November 2006

1
2006 AAF Survey of Industry Leaders on
Advertising Industry and New Media Trends
Prepared by Atlantic Media Company
November 2006
2
Survey Highlights

• Most leading ad executives expect a significant
  portion of broadcast and cable TV ad dollars to
  shift to online video by 2010, with 33 percent of
  respondents predicting that switch will be
  between 10 and 19 percent. In addition, 2007
  budgets for online advertising are expected to
  rise by an average of 42 percent over 2006.
• As to the challenge of integrating traditional
  with online media, broadcast TV is seen as
  offering the most innovative integration with
  online media, while magazines are seen as most
  effective for driving consumers online.
• Ad industry leaders utilize a range of online ad
  targeting, but over half find behavioral
  targeting to be among the most effective
  methodology.
• Search was deemed the most effective new media
  option and, not surprisingly, is expected to take
  the greatest share of the 2007 media budget.
• Industry leaders feel strongly (71 percent) that
  the online medium is very effective or most
  effective for direct response advertising, but
  note that there is difficulty reaching key
  demographics, particularly older audiences,
  online.
• Industry leaders rated Dove, Burger King,
  Volkswagen, Honda and Nike as the most successful
  recent integrated advertising campaigns.
• Nearly 63 percent of those surveyed perceive the
  demands of the advertising industry to be
  higher or much higher than those of other
  industries.
• In sharp contrast to findings of the past two
  years, leaders predict strong growth and recovery
  for careers in advertising, with overall career
  appeal cited as the healthiest category.
• The majority of industry leaders cite mentorship
  as important to their personal career success and
  a record 42 percent always mentor young
  professionals, a 68 percent increase over last
  year.
• The top campaigns of the year were (in order)
  Apple Mac and Geico (two-way tie) Dove
  Budweiser, Target, Mini Cooper (three-way tie)
  Apple iPod and Aflac Insurance.
• Top brands are (in order) Coca-Cola, Nike, Apple,
  Starbucks and McDonalds.
• The most respected industry leader was David
  Ogilvy, followed by Bill Bernbach and Lee Clow.
• The most important factor in achieving success in
  the industry is dedication.

3
Respondent Profile

• One hundred and sixty eight leaders from across
  all sectors of the advertising industry responded
  to the survey over 58 have worked in
  advertising for 16 years.

Advertising Industry Sector (n168)
Years Worked in Advertising Industry (n168)
Consultants Public Relations Trade Associations
4
Anticipated Shift of TV Advertising Dollars to
Online Video

• A significant share of TV advertising dollars is
  expected to shift to online video by 2010 as
  online video advertising grows increasingly
  sophisticated, advertising leaders anticipate an
  even more dramatic shift in the future.

Percent of current spending on traditional
broadcast and cable TV ads expected to shift to
online video by 2010 ( responding)
Determining Factors
When online advertising figures out how to
target a market with upscale, high quality
advertising, it will gain a larger share with
younger audiences. When it creates info-ads that
demand viewer involvement, its share of
advertising will increase. - Academic For
clients to be willing to shift advertising
dollars, they expect to see the ROI based on
impressions, which should be able to be tracked
better with new online tracking technology. -
Agency Exec The determining factor will be the
sheer volume of online opportunities. Will there
be a handful of sites that rise above the fray or
will there be so many sites to chose from that
the media dollars can't possibly cover enough
bases to be effective? - Agency Exec
5
Online Advertising Comprises a Growing Portion of
Media Budgets

• The percentage of media budgets allocated to
  online advertising is expected to rise by 42 in
  2007 to an average of 23.2.

Percentage of media budget allocated (or
anticipated allocation) to online
advertising (average of all responses)
Drivers of Online Spending
Audience shift, duh! - Association New
online web options such as lead generation
programs are offering great new innovative
approaches for new clients and we are increasing
our ad spending with the continually changing
Search Engine Keywords and AdWords options. -
Agency Exec The ROI we generate for our clients
is the highest with online media. We can
demonstrate the lowest cost per lead and the
highest return on investment. Clients gravitate
to the medium that is most measurable. - Agency
Exec The consumer market is only at the
beginning of acquiring the new technologies for
this marketing. When Apples iPod becomes a
video-capable telephone, then the moment will
have arrived. - Agency Exec
6
Targeting a Wide Range of Audiences Online

• Older demographics were repeatedly cited as the
  hardest for advertisers to reach online.

What are your top target audiences for online
advertising? (Write In Responses)
Gender Neutral 13-18 18-24 18-34 18-49 19-25
19-35 21-24 25-35 25-32 25-34 25-55
50 55
Other Ad Agencies Auto B2B Professionals
Caregivers Educational/faculty Homebuyers
Media Buyers Music Fans New Business Parents
Men 13-24 18-45 18-54 18-24 18-35 18-49
15-49 25-54 40-50 45-64
Women 13-24 18-49 18-54 25-54 25-40 25-45
45-54 52-54 55-64
Real Estate Recent College Grads Retail
Retirees/Seniors Shoppers Small Business
Students Trade Upscale Young adults Youth
What are the hardest audiences to reach online?
Older audiences not familiar with technology -
Media Exec
Women 25-54 - Agency Exec
Retirees - Agency Exec
7
Volatility In Allocation of Media Budgets

• At best, TV can still command an average of 50
  of media budgets, but allocations could fall as
  low as 29 on average meanwhile, online
  advertising could see as much as a 24 share.

Greatest and smallest anticipated allocation of
media budget to each medium in 2007 (average of
all responses)
8
Assessing Options for Online Ad Targeting

• Ad industry leaders utilize a range of online ad
  targeting methodologies, but over half find
  behavioral targeting to be among the most
  effective.

Most effective online ad targeting
methodologies ( responding)
Reactions to Targeting Possibilities
The Internet is an information source. The
ability to place ads within a relevant
informational context is potentially very
valuable. - Industry Exec If you have all
those tools and parameters available it's great.
Availability the key.... - Association
9
What Is Online Advertising Good For?

• Industry leaders feel strongly (71) that the
  online medium is very effective or most
  effective for direct response advertising while
  online is considered a less effective medium for
  brand advertising, executives still
  overwhelmingly feel that it is at least
  somewhat effective.

Effectiveness of the online medium for brand
advertising and direct response advertising (
responding)
Reacting to Online Effectiveness
Online advertising provides nearly
instantaneous metrics, which has led most of us
to view online as a direct response medium. We
know that online ads also have solid brand
building power, but this is often overshadowed by
TV and other media that promote brand building
power because they can't claim more measurable
results. - Agency Exec Online is great for
Direct Response advertising because we can use
lead generation programs to target our specific
audience and get a great return with very
specific contact details of those seeking our
specific products and services. - Agency Exec
10
Experimenting With New Online Media

• Industry leaders are starting to experiment with
  new media like blogs and podcasts, but search
  advertising still dominates.

Percentage of media budget planned to allocate in
2007 (average percentages)
Effectiveness of medium (average percentages)
Thoughts on New Media
The adoption rate for some of these new avenues
is surprising fast. We are continually amazed at
how quickly they catch on, especially with
younger consumers. - Agency Exec
11
Media Integration Efforts Connect New and Old
Media

• As to the challenge of integrating traditional
  with online media, broadcast TV is seen as
  offering the most innovative integration with
  online media, while magazines are seen as most
  effective for driving consumers online.

Greatest/Least Potential for Significant Growth
Integrating online and other media ( responding)
Greatest Growth Potential Online Media. Lag
Behind Newspapers - Agency Exec The greatest
potential growth lies in the integration of TV
broadcast with Internet promotions and
activitiesRadio stands to be the media with the
most challenges. - Academic Out of home has
the most potential because it is so dynamic. New
uses and opportunities are being discovered
daily. Newspapers will lag behind most because of
the downward trend of readership. -
Academic Out of Home has the greatest potential,
with magazines lagging behind. - Media Exec
Direct marketing Telephone book Jingles
Direct mail
12
What Were The Most Successful Recent Integrated
Campaigns?

• Select Responses to an open-ended question.

Top 5 Campaigns
Additional Responses
1. Dove 2. Burger King 3. Volkswagen 4. Honda 5.
Nike

Saturn Acura American Airlines Yahoo Wendy's IKEA
Altoids Apple Citi ID theft
Cadillac Brawny Paper Towels Tower
Records Monster.com Careerbuilder Mini
Cooper Wal-Mart Nissan Sentra
13
Getting a Hold on The Challenges of New Media

• Industry leaders are open to a number of
  different ways to get up the curve on new media
  a majority of respondents (56.8) thought case
  studies would be helpful learning resources.

Useful tools in advancing your work in new
media ( responding)
Clients Focus groups of online users Industry
samples
14
Strong Growth and Recovery Seen For Careers in
Advertising

• After two years of cautious assessments of career
  opportunities in advertising, industry leaders
  showed a more optimistic perspective in 2006
  metrics in all three categories rebounded
  substantially from last year.

Health of the advertising industry in (scored on
a five-point scale, 1 facing indefinite decline
and 5 showing signs of strong grow)
15
What are the Strengths and Weaknesses of the
Advertising Industry?

• Selected responses to an open-ended question.

Direction of the Industry
Strengths Good quality creative, humor and
information blended together. Weakness The chew
em up, spit em out mentality that agencies
have. People work one place 1-2 years as a
maximum. - Media Exec Strengths Still offers
excitement, responsibility (and fun) faster than
other businesses. Weakness Instability, insane
account and personnel turnover, decimation of
middle aged exec ranks which has sent a terrible
message to young up and comers. -
Consultant Strengths are in the wide ranging
opportunities replacing traditional media and
message development. A weakness is that the
industry is slow in making the transition to new
media. - Academic Strengths Creativity, fun,
"glamour." Weaknesses Instability,
competitiveness, managing/keeping up with the
changing media landscape. - Association I
think the opportunity for creative and innovative
work are still the strengths that draw interested
people to the field. A weakness could be a lot of
the negative press toward the advertising career
field over the past five years or so. - Academic
The clients will take control of creating their
brand and communication strategies in order to
control integration consistency. There will be no
more advertising generalists. People must become
specialists and act as a much larger team. A new
kind of leadership will require far more
collaboration. - Consultant Younger employees
are encouraged by the success of smaller
"upstart" agencies. On the other end of the
scale, the giant agencies are viewed as dinosaurs
and the mega holding company business model
appears to be broken forever. I believe the
growth in our industry will be with smaller, more
creative and entrepreneurial independent
shops. - Agency Exec
16
Industry Leaders Feel The Benefits of Past
Mentorship

• Over 85 of industry leaders said that being
  mentored was at least important in their own
  personal career success (compared to 81 in
  2005) significantly, no one who was mentored
  felt that the experience was not very important.

Importance of mentorship to personal career
success ( responding)
On Mentoring Experiences
As a mentoree, it was important having someone
pay attention to me (take me under their wing)
when I was on my very first job out of college. I
was so naive, so nervous, so intimidated by the
more mature, more experienced employees. Without
that mentor, who helped get me connected with the
right people and kept telling me what a great
talent I was, I think I might never have gone
anywhere in the business. - Ad Club Executive
Director I am still friends with the man that
got me started in the industry. He is responsible
for my success today. - Media Exec When I
first started in the business I received a lot of
encouragement from an agency founder. This helped
me set my sights high and realize that I had the
potential to achieve whatever I was willing to
work toward. - Agency Exec
17
And Return the Favor By Guiding Todays
Industry Newcomers

• Todays industry leaders work to pass on their
  own knowledge as a record 42.1 always mentor
  young professionals, a 68 increase over last
  year additionally, zero respondents never
  mentor others.

Do you mentor young professionals? ( responding)
18
The Continued Strain Of A Demanding Industry

• Industry leaders struggle to balance their
  professional and personal lives 62.6 felt that
  the demands of the advertising industry are
  higher or much higher than those of other
  industries.

Conflicts between personal life and career, in
comparison to other industries ( responding)
19
No Shortage of Important Attributes For Success
Attributes for success in the ad
industry (five-point scale, with 1 being not
important at all and 5 being extremely important)
What Has Defined Your Success?
Remaining a student of the industry. Always
seeking to know more than anyone else except the
best of the functional experts. -
Consultant Consistently learning more and
staying with or ahead of the curve. Being
proactive rather than reactive in looking ahead
and forecasting/predicting what's to come. -
Media Exec Relationship building, integrity and
a desire to help someone solve business
challenges. - Association Being associated
with talented people. Willingness to take
suggestions. Plan your work. Work your plan. -
Media Exec
Talent Ability to listen Team player Critical
thinking Passion
20
And the Winners Are
Most Successful Campaigns, 2005-2006 (Top
responses, open-ended questions)
Defining Success
Its the ROI. - Multiple Respondents They
enriched the brand experience in ways that helped
create tighter bonds with their customers and
make the brands more appealing and "human" to
prospects. - Agency Exec Memorable, creative
they brand without becoming overexposed in our
mindsets. - Media Exec Creatively/aestheticall
y appealing strategically sound connection
between strategy and creative clear on target
audience. - Academic

1. Apple Mac and Geico (two-way tie)
2. Dove
3. Budweiser, Target, MiniCooper (three-way tie)
4. Apple iPod
5. AFLAC Insurance

2005s Top 5

• Apple iPod
• Burger King
• Target
• MiniCooper
• Hewlett-Packard, UPS and Verizon (three-way tie)

21
The Best of Advertisings Best
Most Admired Brands, 2005-2006 (Top responses,
open-ended questions)
Most Industry Leaders (Responses, open-ended
questions)

1. Coca-Cola
2. Nike
3. Apple
4. Starbucks
5. McDonalds

Dr. Arnold Barban David Bell (2) Alex
Bogusky Bill Burnbach (3) Leo Burnett Lee Clow
(3) Donny Deutsch (2) Fay Ferguson Craig
Fuller Jeff Goodby Howard Gossage Mike
Guarini
Rupert Murdoch David Ogilvy (6) Crispen Porter
team Keith Reinhard Janet Robinson Saatchi and
Saatchi Siverstein/Goodby (2) Wally Snyder
(2) Jim Stengel David Verklin Jack Welch
(2) Will Wieden
2005s Top 5

1. Coca-Cola
2. Apple
3. Nike
4. Google
5. FedEx and BMW