’05 Ad Spending Uptick Led by Insurers

NEW YORK Thanks to several major hurricanes, 2005 wasn’t the best year for insurance companies. It was, however, a bang-up year for the ad agencies that service them as ad spending for the category rose 31.3 percent.

Insurance was the biggest gainer in the top 15 categories of ad spenders in 2005, per Nielsen Monitor-Plus. The segment’s rise eclipsed an overall jump of 7.4 percent in ad spending to $125.5 billion. A Nielsen representative said those numbers were not finalized and do not include online ad revenue, which stood at $9.6 billion in 2004, per PricewaterhouseCoopers.

The jump represents an improvement over increases from the previous two years as well. Spending in 2004 rose 6.3 percent from the previous year, while spending in 2003 rose 5.1 percent over 2002, per Nielsen Monitor-Plus.

Among the insurance category’s biggest stars were Geico, which increased its spending by 51.3 percent to $470.1 million, and Progressive, whose spending jumped 45.3 percent to $354 million. Overall, category spending totaled $2.9 billion.

Ed Gold, director of media and sponsorship at State Farm, said companies like Geico and Progressive, which don’t use agents, have accelerated spending in recent years because of opportunities online. “It’s purely because of the Internet,” he said. “It’s creating a new opportunity for people to shop insurance.” Gold said State Farm has “stepped up [advertising] a bit as the leader of the category.”

Though most companies are funneling more money into online these days and are realizing that the spread of digital video recorders is making TV a less effective medium, most categories in the top 15 increased spending with the exception of auto and truck dealerships, which trimmed their outlays by 1.8 percent.

Meanwhile, the auto and truck category, which was No. 2 next to retail stores, increased its outlay by 6.5 percent to $11.3 billion. Wes Brown, a partner at the Los Angeles auto marketing consultancy Iceology, said though General Motors and Ford are likely to cut spending this year, others will offset that. “Most other companies will probably be up,” he said. “There are a lot of big launches planned.”

Other big gainers for the year were real estate, which increased spending by 29.4 percent as the housing bubble finally started to run out of air; and bath toiletries, the spending for which rose 29.4 percent. Losers include the cleaners, cleansers and polishers segment, which saw spending fall 22.1 percent; and footwear, which saw a 17.7 percent drop.

Among credit card companies, a 2004 U.S. Supreme Court decision was the catalyst for an 82.9 percent increase in spending for American Express in 2005, the largest increase of any brand in the top 10. The court let stand rulings by lower courts that allowed banks to issue credit cards from AmEx and Discover.

This is a brand new era for the American credit card industry,” said David Robertson, publisher of The Nilson Report in Carpinteria, Calif. Robertson attributed the rise to greater distribution for AmEx’s cards. Overall, the credit card/travelers checks segment rose 10.9 percent.

Acquisitions explained other increases in ad spending, including Cingular Wireless, which absorbed AT&T Wireless in 2005, and Macy’s, which bought May Department Stores.

The overall advertising spend was bigger than some had predicted. Steve King, worldwide CEO at ZenithOptimedia, London, had predicted a 2.9 percent jump in U.S. ad spending for 2005. King could not be reached for comment.

Robert Coen, svp, forecast director at Universal McCann, New York, had pegged the 2005 spend increase at 4.6 percent, a downgrade of an earlier estimate. Coen said he’d reserve comments on Nielsen’s numbers until he’d seen all the data. Coen predicts that 2006’s ad spend will rise 5.8 percent. “The economy’s not doing badly,” he said. “We’re not in a recession.”