Annual advertising revenue figures from the Newspaper Association of America underscore why the Digital First approach is important and urgent.
I won’t bother to analyze the figures in depth. Alan Mutter and Rick Edmonds did a thorough job of that.
Here’s what I did: I used the CPI Inflation Calculator to convert the annual print ad revenue figures from 2005 through 2011 into 2012 dollars. After adjusting for inflation, ad spending fell by 62 percent in six years: from $55 billion in 2005 ($47 billion before adjusting) to $21 billion last year.
Mutter’s headline, saying sales slid to the 1984 level, did not adjust for inflation. While the total dollars in ad sales ($24 billion, including digital sales) reached the 1984 level, that 1984 figure was $51 billion in 2012 dollars. If you adjust for inflation, newspaper ad sales last year fell to their level of 1954, the year I was born.
I’m not saying that inflation adjustment that far back is even relevant: I wonder how many items the Consumer Price Index had in common in 1954 and 2011. But I think it’s fair to say that newspapers have lost a lifetime’s growth in just six years. You don’t rebound from that. You build something new.
I’ve had a wonderful career, most of it in the years when newspaper advertising revenues were rising. But the future of print is pretty clear in these numbers. I’m glad I work at a company that’s pursuing the crossover point where the rise in digital ad sales will exceed the decline in print dollars. Growing digital sales aggressively and developing new revenue streams are the only paths to a prosperous future.
Correction: I originally posted these numbers in millions, not billions. Duh. It’s not that bleak.
I just did the back of the envelope check and found that between single copies, subscriptions, cable, movie tickets, internet access, and ‘consumer electronics’ all most all of which are used to access ‘advertising supported’ media … the reader/viewer/user is paying at least $370 billion annually to be exposed to $144 billion in advertising.
Worse for old media thinking, advertising did not grow all that much in 2011 (0.8% or eight tenths of one percent) and more startling is that ‘Internet Media’ advertising grew just 0.4%, or half the rate of total advertising growth. http://latimesblogs.latimes.com/entertainmentnewsbuzz/2012/03/us-advertising-spending-totaled-144-billion-in-2011.html
Where does this leave Digital First, and the investment required to deploy it?
Because virtually all advertising spending increases in one medium are accounted for by decreases in one or more other media, advertising will continue to be a challenging source of new revenue of any kind. This is especially true for the big fish, or formerly big fish in advertising. I’m thinking newspapers.
Now, direct from reader/viewer/user revenue is backed by a far larger pool of cash, and focusing on people willing to pay to access will inherently produce a far better service, which ironically advertisers will much prefer.
Would it be out of line to interpret Digital First as Digital Users First … probably not. Though Digital Subscriber Dollars First is quite another matter … and one that has yet to prove itself capable of sustaining the Digital experience. When that is proven, advertisers will come beating down the doors … because they won’t matter nearly so much. OK … advertisers beating down the doors is a fast fading memory I only hope to freshen.
Best wishes, Steve, on those new revenue streams. If the iPad is the poster for the post PC era, Digital Users First could well become the poster to the post advertising era.
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“You don’t rebound from that. You build something new.”
Perfect!
Actually…the same could be said for education, too.
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Spot on. Did you see this graph earlier this month? Your calculations are exact, and the decline is staggering.
http://www.poynter.org/latest-news/mediawire/165194/numbers-show-that-newspapers-are-indeed-doing-more-with-less/
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