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Plus Report - By Thomas Baekdal - December 2011

The Non-Future of Advertising

Even if digital advertising budgets where to rise 500%, it would still not cover the cost of traditional media.

There is an ongoing discussion about the future of advertising. On one hand we have print advertising, which is in decline - in some places drastically. Many newspaper executives apparently believe the "worst is over" and that while it will continue to decline for 2-3 more years, it will eventually stabilize.

It won't...

Then we have online advertising, which is increasing. This sounds very good, but it isn't.

In this article, I am going to explain why advertising doesn't have a future for publishers. Partly because it has already passed the point of no return; the media just hasn't realized it yet.

Print advertising

Every single newspaper or magazine relies on advertising first to stay in business. Sure, they also have subscriptions and newsstand sales, but advertising makes up the bulk of the revenue.

For the New York Times, for instance, advertising makes up 60% of the total revenue (subscriptions/single copy sales make up 31%).

The problem of course is that print advertising revenue has declined dramatically over the past couple of years. The New York Times advertising revenue has dropped from $1.7 billion to $1.3 billion from 2008 to 2010 (25%). Vogue has dropped 48% from 2009 to 2011.

Of course it is not all bad. The Financial Times says that advertising decline has flat lined for most of 2011 after a catastrophic summer of 2010.

So ...maybe it will stabilize? Right? ....Please?

I'm sorry. It is too late for that, and here is why.

Who is buying the advertising? It's the brands. What do brands care about? Well, if you ask the CEO he would say *sales!!*. But if you ask the person actually buying the ads, the CMOs (marketing executives), most of them have no clue. They still believe that exposure equals sales.

For the past 100 years, marketing executives have been living a lie. They believe that when they buy a full page ad in a popular magazine, the numbers they are given are actually something useful.

 
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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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