Where the Advertising Action Will Be

Cell phones, big-box stores, love drugs emerge as 2004's hot categories

If you want to know where ad spending is heading this year, follow tech and the male libido. Experts expect a big spike in advertising for Viagra-like pharmaceuticals (that already started with Super Bowl spots), for cell phones, for discount retailers and home-improvement stores battling for market share, and for big-box stores that are finally seeing a boom in the DTV market.

The experts expect these categories to be the hottest this year:

Erectile-dysfunction (ED) Drugs. As the Super Bowl proved, there's strong competition between Viagra and two new competitors.

Home-improvement stores.
Although Lowe's has just half as many locations as Home Depot, the upstart is coming on strong, spurring Home Depot to begin pouring millions into store improvements. This year, both are expanding marketing and locations. It's going to be a fertile source of advertising, too.

Cellular phones. There's nothing like a little competition to heat up TV spending in an ad category. Weirdly, though, regulation (often the bane of free markets) may prove a bonanza for cellular companies and those that sell them advertising. Last November, the FCC made it possible for cell-phone users to switch carriers but keep the same number. Experts expect 30 million Americans to do that this year—hence, the intense commercial battle between telecom competitors.

Big-box stores.
Wal-Mart, the nation's largest retailer, and Target, its fancier discount competitor, will be battling for the low-end. They're both due to expand their advertising significantly this year. The same is true of appliance giants, which will find themselves at the business end of a big shift in consumer entertainment options—from Game Boys to high-definition television sets that are starting to sell as prices drop and programming expands.

Love Drugs

"All the ED players are going to be spending heavily this year," said one network sales source. "I wouldn't be surprised if, collectively, they spent $100 million more on TV this year than they did last year."

Of course, until last year, Viagra had the category all to itself. But, in quick succession, Levitra, with front man and former NFL coach Mike Ditka, and longer-lasting Cialis entered the market. In its Super Bowl spot, Cialis went for a touchy-feely hot-tub spot, while Ditka, in a far less subtle marketing pitch, was shown tossing a football through a tire swing and, for some reason, suggesting that football and sex were more closely aligned than baseball and sex (maybe because Viagra uses baseball slugger Raphael Palmiero in its commercials).

Still, rivaling Janet Jackson for buzz last week was the Cialis disclaimer recommending that men seek medical attention if their Cialis-aided erection lasts longer than four hours.

Viagra has been very, very good for drug manufacturer Pfizer, which raked in a reported $1.9 billion in sales last year. But Cialis has a unique marketing pitch: It lasts up to 36 hours vs. four hours for both Viagra and Levitra. And, according to drug research firm Impact Rx, Cialis is capturing a bigger share of the prescriptions for first-time users of erectile-dysfunction drugs than its two competitors.

According to Nielsen Monitor-Plus, the ratings company's ad-tracking service, Levitra spent $30 million in 2003, its first year on the market. Viagra spent $73 million last year, down 4% from 2002. No recorded spending for Cialis last year. It's big push really didn't start until the Super Bowl last week.

Home Improvement

Meanwhile, the battle for the hearts and minds of the do-it-yourselfers also will heat up this year.

"That whole category is really emerging," says Joe Abruzzese, president of advertising sales for Discovery Networks. Discovery has a big sponsorship deal with Home Depot for hit show Trading Spaces
and While You Were Out
but also does brisk business with Lowe's and other players in the category, he says.

The Monitor-Plus data shows that, in 2003, Home Depot was the No.1 brand in terms of total TV spending from January through November (the latest data available). The company spent almost $300 million on TV, a 26% increase over the previous year.

Clearly, the company is trying to fend off aggressive pursuit by Lowe's, which was the No. 6 brand in TV ad spending last year. The company spent $188 million on TV ads last year, up 16%.

Both companies have outlined aggressive growth plans for 2004. Home Depot said recently it will spend $3.7 billion to upgrade its current stores and open an additional 175 stores. That's slightly less than the 200 stores the company opened in each of the past three years. Lowe's will counter by opening 140 stores this year and another 150 stores in 2005.

Wireless Wars

The telecom wars, waged in living rooms through TV advertising, will escalate in 2004, according to both buyers and sellers. "There's going to be a lot of one-upmanship among all those players, especially among Verizon, T-Mobile and Sprint," according to one source on the sales side. "With the new portability rules, the feeling is a lot of business is up for grabs and all those players are stepping up aggressively to try to increase share of market."

In 2003, Verizon was the single biggest TV spender in the wireless wars, spending roughly $285 million to promote wireless services generally and its America's Choice plan specifically, according to Monitor-Plus. That was an increase of almost 90% over 2002.

T-Mobile boosted spending by 23% last year and is expected to spend more this year. Both Sprint and Cingular spent less on TV last year but are expected to reverse course this year, sources say.

Another buy-sider points to Quest as a telecom brand to watch. "They've taken hits for poor customer service and have taken steps to turn that around. They will market much more aggressively this year."

Big Boxes

Among the discount department stores, Wal-Mart remains the biggest spender and is expected to continue to spend aggressively in 2004. It's battling bad press over how it treats its employees, but the company has been fighting back of late, more aggressively challenging the media on disputed facts. Sales sources say its TV ad campaign this year will put employees—happy employees—in the spotlight to counter some of the press reports.

Target, insiders say, is one to watch. The retailer actually reduced its TV spending last year but is poised to reverse course in 2004 in a bid to grab increased market share.

Consumer electronics is also a hot category with such chains as Best Buy and Circuit City starting to aggressively market high-definition TV sets.

"That's a really big product push," says one sales executive. "People who wouldn't spend $10,000 for a set are willing to spend $3,000." Beyond HD, home-theater products generally are getting major marketing support this year.

Circuit City spent $124 million last year, up 4% over the previous year. Best Buy had the bigger spending increase last year, with 30% more TV ad dollars placed last year, totaling $117 million, according to Monitor-Plus.


In the always hot restaurant category, leading spender McDonald's actually spent less on TV last year, but executives says that may change this year. "They are spending heavily on their youth campaign," launched in late 2003, says one sales executive. McDonald's was the third-biggest brand in TV spending in 2003, but that was down 18% from 2002, to $250 million. "They are indicating they will spend more, not less, in 2004,'' said the executive.

Meanwhile, one restaurant chain to watch, albeit on a regional basis (West, Midwest and Southeast), is CKE Restaurants, which operates the Carl's Jr., Hardee's and La Salsa chains. Company sales were sluggish in 2003, and part of the company's turnaround strategy reportedly involves increased TV spending this year as it launches the sort of low-carb, Atkins-friendly menu that a number of fast-food chains are starting to embrace.

As Seen on TV
The top brands ranked by spending, January-November
Rank Brand 2003 (000) 2002 (000) Change
*Brand introduced in 2003 NA = Not applicable SOURCE: Nielsen Monitor-Plus
1Home Depot$298,438$237,396+25.71%
4America Online$241,182$169,902+41.95%
5Dell Dimension$203,684$195,348+4.27%
7Telecom USA$184,609$12,679+1,355.98%
9J.C. Penney$176,840$174,359+1.42%
10Taco Bell$173,838$151,220+14.96%
12Verizon Wireless$167,452$85,855+95.04%
14Geico Direct$146,778$118,067+24.32%
16Old Navy$142,897$126,920+12.59%
17Office of National Drug Control$142,506$124,221+14.72%
19Nissan Altima$139,729$145,982-4.28%
20Pizza Hut$136,309$151,341-9.93%
22Coca-Cola Classic$134,413$108,31824.09%
24Domino's Pizza$131,016$72,03481.88%
25Capital One$130,979$10,1451191.08%
26Miller Lite$130,572$114,60313.93%
28Bud Light$129,123$114,89712.38%
29Circuit City$123,895$119,2763.87%
31Burger King$120,811$149,857-19.38%
32Cingular Wireless$120,548$185,944-35.17%
37Verizon Wire$117,170$50,162+133.58%
38Best Buy Superstores$116,690$89,328+30.63%
41Mitsubishi Endeavor trucks$111,082*NA
42Sprint PCS$110,374$170,850-35.40%
46AT&T Wireless$106,754$89,967+18.66%
47Sears home furnishings$103,149$93,601+10.20%
48Ingles Sin Barreras$99,321$59,734+66.27%
50Southwest Airlines$94,771$93,853+0.98%
TV's Top Spenders
Rank company 2003 (000) 2002 (000) Change
Source: Nielsen Monitor-Plus
1Procter & Gamble$2,023,738$1,554,274+30.20
2General Motors$1,406,049$1,632,612-13.88
3Time Warner$976,006$883,205+10.51
4Walt Disney$912,958$745,151+22.52
5Ford Motor$839,564$908,979-7.64
6Johnson & Johnson$803,179$761,077+5.53
10General Motors Dealers$718,377$371,963+93.13
12Nissan Motor$690,254$486,030+42.02
13Altria Group$665,357$581,517+14.42
14Yum! Brands$663,974$594,958+11.60
15Ford Motor Dealers$658,886$449,305+46.65
16General Mills$646,008$581,554+11.08
17Toyota Motor$606,794$584,814+3.76
18Honda Motor$573,932$553,357+3.72
21Verizon Communications$516,459$569,345-9.29
22Sears Roebuck$507,688$486,871+4.28
23SBC Communications$467,494$307,995+51.79
24U.S. Government$464,867$435,639+6.71