What if advertising doesn’t recover with the economy?

What if the cyclical part of the advertising collapse does not come back after the end of the cycle?

Lad Paul, an old friend and colleague from the Des Moines Register who recently retired as executive editor of the New York Times News Service and is now consulting, asked that question recently on my Facebook page.  I asked Lad if I could share his question and my answer on the blog (with some minor editing, mostly to remove personal remarks we exchanged, and with some elaboration because I’ve thought more about it as I’m writing this) and he agreed. He had been making his way through my Blueprint for the Complete Community Connection and these questions kept nagging him:

What if advertisers have discovered that they don’t need middle men like our newspapers to find their customers? What is to stop them from taking the money that in the old world would have been their advertising budgets and spending it instead on developing fancy Web storefronts, and then letting the customers find them and their products via search?

If that were to happen, it seems to me, the only time advertisers would need us would be (1) to introduce new products that customers don’t yet know about, and (2) brand building (or what we Old Media types used to know as “image adverising”).

Those two won’t make up what we’ll have lost in day-in day-out retail product advertising.

So my question is, how would your idea of being the sales agent, as it were, for local retailers, short-circuit this? What’s the “value proposition,” as our MBA friends like to say, of having the newspaper act as the retailer’s agent, selling the goods and taking a cut of the revenue?

And what other revenue components are you envisioning? I get that you’re an ardent foe of content fees, but what are the other ideas out there for supporting our very costly addiction to gathering and disseminating information? Or haven’t I read far enough in yet?

Here’s how I answered:

Nothing is stopping businesses from taking the money they used to spend advertising with us and reaching consumers directly. Many businesses are doing that already. In fact, I presume that traditional advertising won’t bounce back with the economy.

As Alan Mutter reported in his Newsosaur blog, employment, real estate and automotive advertising, the three traditional pillars of newspaper classified advertising, each fell nationally by more than 40 percent in the first quarter of 2009, when compared to 2008 figures that we though were dismal then. Retail advertising fell by more than 20 percent. Some of that is a cutback in spending, but some of it reflects efforts to reach the public directly or through other sources.

Our only way to ensure that we will recover with the economy will be to offer new value to business customers and develop a new relationship with them.

I see two primary reasons why some businesses will come to us (if we develop the expertise and the community connections that will help us succeed):

• They aren’t in the communication business, so they want to spend their time on their core business (remember Jeff Jarvis‘ advice: Do what you do best and link to the rest).
• If we succeed at the content aspects of the C3 approach, we should have a larger audience than businesses in our communities will be able to gather by themselves. And unlike the old days when all we offered was a mass audience (much of which each business customer had little interest in), we will be able to help businesses connect with exactly the customers who are most interested in their products and services. And we will have valuable data about the interests of the community and an ability to help businesses connect with the most likely customers.

As I explained in the C3 blueprint, I see us shifting from a model that sells eyeballs to businesses to a model that enables (and often conducts) the transaction for businesses. If our relationship with businesses is simply to sell advertising, we are just an expense line in their budgets. And we all know what every business does in hard times: We look for expenses to cut. If we are enabling or conducting transactions for businesses, we become part of their revenue stream and they will be seeking ways to do more business with us in good times and bad.

For more on how I see this relationship changing, and possibilities for new revenue streams in a recovering economy, check out these sections of the C3 blueprint:

• Revenue approach
• Driving
• Graduation
• Weddings
• Business connection services