Marketers are putting more advertising money into online but not enough to have an impact on other media. The ICA Survey of Marketing Budgets released yesterday, indicates that higher sales and profits fueled ad budget increases for the third quarter of this year with Internet seeing the highest gains. And MIC scored time with M2 Universal and ZenithOptimedia pundits to get their take.

Media agencies have been experiencing this trend with their clients and expect it to continue, as the Internet becomes a standard component of integrated campaigns. The latest projections from ZenithOptimedia peg growth in Internet ad spending in Canada at about 20% year over year for 2005 through 2007 while little or no change is expected for other media, including cinema, during the same period.

But while Internet is seeing the biggest spending increases, it remains a small piece of the advertising pie. ‘It is still building on the smallest base,’ says Debbie King, EVP/COO of ZenithOptimedia. ‘In reality, what moves out of other media into online is not exactly leading anyone to make the conclusion that (any other media) is taking a big tumble. Online at best may be accounting for – and I think this is high – maybe 5% of mass media dollars.’

For King, the good news is that Internet is now on the mass media radar. Advertisers are not peeling off a small piece of their budget for online as an afterthought; it is involved in the media planning process right out of the gate. She says this growth is going to continue because we now live in an ROI world and the Internet offers the ultimate in accountability in terms of gauging response.

King says online advertising is also no longer about just putting a banner skyscraper on a Web site, it’s content – the most content-rich media there is. For advertising, the same broadband technology that allows sites to feature video, music, and information content also enables the use of re-purposed TV-like advertising to be placed and viewed in ad spaces on the sites.

One of the most recent innovative and successful campaigns out of ZenithOptimedia was a multi-media effort for Nestlé’s Kit Kat brand. The 10-week campaign began mid-June and combined the use of daily news and entertainment magazine Dose, its dose.ca Web site, and text messaging.

Consumers buying a Kit Kat Peanut Butter bar could enter the UPC code of the product either on dose.ca or via text messaging to receive a free download – either a game, music, or computer wallpaper screensavers – and be entered into a contest to win a Sony PSP. The creative promoting that week’s downloadable prize changed each week.

Hugh Dow, president of M2 Universal, agrees that there is significantly more money going into the Internet today than two or three years ago, but that it is still a comparatively small number. He says the amount of dollars being allocated to online depends on the product category and how the Internet can be used.

‘It can be anywhere from 1% to some brands as high as 10%. The majority is pretty small. Online is probably accounting for 2% to 2.5% of our total spend. Mind you, that’s gone from 1% about 18 months to two years ago. So the percentage of increase is pretty dramatic – 100% or so – but you’ve got to remember it came from a pretty small base.’

Dow says virtually everything M2 is doing today has an online component but clients are also interested in exploring non-traditional options such as mobile. ‘Anything that has any kind of innovation or impact attached to it, something that is merchandisable – both to consumers and the trade and even to their own marketing people – is an important element. The key, of course, is integrating it and tying it in with the other communications channels. It’s not just a matter of just selecting something and leaving it in isolation it’s got to be tied in.’

He says automotive and financial services are natural categories for Internet components, and M2 client General Motors has been quite innovative in its use of online advertising, including recent campaigns for the Pontiac Vibe and the launch of the 2006 Solstice model on The Apprentice on TV. Both had Web components and provided quantifiable measures of results and response.

Music is a big component on the Net and music clips have a lot of relevance for younger target groups. Some of the upcoming work from M2, Dow says will take full advantage of the Web’s rich media possibilities similar to the site with four short online films that’s part of a GM campaign in Quebec created by the Cossette Communication Group. (filmschevrolet.ca) Dow doesn’t expect the Internet to continue with 100% growth year over year, but at least for the foreseeable future sees double digit increases for the medium.

This explains the findings of U.K.-based NTC Research, which confirmed that the strongest growth is in internet spending. NTC conducts the survey of 270 senior marketing executives for the Institute of Communications and Advertising each quarter. The Q3 edition found that 22% of the panel revised their total budgets for the current financial year while 12% reported lower budgets. The media adspend was up overall, as was sales promotion. Budget cuts were seen in other activities such as sponsorship, marketing research, PR, corporate communications, and direct marketing.