook, etc. Sixty-two percent stated that "blogs are too risky to advertise with due to lack of predictability of the editorial content," while only 53 percent agreed with the same statement about user-generated content. Despite these concerns, an overwhelming majority said advertisers "should exploit the viral marketing opportunities" of user-generated sites and, to a lesser degree, blogs.

The survey, prepared by Atlantic Media Company, yielded additional findings of interest:

  • Online video has not yet had a significant impact on ad spend with television network upfront markets. Sixty-two percent of those that participate in TV upfront said online video did not have an effect on their spend with networks, and only 15 percent said online video decreased their network spend.
  • Advertising industry leaders forecast expanded ad budgets across online media as a whole. Average spending on online advertising, as a percentage of the total media budget, is anticipated to increase from 15 percent in 2005 to 20 percent in 2006, and forecasted to reach 32 percent by 2010.
  • New media platforms will get only a small percentage of online budgets next year, with social media and video getting the top percentage of spend.
  • Paid search is set to increase from nine percent of the online budget in 2005 to 11 percent in 2006 and 23 percent in 2010.
  • Display advertising is set to increase from 22 percent in 2005 to 28 percent in 2006, but will decrease by over half to 13 percent in 2010.
  • Rich media will increase from 11 percent in 2005 to 13 percent in 2006 and 18 percent in 2010.
  • The top five most successful digital media campaigns over the last year were 1) Burger King; 2) Apple and Verizon (tie); 4) Volkswagen and 5) Axe.

The AAF Survey of Industry Leaders on Digital Media Trends was released on the opening day of the AAF National Conference 2006 in San Francisco and surveyed 140 advertising industry leaders, spread across agency (23 percent), media (28 percent), client (7 percent) and other (22 percent, composed mostly of consultants and researchers) sectors. Sixty percent have worked in the advertising industry for more than 15 years, with 30 percent for 25-plus years.

A full executive summary of the survey results is available here (Word document, 32k).

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The American Advertising Federation (AAF), headquartered in Washington, D.C., acts as the "Unifying Voice for Advertising." The AAF is the oldest national advertising trade association, representing 50,000 professionals in the advertising industry. The AAF has a national network of 200 ad clubs located in ad communities across the country. Through its 215 college chapters, the AAF provides 6,500 advertising students with real-world case studies and recruitment connections to corporate America. The AAF also has 130 blue-chip corporate members that are advertisers, agencies and media companies, comprising the nation's leading brands and corporations. For more information, visit the AAF's Web site at www.aaf.org.