Title Slide

1
AAF Survey of Industry Leaders on Advertising
Trends 2005
Prepared by Atlantic Media Company
November 2005
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Survey Highlights

• While conditioned somewhat by rapid change and
  uncertainty about its impact, industry leaders
  are generally bullish on the state of
  advertising, with 64 saying the industry is in
  recovery.
• Asked to characterize the state of the ad
  industry, industry leaders mainly focus on the
  emergence of new media that is changing
  traditional methodologies and tactics as to
  specific business challenges, industry leaders
  attach greater concern to age-old industry issues
  such as demonstrating ROI and breaking through
  clutter, less on the impact of emerging
  technologies.
• Advertising industry leaders overwhelmingly (80)
  agree that DVR technology will have a significant
  long-term impact on the 30-second spot, and the
  majority (58) either have already changed or
  expect to change their ad buys in response to
  DVR.
• The share of spending for online advertising is
  expected to continue increasing. 2006 predicted
  spending surpasses last years forecasts for 2007
  an even faster shift to online than previously
  anticipated.
• Industry leaders are very concerned about new
  media, but they remain tentative about its
  effectiveness as an alternative to traditional
  advertising methods. Blogs, podcasts and
  web-enabled cell phones are all seen as
  relatively weak in terms of effectiveness as
  advertising vehicles.
• The importance attached to reaching ethnic
  markets has increased over the past year, while
  perceived difficulty in targeting these audiences
  has decreased. The priority gap between
  Hispanic and other minority populations is
  narrowing.
• While most industry leaders (84) report
  satisfaction with balancing their personal and
  professional lives, they also perceive careers in
  advertising to be more demanding than in other
  sectors.
• The majority (81) cite mentorship as at least
  important to their personal career success, and
  even more (96) choose to mentor young
  professionals. The most important factor in
  achieving success in the industry is integrity.
• But both this year and last, industry leaders
  have been cautious overall in their assessment of
  career opportunities in advertising, their
  perspective has deteriorated with respect to
  long-term career prospects and overall career
  appeal, and only marginally improved for
  attracting and retaining new talent.
• The top campaigns of the year are 1. Apple iPod,
  2. Burger King, 3. Target, 4. Mini, and a
  three-way tie for 5.Hewlett-Packard, UPS, and
  Verizon.
• The most admired brands are 1. Coca-Cola, 2.
  Apple, 3. Nike, 4. Google, and 5. FedEx and BMW
  (tied).

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Broad Range of Senior Advertising Industry Leaders
Seventy-five executives from agencies, media
organizations, advertiser-clients and other
related firms responded to the survey over 90
have worked in the advertising industry 11
years over 50 for 25years
Advertising Industry Sector (n75)
Years Worked in Advertising Industry (n75)
-Trade associations -Consultants -Public relations
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Industry Recovery Underway, but Overshadowed by
Uncertainty

• Industry leaders are generally bullish on the
  state of the advertising industry, however they
  gravitate toward extremes of opinion compared to
  past years, perhaps reflecting the uncertain
  impact of the changes now buffeting the industry

State of the Advertising Industry ( responding
2003, 2004, 2005)
In Their Own Words
2005 has been the first year that didn't feel
troubled since 2001. Agency Exec I would
qualify my answer by noting the HUGE uncertainty
that surrounds the advertising business and its
traditional way of doing things. Changes in the
media environment are rapidly transforming our
standard operating environment and undermining
established ways and patterns of planning and
strategy making. Media Exec
64 say industry recovering

• - Changing rapidly!
• Rapidly changing as consumers
• gain control of their media choices
• - In flux old ways have bottomed out
• - Fractionalizing

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Evolution of Media Driving Two Separate
Industries
When describing the state of the advertising
industry, the majority talk (without any specific
prompting) about the seeming segmentation of the
ad industry into traditional versus new (i.e.
online) media platforms

The State of the Advertising Industry (selected
responses, open-ended question)
Old Versus New Media
There continue to be many new and unique ways
to spend ad dollars today, so traditional media
will continue to see an "erosion" of market
share, while new forms of media will show slow
growth...overall the spending is probably still
steady, just different. Media Exec We
are seeing two industries today - traditional
industry is recovering slowly or going sideways,
while the new digital/online industry is growing
and expanding very quickly. The only issue is if
the traditional industry can take advantage of
this new growth. Agency Exec Growth
seems to be shifting to interactive media with
softness continuing in all of the traditional
media platforms. Is the increase on interactive
spending and "branded entertainment" coming at
the expense of the existing media? It appears
this may be the case. Media Exec While
traditional media continue to struggle, online
advertising is showing impressive growth. To me
this says advertisers are willing to increase
their budgets but are looking very carefully at
three questions how do I better segment and
target my audience what is the true ROI on this
investment and, how do I attract new audiences
to my marketing message? -Media Exec
Industry Retrenching
Agencies need to reinvent themselves to again
become valued partners to senior client
management.....their value is now marginalized.
-Consultant Spending is recovering however,
agencies are having a harder time securing
long-term commitments from clients, monthly
retainer fees, and a reasonable level of
profitability on accounts. -Agency
Exec Advertising industry is losing it's
credibility, business leaders think less of the
effectiveness of advertising, agencies have lost
their place in the inner circles of American
industry. -Consultant
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Multifaceted Challenges, Coming from All
Directions
Industry leaders do not view any one challenge as
singularly important, but see the industry as
facing an array of challenges, all of relatively
high importance concerns related to
technological change are trumped by
longer-standing concerns such as ROI
Responding to Challenges
Most Important Business Challenges (score on
5-point scale)
Implementing blogs into the overall
communications plan. -Media Exec We are trying
to provide higher levels of expertise in the new
media channels and tactics, in response to
changing consumer behavior and client
needs. Agency Exec There is and always will
be continual change in the advertising/
communications industry. Our goal is to remain
knowledgeable regarding industry trends and be
proactive in meeting those challenges so we can
most effectively and efficiently deliver
information to the customer. -Client We are
getting up to speed on non-traditional ways of
reaching out to the consumer in terms of media
and are constantly improving our techniques for
understanding and acting on unique consumer
insights. -Agency Exec
only the first five challenges were asked in the
2004 survey
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DVRs Impact Unquestioned, But Extent Still
Unclear
Over the past three years there is growing
consensus on the transformative long-term impact
of DVRs on the 30 spot, with 80 seeing a
significant impact and only 11 citing
limited-to-no long-term impact
Anticipated Impact of DVR Technology on 30-Second
TV Spot ( responding 2003, 2004, 2005)
Death of the 30-second spot and dramatic
transformation of TV advertising
paradigm Significant growth of sponsorships,
product placement, and other non-traditional
formats, but 30-second spot will remain
Limited prospects for technology reaching
critical mass of penetration, and therefore only
limited impact No significant long-term impact
(i.e., TiVo threat is over-hyped) cornerstone of
TV advertising Dont know/other
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DVR Already Impacting Ad Plans

• 58 of industry leaders have already changed
  their ad plans in response to DVR or plan on
  doing so in the near future.

Have you made any adjustments to your own (or
your clients) ad plans/buy-ins due to DVR
technology? ( responding)
Reacting to DVR
We are focusing on how we can use technology
to enhance the 30 and enhance the overall
messaging for the client. It is not a case of
either/or it is a case of innovating to follow
the consumer. -Agency Exec Substantial
increase in use of Direct Response Television and
interactive tools to better establish response
patterns and ROI. -Agency Exec Have reduced
television buy considerably. More to come unless
rates come down to reflect lost viewership.
-Media Exec
58
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Where the Dollars are Going
The percentage of media budget allocated to
online ads continues to rise the 2006 budgets
expected to be almost 19 - more than the 17
projected for 2007 in last years survey,
indicating a faster shifting to online than
previously predicted
Percentage of Media Budget Allocated to Online
Ads (average of all responses)
32.6
69.8
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Perhaps Tradition Isnt So Bad
Perceived effectiveness of non-traditional
advertising tactics has declined overall in the
past year, with industry leaders tentative on the
effectiveness of these tactics (and new media) as
a whole, rating them in the lower-middle range of
a five-point scale
Effectiveness of Non-Traditional Advertising
Tactics as Alternatives to Traditional
Methods (score on 5-point scale)
Effectiveness of New Media as Advertising
Vehicles (score on 5-point scale)
Single-sponsor buyout of media e.g., Target and
The New Yorker Cell phone text messaging e.g.,
ATT Wireless used for American
Idol Advertainment e.g., Burger Kings
Subservient Chicken Online affiliate
marketing e.g., The Budget Fashionista and Old
Navy Guerilla marketing e.g., Le Tigre
static-cling stickers placed around New York
City Content sponsorship e.g., Sony Pictures of
Nip/Tuck Product placement e.g., Coke on
American Idol Video-to-video e.g., Cadillac
SRX 3-minute ad DVD-based marketing e.g., custom
published DVD brochures
2.9
new category 2004 data not available
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Reaching Out to Everyone
The relative importance of reaching multicultural
audiences has increased over the past year, and
the perceived difficulty of targeting/reaching
these audiences has mostly decreased the
priority gap between Hispanic and other
segments is narrowing
Importance of Reaching Minority Markets (score on
5-point scale)
Difficulty of Reaching Minority Markets (score on
5-point scale)
-gay/lesbian -other affinity markets -various
segmentations beyond race lifestyle,
psychographics, interests
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An Industry that Demands More from Its Employees
While only 16 of industry leaders cited
dissatisfaction with their balance of personal
life and career, 66 said that the demands of the
advertising industry are higher than those of
other sectors
Satisfaction with Balancing the Demands of
Personal/Family Life and Career ( responding)
Demands of Ad Industry on Personal Life (in
comparison to other industries)
How have you balanced personal and work
commitments?
It is not easy, but when you love what you do
and love your family you work hard at making it
work. -Consultant I have only two hobbies --
my job and my family. Unfortunately, there just
isn't time for anything else. Public
Relations Exec I haven't. The job always seems
to win out. -Agency Exec
52
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Id Like to Take All the Credit, But
81 of industry leaders said that being mentored
was at least important in their own personal
career success only 11 say they were never
mentored at all
Importance of Mentorship to Personal Career
Success ( responding)
On Mentorship
Young people always need help and training. The
problem with the agency business is simply that
it doesn't take this very seriously, which is
amazing considering the greatest asset an agency
has is its people. -Agency Exec
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Seeing the Value in Investing in Tomorrows
Leaders

• While 81 say that mentorship was important to
  their own careers, 96 of industry leaders mentor
  young professionals on at least an occasional
  basis only one out of seventy respondents said
  s/he never mentors others

On Mentoring Others
Mentoring women is especially important given
their lack of presence in senior ranks.
Advertiser/Client Providing interns an
opportunity to work on real life projects which
provide results for their portfolios is
important. Media Exec Patience is the key.
Learning can be two sided. For the older
generation we can learn new technologies from the
younger generation, and the older generation can
teach skills that have been learned via
experience and not taught in a text
book. Advertiser/Client I have taught
advertising part-time for the past 24 years. This
has given me an opportunity to be in tune with
the next generation, admire their new technology
abilities and use my teaching as a recruiting
tool. I always hire former students before an
unknown, and I am always available for referrals
for other agencies to my best students. Agency
Exec
Do You Mentor Young Professionals? ( responding)
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No Simple Recipe for Success, But Lots of Common
Ingredients
Attributes for Success in the Ad Industry (score
on 5-point scale)
What Has Determined Your Success?

• Integrity, creativity and quite simply a love
  for the advertising agency profession.
• -Agency Exec
• Not taking no for an answer and always coming
  back withwell, how about we look at it this
  way--that way--this other way."
• -Agency Exec
• Building and empowering a strong team of
  committed professionals.
• Media Exec
• Strong belief in the importance of advertising
  to the growth of the American economy.
• -Agency Exec
• Diversity management. Helping the industry to
  diversify its employment ranks.
• -Agency Exec
• Opportunity to work with a great organization
  that resources you along with great people who
  support you is critical.
• -Agency Exec

- Persistence, persistence,
persistence! - Loyalty - Competitive instinct
- Intelligence - Resiliency, resiliency,
resiliency
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Less Optimistic About Careers in Advertising
While both this year and last, industry leaders
have been cautious overall in their assessment of
career opportunities in advertising, their
perspective has deteriorated in two key metrics
Health of the Advertising Industry in (score on
a 5-point scale)
On Advertising Careers
Lack of work/life balance, burnout and tight
staffing are going to threaten the industry's
ability to keep and attract top creative and
strategic talent. Number one challenge,
especially as the industry morphs, is that we
need great people to lead the future. Agency
Exec Investment (dollars and time) for training
is almost non-existent the people below us
aren't being adequately trained to replace us.
Agency Exec
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What are the Strengths and Weaknesses of the
Advertising Industry?

• Selected responses to an open-ended question

Ideas are our strength. Being scared is
weakness. Agency Exec Strengths - great
creativity and innovation to lead the curve of
media and popular culture. Weaknesses burnout
stretched and limited resources clients who do
not treat us as partners inability for us to
prove the ROI of our work. -Agency
Exec Creativity and innovation is its strength.
Slowness to respond to changing consumer and
media environment is its major weakness. We need
a new paradigm! Less defensiveness about
change! -Agency Exec General decline in the
impact the industry has in client relationships
at the C level of corporate America is the
Achilles heel of this industry. -Agency
Exec Strength Ability to adjust and adapt to
new technologies and utilize for advantage.
Weakness Image problems as pushy peddlers and
proliferation of ad clutter. -Academic Wea
kness Slow to change to realities of new media
environment. Internet and search ads change the
way marketers must think about how they engage
consumers. -Media Exec Agencies are slow
to change which has lead to many boutiques and
freelancers. Inability to get the image of the
advertising industry to a positive perception.
Creative is getting better all the time. We
embrace youth and enthusiasm. -Agency Exec The
strengths are in multicultural nuances. The
weaknesses are in habitual versus out of the
box problem solving issue versus opportunity
thinking. -Media Exec
As a Career Path
Strengths...no other professional services
industry has demonstrated now and over time the
ability to have creativity and ideas, and to
connect with consumers weaknesses....not known
for being a good career path, either in
compensation or in supportive environment. -Adver
tiser/Client Strength - considered to be an
exciting industry weakness - inability to make
significant progress in the area of multicultural
hiring, retention and promotion. -Ad Trade
Association Exec We're a creative industry and
entry level positions will always be easily
filled but we need to pay employees better so
that we can retain the good, smart ones. -Agency
Exec
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And the Winners Are
Most Successful Campaigns of 2004-2005 (top
responses, open-ended question)
Defining Campaign Success

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

In my view there was only one...and it wasn't
merely an ad campaign...it was and continues to
be a masterful, integrated multi-media/multi
-platform assault on the music culture that has
single-handedly transformed the company, the
music industry and the music consumer on a global
basis ... making ear buds the ultimate symbol of
hipness. And there's no end in sight...the fun
has just begun as podcasts, books, video and
gaming continue to expand the game. And no. I'm
not an Apple stockholder. Agency Exec on Apple
iPod Break-through work that leaves the
competition in the dust, elevates the brand to
icon status, and delivers outrageous returns to
the corporation. -Agency Exec on Target, Mini
and BK Did a great job promoting something new
and innovative, as well as launching a new
product category, with an entirely breakthrough
creative approach. Media Exec on Apple iPod,
Swiffer, JetBlue Campaigns that are effective
across several mediums. Consultant on Aflac,
Apple iPod and Verizon
2004s Top 5
1. Apple iPod 2. Mini 3. Citibank 4.
MasterCard 5. Target, Volkswagen,
Cadillac
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Icons of Advertising Success
Most Admired Brands (top responses, open-ended
question)
Most Admired Industry Leaders (responses,
open-ended question)

• Coca-Cola
• Apple
• Nike
• Google
• FedEx and BMW

Howard Bell Bill Bernbach (2) David Bradley Leo
Burnett (2) Tom Burrell Jay Chiat Lee Clow
Peggy Conlon Jerri DeVard Stan Freberg John
H. Johnson
Shelly Lazarus (2) Maurice Levy Sallie
Mars Renetta McCann (2) David Ogilvy (2) Keith
Reinhard Stan Richards Liener Temerlin Ed
Vick Mary Wells Lawrence (2) John Wren
2004s Top 5
1. Nike 2. Coca-Cola 3. McDonalds 4. Apple 5.
Budweiser
these names are reported as they were
given/spelled by the respondents of the survey