Archive for the ‘Advertising’ Category

Possibly the silliest notion ever perpetrated on the Internet is that “information wants to be free.” First, information is not sentient and can’t “want” anything. Secondly, it is created a a cost — often a very significant cost. The reporters, analysts, artists and others have to eat. If we’re not willing to pay for it, we’ll get less of it.

This is the reality behind two interesting articles. One, published in American Journalism Review, documents the decline in reporters covering important federal agencies since 2003. The other is Poynter media business analyst Rick Edmonds’ update on the various experiments that are about to launch for charging for online news.

The time when we thought advertising would fund quality news coverage has come and gone. It just didn’t work out that way. And now, we face the reality that when there’s no money for quality news coverage, we get less of it. Information isn’t free and never was.

The new Newspaper Association of America’s yearbook is out. This chart shows the decline in classified advertising from 1997 to 2009. This used to be a lifeblood for newspapers. NAA report.

Knowing where your ad dollars go, what they buy, and what kind of results you get is a good thing, right?

Yes — if you’re an advertiser. But if you’re selling the ads? Not so much, as Marketing Pilgrim blogger Joe Hall points out. He says that the owners of Hulu, for example, are still making most of their money on traditional advertising, even though Hulu has more viewers than Time Warner Cable.

His logic? Buyers of traditional media are buying blind, not knowing what works and what doesn’t. Online ads, by contrast, now permit us to track ROI, and conversions in ways we never dreamed of a few years ago.

He loses me, however, at the point where you have to ask why knowing what you’re buying is a bad thing. Short-term, what he’s saying is that online advertising suffers because online advertisers are not preying on stupid advertisers who insist on wasting money. But longer term, it’s hard to believe that better measurement doesn’t attract more ad dollars. Doing things right is always a better strategy.

Besides, it’s not like the online advertising business doesn’t have its share of smoke-and-mirrors chicanery.

Even as I noted the improving financial results of publicly held media companies last quarter, it was clear that the black ink was produced by cost cuts, not improved revenues.

Remember: Newspapers get money from two sources – readers and advertisers. And the advertisers are continuing to bail, with ad revenues down 29% on average through the first half of the year, according to the Newspaper Association of America.

What only time will tell is how much of that loss is due to the recession and how much is part of the permanent, secular shift to other advertising media.

Newspapers have already lost much of their advertising for real estate and jobs. Now they could even lose the movie listings.

For a couple of years now, movie theater chains have been directing customers to web sites like Flixster, Fandango and Movietickets.com for show times. And now, with a majority of their customers getting their movie info from the web rather than the paper, they’re beginning to cut back or eliminate their newspaper ads.

So far, the Newspaper Association of America says it’s not a big problem, but losing the movie ads could hurt circulation as well, because local movie times are one reason some people buy the newspaper.

In an Editor & Publisher article on the trend, an official from AMC is quoted saying that “so far we’ve seen no impact on attendance” where the movie chain has cut back on newspaper advertising.

Even on the surface, newspaper and magazine ad revenues are grim — down 7.9% in 2007 and 16.7% in 2008. And we’re probably looking at declines of 30% for 2009. While some of that is cyclical, much of it is permanent. Classifieds that have gone to Monster, Craigslist, Ebay and real estate sites aren’t coming back. Advertisers have formed new habits.

Columbia Journalism Review’s Ray Chittum spent some time with the Newspaper Association of America numbers I wrote about the other day and adjusted them for inflation. Once that’s taken into account, you have to go all the way back to 1965 to find a year when things were so lousy for publications. You can read Chittum’s article here.

For those who do any newspaper advertising, the Newspaper Association of America’s annual reports on readership trends are a gold mine. It’s important to keep in mind that the NAA’s goal is to shill the industry, so remember the data may be skewed to make member papers look good.

One number from the 2008 report really jumped off the page at me: Higher-income readers are less likely to see ads than those with lower incomes. Among daily newspaper readers with household incomes under $30,000, 66 read sections that carry advertising. For those with incomes over $75,000, only 57% read sections with advertising. That’s a big spread.

As we’ve seen in the past few weeks, several of the major newspaper chains have been turning profits. But McClatchy — which is the second largest newspaper publisher in the country as measured by circulation — has nixed the idea of un-freezing the salaries of its employees.

The reason? The cost cuts have produced the profits. Circulation and ad revenue continue to skid at alarming rates, and the newspapers have had to face some unpleasant realities. In addition to freezing salaries, McClatchy has laid off about one-third of its work force and required remaining employees to take unpaid furloughs.

McClatchy’s 32 dailies include the Sacramento Bee, Kansas City Star and Miami Herald. The chain also owns approximately 50 weeklies.

Advertising Age’s Judann Pollack does a nice job of summarizing the current advertising marketplace, arguing that while ad spending is probably bottoming out, we can’t expect a quick reversal. Advertisers are taking advantage of falling online ad pricing, but TV is taking hard hits at all levels, national and local. And advertisers are demanding more accountability and better metrics. It isn’t just a current market condition, but a new way of life, says Pollack.

As we’ve seen in the past few weeks, big newspaper chains have been reporting some surprising profits, and Borrell Associates — which keeps tabs on the industry from an investor standpoint — says there’s more good news to come as the economy turns the corner.

The firm projects losses in 2009, a 2.4% increase in 2010, and five years of modestly rising income (a total of 8.7%). But the forecast doesn’t predict a return to the good ol’ days – even in five years, total income will be below 2008 levels, says Borrell.