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TNS: US Advertising Expenditures Decreased 0.3% in First Half, Challenges Ahead

Total advertising expenditures in the first half of 2007 totaled $72.59 billion, down 0.3% from the same period in 2006 - and, for the first time since 2001, expenditures declined for two consecutive quarters - according to data released Tuesday by TNS Media Intelligence.

“While the protracted downturn in automotive spending has been a prime contributor, the overall results reflect weakness across a wide range of industries and advertisers,” said Steven Fredericks, president and CEO of TNS Media Intelligence.

“Given the uncertainties about near-term economic growth and consumer spending, we expect core ad spending will continue to face challenges during the second half of the year.”

TNS’s 1H07 ad-expenditure estimates are summarized below:

Ad Spending by Medium

Media experiencing ad-spending growth:

• Internet display advertising was again the growth leader, registering a 17.7% increase to total $5.52 billion in expenditures in the first half.
• Consumer magazines posted a 6.9% gain to $11.50 billion in advertising.
• Outdoor expenditures were up 3.6% to $1.90 billion.
• Cable TV followed with a 2.8% increase to $8.38 billion.

Broadcast TV media continued to experience weakness in the second quarter and turned in significant half-year declines:

• Network TV expenditures fell 3.6% to $11.84 billion.
• Ad spending on Spot TV dropped 5.4% to $7.29 billion.
• Syndication TV was down 5.3% to $2.00 billion.

Newspaper and Radio media also experienced widening losses during the second quarter. And for the half-year period:

• Ad spending in Local Newspapers plunged 5.7% to $11.09 billion on a reduction of 4.7% in space sold.
• Marketers lowered their Radio advertising budgets 2.7%, expending a total of $5.14 billion.

Share of Spending by Medium

While total ad expenditures declined 0.3%, there was unusually wide variation by the various media types. As a result, changes in share of spending by media type were more pronounced than normal:

• Internet display advertising jumped to 7.6% of total expenditures, up from 6.4% a year ago.
• Magazines gained 0.9 share points and finished the period at 20.0% of ad spending.
• Newspapers lost one full share point and slipped to 17.8% of total expenditures.
• National Television and Local Television each lost share but still accounted for a combined 43.6% of all expenditures.

Ad Spending by Advertiser

In 1H07, the top 10 advertisers spent a combined total of $9.0 billion, a reduction of 2.2% from the year-earlier period. Second-quarter spending for the top 10 was up slightly, rebounding from a steep 5.1% decline during the first quarter.

In the case of the top 50 marketers, a more diversified group representing one-third of the measured ad economy, expenditures were down 1.6% for the half year, to $23.3 billion.

• Procter & Gamble maintained its spot atop the rankings with $1,611.8 million in spending, up 1.8% from last year on the strength of an 11.7% increase during the second quarter.
• National Amusements posted the largest percentage gain among the top 10, up 56.5% to $589.8 million, behind higher spending from its movie studio division.
• Telecommunication companies claimed three of the top 10 spots:
  • AT&T expenditures were down 12.5%, to $1,100.2 million, due to a very large re-branding campaign last year.
  • Increased spending behind core wireless businesses contributed to higher outlays at Verizon Communications (up 8.8%, to $1,041.1 million) and Sprint Nextel (up 13.5%, to $689.2 million).
• General Motors slashed its budgets by over $100 million in the second quarter, marking the fifth consecutive quarter in which its expenditures decreased at least 15%. It finished the half year with $958.9 million in spending, a 25.1% decline versus a year ago.
• At Time Warner, the virtual elimination of advertising support for the AOL service led to a 7.9% reduction in total advertising, to $793.3 million.
• Johnson & Johnson spending tumbled 9.1%, to $725.9 million, on cutbacks across its brand portfolio of health and beauty aids.

Ad Spending by Category

The Top 10 advertising categories in the first half of 2007 spent an aggregate $36.47 billion, down 0.5% from a year ago:

• Financial Services maintained its top position with $4.49 billion in expenditures, up 3.5%. Higher spending from retail banks offset reductions by credit card brands.
• Direct Response had the largest percentage gain, up 11.3% to $3.54 billion. The category showed deep strength with higher ad spending levels across a broad range of brands.
• Personal Care Products advanced 6.7%, led by resurgent spending from several top advertisers.
• Local Services & Amusements (+2.1%) and Restaurants (+0.8%) achieved small gains.
• Advertising spending in the telecommunications category declined 6.3% to $4.46 billion. This was mainly due to lower expenditures from AT&T, Vonage Holdings and the AOL division of Time Warner.
• The persistent malaise in the automotive category pushed Non-Domestic Auto down 6.1%, to $3.92 billion, and Domestic Auto down 10.8%, to $3.39 billion. Automotive advertising has now declined for eight consecutive quarters.
• Travel & Tourism advertising improved during the second quarter but still finished the half-year down 1.2%, to $2.85 billion.

Branded Entertainment

In the second quarter of 2007, an average hour of monitored prime time network programming contained 8 minutes, 4 seconds (8:04) of in-show Brand Appearances and 17:25 of commercial messages. The combined total of 25:29 of marketing content represents 42% of a prime-time hour.

Unscripted reality programming had an average of 11:52 per hour of Brand Appearances, compared with just 5:34 per hour for scripted programs such as sitcoms and dramas.

Late night network talk shows had even higher levels, averaging 14:12 per hour.

The combined load of Brand Appearances and ad messages in these shows reached 35:55 per hour, or 60% of total content time.

(TNS Media Intelligence monitors Branded Entertainment within network prime time and late night programming. The tracking identifies Brand Appearances and measures their duration and attributes. Given the short length of many Brand Appearances, TNS deems duration a more relevant metric than a count of occurrences for quantifying and comparing the gross amount of brand activity that viewers are potentially exposed to in the program versus in the commercial breaks.)