RALEIGH – If you want to understand why so many newspaper publishers, ad execs, marketing professionals, media-company investors, and political consultants are pulling their hair out right now, a single page in the March 17 edition of Business Week would be well worth reading.
It contains a couple of data charts on the advertising industry. One depicts changes in U.S. advertising expenditures over the past year. The other depicts the market capitalization of major U.S. advertising firms.
Overall, ad spending was up 2 percent in 2007 over the previous year, to about $300 billion. What’s more important is that the composition of ad budgets has been changing significantly. In just that one year, Internet spending surged by 26 percent, to $21 billion, while newspaper advertising dropped by 6 percent, to $44 billion. Only a few years ago, online advertising was only a small fraction of print. Now, as you can see, it’s nearly half. In the not-too-distant future, the two trend lines will converge on the same number, then diverge upside down.
Interesting, while the newest-tech advertising option posted the fastest growth rate, one of the oldest-tech options – billboards and other outdoor advertising – posted the second-fasted growth rate, at 6 percent. Other stories are more familiar. Cable TV is up, broadcast TV is down. Direct mail, an old idea given new application by sophisticated data-mining technology, remains a growth industry. But the Yellow Pages, an old idea now in competition with easily searched online options, is barely treading water.
Now, as to the aforementioned balding trend, those professionally engaged in trying to market information to the public – be it about President’s Day sales or presidential politics – have yet to get a handle on where to put their dollars to reach the larger audience at the lowest cost-per-effect. Media with declining total audiences may still attract the audience segment most of interest to a particular client. Nor is the decision simply a matter of moving dollars from one account to another. Most effective online advertising differs not just in delivery vehicle but also in form from radio spots or print ads, while also facilitating a greater degree of accountability to advertisers because of the existence of real-time user metrics.
I’m certainly glad not to have to puzzle out answers to such questions every day. I have only a small advertising budget to manage each year, and its best disposition isn’t hard to determine. When I talk to political consultants of both major parties, they are candid about how much the rules have changed in just a few years, and how little empirical information there is on which to base multi-million-dollar decisions that could potential make or break campaigns.
It’s worth remembering that despite recent trends, the various print media still account for nearly half of all advertising spending. Commercial broadcasters attract another 31 percent. We still live in a world where most people get their news, consumer and political information, and entertainment from reading pieces of paper, listening to the radio, or watching TV. But this familiar world is fading away before our eyes. What will its replacement look like? And specifically, how will serious newsgathering operations sustain themselves within it?
The pros don’t know. Many are acting on educated guesses, at best. It will be fascinating to see what happens next – or, more likely, to read about it on a blog.
Hood is president of the John Locke Foundation.