This is marketing research on the advertising industry and can include information on the background, market structure, definitions, competitors, trends and developments of advertising and is related to other topics such as marketing, branding, TV and selling.

Table of Contents

[edit] Background

Advertising is the art of communication used typically by profit-generating corporations seeking to increase consumer demand for their products or services. While paid advertisement is largely responsible for the growth of this industry, other entities such as non-profit organizations will use free, unpaid advertisements such as public service announcements or word-of-mouth. Word-of-mouth is the best kind of advertising since it’s a very economical, community approach where the consumers push the brand.

[edit] Market Structure

Covert advertising, TV ads, Internet and Short Message Service (SMS) text messages comprise the majority of today’s advertisements.

First, covert advertising is when a product or brand is embedded in entertainment and media. Examples include the use of certain luxury cars in the James Bond movies or carbonated beverage in music videos.

Second, TV commercials are generally considered the most effective mass-market advertising format and this is reflected by the high prices TV networks charge for commercial airtime during popular TV events. A single 30-second TV spot during the Super Bowl football game is estimated to cost $2.7 million (as of 2007).

Third, new media mediums such as the Internet and text messages are overtaking television due to a shift towards consumer's usage of the Internet, as well as devices such as TiVo.

Internet advertising is a recent phenomenon led by Websites such as Yahoo!, Google and AOL. The cost of Web-based advertising space is dependent on the "relevance" of the surrounding web content and the traffic that the website receives. Most consumers now educate themselves through the internet using on-line brochures and user reviews to make product decisions. Companies are struggling with the balance between old line media advertising vs. the ability to focus on relevant content and get back significant analytics that the web offers.

Finally, SMS (Short Message Service) text messages are also a new phenomenon of this decade. Ads sent as SMS text messages took Europe by storm and are breaking into the USA.

Regardless of the form it takes, advertisements are tracked to measure their effectiveness. Ad tracking provides a measure of the combined effect of the media weight or spending level, the effectiveness of the media buy or targeting, and the quality of the advertising executions or creative.

[edit] Industry Definitions

• Advertising is a paid, one-way communication through a medium in which the sponsor is identified and the message is controlled by the sponsor. Public relations, product placement, sponsorship, underwriting, and sales promotion all fall under advertising. Communication of advertising messages use mediums such as television, radio, movies, magazines, newspapers, the Internet and billboards and are typically placed anywhere the audience can be easily and/or frequently targeted.

• Product placement advertisements - ads placed by companies using real products in media based on a payment to the media provider.

• Publicity, a division of Public Relations, is the effort to manage or alter the public's view of a product or service.

• Sponsor - to support an event, activity, person, or organization through a financial arrangement, these are very popular for sporting events and industry shows.

• Sales promotions - efforts that are created to increase sales of a product or service usually in a short time frame

[edit] Market Metrics

The advertising industry is large and continues to grow globally. In 2005, companies spent close to $144.32 billion on advertising in the United States and $385 billion worldwide. Global ad spend is anticipated to exceed half-a-trillion dollars by 2010.

The advertising and marketing services industry in the United States includes about 30,000 companies, with combined annual revenues of $60 billion. In this fragmented industry, the top 50 companies have less than 40 percent of the market.

Demand comes largely from corporations that sell consumer products, and telecommunications, entertainment, and financial services. The industry is labor-intensive, but the high value of the product produces annual revenue per employee of about $150,000.

[edit] Industry Players

The Interpublic Group of Companies, Inc is the world’s third-largest advertising advertising and marketing services conglomerate behind the Omnicom Group and WPP Group, operating through offices in more than 100 countries. Its creative agencies include McCann Worldgroup, DraftFCB, and Lowe & Partners. Interpublic also offers direct marketing, media services, and public relations through such agencies as Initiative and Weber Shandwick. Its largest clients include General Motors, Johnson & Johnson, Microsoft, and Unilever.

BBDO operates as the flagship agency of media conglomerate Omnicom Group. BBDO Worldwide offers creative development services for some of the world's top brands. BBDO Worldwide also provides campaign planning and management services, as well as other brand promotion services. The firm's Atmosphere BBDO unit offers interactive marketing services in North America. BBDO's clients have included Daimler Chrysler FedEx and Pepsi Co. WPP Group is one of the world’s largest media and communications services conglomerate with operations in more than 100 countries. Its flagship advertising agency networks, including Grey Worldwide, JWT, Ogilvy & Mather, and Young & Rubicam, offer creative campaign development and brand management services. WPP's holdings also include public relations firms, media buying and planning agencies, and many specialized marketing and communications units. In addition, its Kantar Group division is one of the world's leading market research organizations. WPP was founded in 1958 under the name Wire and Plastic Products.

JWT, which operates as the flagship advertisement agency of the WPP Group, provides creative ad development, campaign management, and strategic planning services to such clients as Ford, Kimberly-Clark, and Shell. JWT also offers brand development and specialized marketing services, including customer relationship marketing, event marketing, and sponsorships. The firm operates in almost 90 countries through more than 300 offices. Founded in 1877, it is one of the flagship agency networks of UK-based media conglomerate WPP Group.

Name	                        Headquarters	Operations	  Sales (2006; millions)

Interpublic Group of Companies	New York City	100 countries	    $6,190.8
Omnicom Group (BBDO Worldwide)	London	         75 countries	   $11,376.9
WPP (JWT)	                London	         90 countries	   $11,574.0

[edit] Recent Trends and Developments

New media advertising is the hot trend within this industry. This new concept allows for the development of an online community, which allows satisfied customers to congregate and advocate the virtues of a particular brand. In most cases, the online community uses mechanisms such as blogs, podcasts, message boards, and product reviews as communication tools to facilitate further discussion.

New media ads are delivered by Internet-driven technology such as blogs, RSS, Web video productions, and podcasts. Meanwhile, advocates of new media advertising believe that consumers are more inclined to believe feedback from their peers than corporate marketing verbiage delivered by a company. You can see by the following three charts that internet advertising has everyone's attention.

The rapid growth of this industry, illustrated by the prevalence of unsolicited commercial e-mail and other forms of spam, has resulted in advertisements becoming a major nuisance to users of these services, as well as being a financial burden on internet service providers. It appears that advertisements are increasingly invading public spaces, such as schools, which some argue is a form of child exploitation.

[edit] Sources

• American Association of Advertising Agencies
• Bureau of Labor Statistics
• TNS Media Intelligence
• Ad Week
• IBM
• Factiva
• Wikipedia
• eMarketer

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