I found myself at our client meetings last week in San Francisco, Seattle and LA, repeatedly making the point that CPGs had been increasing their online ad spend. This was based upon conversations that I’d been having with folks in the CPG space and the intense interest that we’ve been seeing lately from CPGs in online advertising. As I had a few spare minutes today, I checked AdRelevance to make sure that I was right about this. I was relieved to see that online ad impressions among Food and Drug and Personal Care categories had indeed increased by 32 percent over the past 12 months (Oct 06 - Sep 07 compared with Oct 07 - Sep 08). Interestingly, there is a big difference in the growth between the two big subcategories within CPG. In the most recent 12 months, impressions did not grow relative to the same period in the previous 12 months in the food and beverage category. In personal care, on the other hand, impressions grew by 87 percent.

What happened? Well, when we dig into the data, we see that it’s mostly a story about a few big advertisers significantly curtailing their online ad budgets with many others showing modest increases. During the two periods that we measured, Coca Cola’s ad impressions dropped from 276 million impressions to 50 million. Miller Brewing’s impressions dropped from 184 million to 52 million. On the personal care side, though, we saw the big advertisers generally keeping their impressions up.

Is this about personal care, or about food and beverage? I don’t think so. I think that it’s mostly about the immaturity of the media in tough economic times. As one big advertiser pulls back, we’ll see many others plodding along with modest increases in the online ad budgets, reflecting even greater increases in the allocation of ad dollars to the Internet. Given the tough economic climate that many advertisers are going to be operating in, I think that this is the story that we’re going to be seeing for another year or two. Some big advertisers will scale back significantly, a rare advertiser will dramatically shift dollars to the Web, and many others will continue to execute a modest shift of dollars from traditional vehicles to Internet.

Within the whirlwind of negative news regarding the economy and the advertising outlook, I found a significant, welcome trend in the IAB’s recent revenue report covering the first half of this year. I’m scratching my head trying to understand why more hasn’t been made of this, because it portends hugely positive things for the online space.

The IAB recently announced a 15.2% year-over-year growth rate for Internet advertising for the first half of 2008. When you dissect the 15.2% number, some interesting details emerge. Out of nine industries tracked, only four have grown from last year. In and of itself, this finding would fall in line with all of the other negative things we’re hearing about the prospects for advertising.

However, look at the list of the four growth industries: CPG, Auto, Telco and Computing. Do you see what I see? These industries have consistently been the big overall ad spenders for a long, long time. Companies within these four industries make up 42 of the Top 100 national advertisers, and 52% of the advertising spend. And note that the two largest ad-spending industries, i.e. CPG and Auto, have been largely absent from the digital world until very recently. When you combine these four industries, their online ad spending grew 29.8% on a year-over-year basis from the first half of 2007.

The implications of all this? If the big ad spending industries continue to embrace the online medium more aggressively, chances are good that new, significant waves of growth are in the works for the interactive space. In his recent forecast, Jack Myers makes this interesting statement: “We are in the dead center of a two-decade industry transformation that began with the launch of Google in 1998. It will be 2012 before the industry of the future - the 21^st Century model of the media and advertising industry - will begin to prosper.” While new technology trends typically get all the buzz, I have this sneaking suspicion that some of the leading advertisers that make up big ad-spending industries may be out-innovating all of us, and we will see new online market mojo well before 2012.

Early this morning it was reported that the Salmonella outbreak (Salmonella Saintpaul) has now sickened more than 750 consumers. As inspectors investigate farms from Mexico to Texas and southern Florida, consumers have been expressing concern and raising questions in online communities. Much of the buzz came in immediate response to the FDA warning on June 10, 2008. In total, we’ve documented nearly 8,000 messages posted on blogs, boards and groups during the month of June. And this is just buzz. The Associated Press uploaded a video to YouTube.com on the June 5, which has received nearly 20,000 views. Salmonella Saintpaul has also prompted scores of inbound links to the FDA page: http://www.fda.gov/oc/opacom/hottopics/tomatoes.html

Buzz volume for Tomato Salmonella FDA Warning

Source: Nielsen BuzzMetrics service. Buzz expressed as raw number of messages.

One of the most vocal bloggers is Salmonellablog.com (voice of the Marler Clark firm), which has dedicated more than 20 posts in recent weeks to the outbreak and calling out the FDA’s snail-like response. On boards, we tend to see more conversation related to how consumers are adjusting in the interim. Weightwatchers.com in particular has spurred a couple of hundred messages related to the outbreak. Many dieters punt questions to the community about which types of products are tainted and some mention substituting tomatoes in recipes.

“Have they found out where this started? Is it safe to eat tomatos now? Also, is it safe to eat the ones in the cans? I know this is silly, but my children asked me that last night and I can’t answer that!!”
Source: Weightwatchers.com; June 12, 2008

“Normally I’d say a tomato /mozzarella salad, but with the salmonella, go for roasted peppers with mozzarella.”
Source: Weightwatchers.com; June 21, 2008

The discussion has already dropped off precipitously. There are few indications from the nature of the current conversation that this scare will have long terms effects on category sales. If we can take any cues from the e.Coli outbreak in 2006, we may see a softening in sales in the weeks to follow. The spinach outbreak had something of a ripple effect because of the back-to-back outbreaks that year. Ultimately fresh bagged salad approached previous year levels, though sales for fresh spinach were sluggish to recover.

Sales for Precut Fresh Salad Mix and Fresh Spinach

Source: Nielsen LabelTrends; usda.gov

Beyond sales, this latest outbreak does nothing but chip away at consumer confidence in foreign-produced food and the our own government’s food inspection systems. Earlier this week, the Harvard School of Public Health released findings of a recent survey that queried consumers on just this topic. 37% of respondents believed U.S. produced food was very safe. What raises eyebrows is that 58% believed it was only “somewhat safe”; 47% deemed food from Mexico unsafe and 56% were concerned about food from China.

Memories of past outbreaks linger. In the same survey, 74% remembered the spinach recall and 82% remembered the recent ground beef recall. It remains to be seen how memorable Salmonella Saintpaul will be, but surely if the FDA doesn’t find the source soon, it will likely further instill consumers sentiment toward globally produced food and call into question US production as well.