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Why Big Bucks Are Chasing Targeted Media

In advertising, 2005 will be the year of the sharpshooter. With consumers harder to reach than ever, ad spending on targeted and easily measured media is outpacing outlays for older, less focused media forms. Internet advertising will surge 25%, says Universal McCann. Direct mail should grow by 9.5%, the magazine sector by 7.3%, and cable TV by 7%. Mass media isn't where the action is: Radio ads, billboards, and other outdoor media will grow just 5%, and network TV a scant 2%. Even with these laggards, however, McCann expects overall growth in ad spending to surpass that of gross domestic product for the second straight year, hitting $280.6 billion, a 6.4% rise from 2004.

This year the industry won't see free-spending political campaigns or the Olympics. But major advertisers -- especially in autos, financial services, and household products -- are under pressure to boost market share. That means more spending on marketing, particularly campaigns with highly targeted messages. "Marketers have been hoarding their resources while the need for greater marketing efforts keeps piling up," says McCann's forecasting chief Robert J. Coen.

No one expects advertisers to become freewheeling spenders. The focus will be on return on investment (ROI). Indeed, CFOs are demanding big bangs from media budgets. Over the past decade, says Carla Hendra, president of direct-marketing agency OgilvyOne, companies have reengineered to reduce costs and improve accountability. "Now that has finally come home to marketing," she says.

Companies such as Ford (F) and Procter & Gamble (PG) can't break their TV habit even as media prices climb and eyeballs get fewer. But they are increasingly keen to reroute money from easily-zapped 30-second ads into "product integration." Reality shows such as The Apprentice are being constructed around product placement. Indeed, among advertisers' hottest tools are those that figure out the ROI of paying to put M&Ms in Donald Trump's itchy hands, vs. advertising on his show. If placement demand keeps up, soon we could see networks saying "You're fired!" to 30-second spots.

By David Kiley in New York

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