A little while ago another newspaper group filed for bankruptcy. Freedom Communications, which runs the Orange County Register and a collection of 100 more newspapers across the country, joined Tribune Co. (operators of the other big local paper – The LA Times) and 4 other newspapers in bankruptcy court.
The problem is declining advertising revenue. The auto industry, one of the biggest buyers of newspaper ads, is in the tank. Craigslist et al have devastated the classified monopolies that provided huge profit margins for newspapers in days gone by.
This trend is not restricted to newspapers. TV is seeing the problem as well. According to Jack Myers, an industry consultant:
“2010 advertising spending is heading toward record-setting declines of 13% to 15% in 2009, according to the new Jack Myers Media Business Report forecast due to be released to subscribers September 14.”
And the trend is not just an offline phenomenon, online the price advertisers are willing to pay for impressions is dropping as well. Consider the following from the media focused MultiTasker
Cost-per-thousand ad impressions for online publishers are generally off about 20%, according to several people on both the buying and selling side, and sell-through rates are dropping. And where publishers used to unload 60% of their inventory, some are now able to sell only 30%.
What we are seeing is the law of supply and demand at work. The amount of available advertising space is growing fast and much faster than the demand. When supply goes up faster than demand that means prices will drop. And prices for impressions are dropping fast.
That means that anyone who tries to make a living by selling advertising impressions is going to feel the hurt. Offline, online – it doesn’t matter. Impression based advertising prices will continue to drop fast for just about everyone.
There will be exceptions. Big events will command good prices for impressions and may even do better. There is only one Super Bowl, one Academy Awards, etc. These will be situations where what is being bought is actually getting scarcer. Huge audiences all gather in one place at one time. This is what big TV shows used to be able to do. Now, that is the exception, and therefore will will likely see impression pricing rise for this shrinking segment.
Some will also point to Google as an exception. But in fact Google doesn’t make its money by selling advertising impressions, they make their money from people who pay them for potential leads (people who click on the ads). For the most part, you don’t pay for impressions on Google, you pay for clicks. In fact, Google won’t even let you get huge amounts of impressions without your ad being highly relevant to topic. Just do a search on any celebrity and for the most part you won’t see any ads, with the exception of Bing ads (Microsoft must has given Google a lot of money to promote Bing.) No, Google’s revenues are not driven by the economics of impressions, their revenues are driven by the economics of lead generation.
It is time for every media company to figure out life beyond impression based advertising. If you think you are going to make your living by selling advertising impressions, stop and think of something else.
I believe we are seeing the collapse of an media era driven by the economics of impressions and the emergence of an era that will be based on the economics of community.
Media is a beautiful social object. We love to watch, listen, talk about it, play with it. Media has the power to draw us together, and that can be used to create community.
We can and should recast the discussion from economics of impressions to the economics of communities. And what are the economics of communities? They are micro-economies where trade, commerce and personal interaction are all intermingled with each other.
I’m not talking about clicking on someone’s purse in a web show so you can buy it (although that might work), I’m talking about create real economies where consumers can trade with other consumers and trade with the media creators. Who knows what the audience will buy or sell. We won’t know until we see it. Our job is to find ways to enable it.
Here are 7 steps I think every publisher should be taking.
These are my thoughts, what about yours? Is the future hopeless for media? Do you think media companies can make money in the future? What other steps should publishers be taking.