Why Newspaper Advertising Prospers While Readership Declines

Jupiter Research analyst Niki Scevak, who covers advertising and media forecasting, seems perplex at how expenditures on newspaper advertising can grow while newspaper readership declines:

    A post by fellow Jup blogger David Card got me thinking more about advertising’s supposed axiom: the dollars follow the consumer. The reality, as we know, is they don’t. Measurement has a little bit to do with it (it doesn’t matter if the Internet has a great measurement system if TV et al don’t have similarly great systems). But ultimately the responsibility rests with the marketers and the agencies they employ. With history as a guide, they have done an increasingly terrible job. IT managers never get fired for buying IBM, and ad agencies never get fired for recommending TV. People shrug their shoulders and say it will be different in 20 years, but I am not so sure.

    Let’s take Newspapers as an example. Arnold Kling and Vin Crosbie both have penned thoughtful pieces that every media type should read, but they both have overly pessimistic conclusions. Vin points to a particularly interesting data point from the Newspaper Association of America that shows that the percentage of Americans who read a newspaper daily has decreased from 81% in 1964 to 58% in 1997. That means that the number of readers grew from 95m to only 112m. But, advertising spending on newspapers grew from $4.1bn to $41.3bn over the same period. Go figure.

    Increasing your readers by one fifth but growing your advertising ten fold? What a way to ‘die a slow death’.

As a matter of fact, it’s death by freezing. To understand what advertisers are doing, imagine that you’re standing on the ice of the Arctic Sea when suddenly that ice beneath you begins fracturing into pieces. Wouldn’t you jump onto the largest remaining block of ice that you could find?

Advertisers’ media environment used to consist of large masses: TV, the local newspaper, and general interest periodicals (Life, Look, Colliers, and The Saturday Evening Post). Then advances in the evolution of media technologies caused that environment to segment into myriad specific interest blocks — hundreds of speciality magazines and special interest TV channels and millions of special interest Web sites — almost all of which are popular but have markedly diminished the readership of newspapers and the viewership of traditional TV networks.

Faced with that ‘fracturing of audiences’, where have advertising agencies recommend that advertisers land? On TV and newspapers, which have shrunk but still remain relatively larger than each of the special interest segments. [Niki notes that they grew from 95m to 112m readers, a growth of nearly one-fifth (17.9 percent), but the countervailing fact is that the overall (readers and non-readers) population nearly doubled during that time.]

As Niki mentions, no one at the ad agencies ever got fired for recommending TV — or newspapers. Thus has advertising expenditures on newspapers increased by a magnitude while newspaper readership shrunk from 81 percent to 58 percent. Moreover, that increase in ad revenues has made newspaper publishers complacent and helped mask their publications’ readership problems.

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