The holidays are here and as business activities slow down momentarily it is a good time to reflect on things we take for granted. I’d like to spend a little time thinking through the trends in print advertising in this Blog entry, as this topic has become a hotbed of conversations lately. Those advocating the new digital world enjoy forecasting the imminent demise of print as they point to the struggling newspaper and magazine industry. Print-based companies say print advertising remains the most effective way of communicating to consumers as they point to studies that show that consumers heavily rely on this resource to plan their shopping. Which is true? Let’s look as some data on this issue to help us make objective decisions regarding the best approach for planning advertising and promotional events.
In anticipation of the impact of the recession most companies have reduced operating costs aggressively and advertising budgets were not spared the scalpel. A recent article in the Los Angeles Times cited that newspaper, magazine, radio and outdoor media ad spending was down 24%, 25%, 21% and 15% in the first half of 2009. These numbers are large and invite a number of interpretations into ad spending trends in traditional media. The article goes on to say that the two growth areas in ad spending were in Internet advertising (no surprise here) and (drum roll please) newspaper insert advertising; up 6.5% and 4.6% respectively. While ad spending in digital media continues to grow it seems that the media that retailers have traditionally relied on is doing just fine.
As for whether newspapers will disappear over the next few years an interesting commentary by Dan Kennedy points out that the typical newspaper still posts gross profits of between 10% and 20%; a respectable figure. He adds that most major newspapers, such as the Tribune, have amassed large debts during the consolidation of the Newspaper industry that can’t be serviced by the recent decline in ad revenues. He posits, however, that most newspapers will survive by returning to their roots of concentrating on local and regional issues and leaving the expense of global news coverage to news services, such as AP and Reuters and modifying other aspects of their business model.
While the recent decline in print advertising spending has stabilized and newspapers are likely to be around for the foreseeable future, retailers should not ignore the long-term trends in advertising spending. An ad spending analysis completed by the Newspaper Association of America shows that print ad spending has been stalled or been in decline for several years while on-line ad spending has generally been increasing over the past 5 years. This is a real trend that retailers need to be aware of.
Upon final reflection, it appears that if you disinvest in print advertising prematurely you may do so at your peril and if you ignore on-line advertising you’ll lose revenues from the fastest growing channel. The conclusion seems to be that retailers should start planning to make sure their business processes and systems support advertising across all channels and do so without breaking the ad budget. That is, plan to do more with less. We will explore how to do more with less in future Blog entries.