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Aug 5 2009, 1:00 pm by Daniel Indiviglio
It's no secret that the current recession has hit media companies hard. It's not only consumer demand for their product that suffers -- advertisers are also cutting budgets. While this has affected some types of media more than others, advertising's contraction has been felt across the broad spectrum. But once the recession ends, where will advertisers go?
Of all the types of media, newspapers and magazines have probably been hurt the most. Their turmoil has not only been caused by the recession, but also by fewer subscribers who increasingly prefer to do their reading for free online. A prime example of the industry's troubles comes through Condé Nast. The New York Post today reports particularly bad times at the company:
After Condé Nast's ad-page tally last year fell 10.5 percent to 34,966 from the previous year, according to Media Industry Newsletter, the company behind mags like Vogue and Vanity Fair is expected to see the ad-page count fall more than 20 percent this year.
Through the numbers shown above, that 5,000 page ad loss would be a decrease of an additional 15% this year, after last year's 10.5% decrease. The firm has even hired an outside management-consulting firm McKinsey & Co. to help. (For an amusing imagining of McKinsey's thoughts check out The Atlantic's Jeffrey Goldberg's post from a few weeks ago.)
TV
Things aren't much better in television. A recent Wall Street Journal article provides an example of TV's troubles through its report on Disney's earnings. They own several TV networks, including the popular sports channel ESPN. WSJ says:
So while TV might not be hurting quite as badly as print media, it's still feeling the pain.
DVR
A part of TV's troubles come through the digital video recording systems like TIVO. They're gaining in popularity, allowing viewers to fast-forward through commercials. While that's great for viewers, it's terrible for the TV shows and networks that rely on revenue from the advertisements that can now be fast forwarded through. From the example above, ESPN should feel this effect even less than most stations. Of all the types of TV you can record, sports is among the least desirable, since people like watching sports live. And yet, ESPN's advertising is still suffering.
DVR should continue to gain popularity in the near-term. A recent Supreme Court decision cleared the way for getting rid of the boxes altogether, allowing cable subscribers to store their recorded TV shows remotely.
The Internet
The biggest threat to DVR in the long-term, however, is the internet. As new televisions continue to become more compatible with the internet, DVR will become less necessary, as people can simply enjoy the TV shows they missed online instead. TV station websites and others like Hulu have already begun streaming some shows.
An article from Multichannel News characterizes CBS's chief research officer David Pollack as having exactly that belief. The article says:
He further posited that the DVR is poised to go the way of the VCR as near-term technology advancements will make it simpler for consumers to hook their computer directly to their TV screens, allowing online video streams to be played on the biggest tubes at home. DVR will essentially be replaced by computers.
The Future
So what does it all mean? The internet is the future of advertising. I have always found it odd that advertisers are willing to pay so much more for ad space in a magazine than they do online. I can flip a page just as quickly as I can scroll past a banner. And the internet has a huge advantage over print since you don't have to be a subscriber to see the advertisement -- anyone casually surfing might stumble upon it.
The same can be said for TV versus the internet. I can fast forward through TV shows with a DVR or VCR. But most streaming content I've watched has short video clips that you can't fast forward through. As viewing of online content continues to grow, so that online audiences come closer in number to TV audiences, I will be shocked if online advertising revenue does not also increase dramatically.
The challenge, of course, is preventing the proliferation of software designed to avoid that online advertising, like the DVR does for TV. That's a technological barrier that media websites must overcome. I don't think that task is necessarily impossible, but I worry that, for every smart programmer the media industry hires to prevent such software, there will be a smarter hacker than can write more code to undo those preventative measures.
Still, the idea that such niche software can become widespread enough that the media industry's advertising efforts can be mostly neutralized seems doubtful. The majority of Americans are not computer savvy enough to visit hacker websites to download and install software to block legitimate ads. If I'm wrong, and most people do find a way to systematically eliminate commercials from online content, then advertising in entertainment will cease to exist. The only alternative that media will have under that circumstance will be subscriber fees or some other mechanism forcing users to pay for content.
As David Pollack is said to have asserted above, consumers overwhelmingly prefer ads over paying for content. So we might be better off just letting those commercials run, unless we'd rather pay for all the media we consume. As much as I love my DVR, I still find myself pausing recordings to run to the bathroom or grab a snack. Such errands could continue to occur in the future just like they did in the past -- during commercials. But now they'll be online, instead of on TV.
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Comments (7) mgoodfel August 5, 2009 1:18 PMAdvertising is changing. It used to be you just splashed your name and some appealing content-free images all over the place, and hoped for "brand awareness." Now, if I want something like a laptop, I go to the gadget review sites and see what they like. I comparison shop online before I buy, and I look at the technical specs and customer reviews.
This is more information than could ever fit in an ad, in any media. Banner advertising, TV commercials, magazine ads, all have no effect on my purchase. If Gizmodo doesn't like it, I'm not buying.
This means that advertiser supported media in general are going to be squeezed. Newspapers lost all those other services because they couldn't compete. Craigslist isn't just a free classifieds section, it's a better classifieds section. And review sites are a better form of advertising than uninformative banner ads.
Reply ed August 5, 2009 2:02 PMOne of the biggest problems facing media is the growth of media - providing many more outlets for ads, but decreasing the number of ads at any one outlet.
Take TV. At one time you had 3 networks, plus some independent stations in larger markets. How many cable, and even broadcast, channels are there today? Even within segments, you have growth of outlets. At one time the New York market had 3 early morning news outlets - broadcasting the network AM news shows with breaks for local coverage. Today there are 6. If an advertiser wants to reach that audience he has to choose among al those, or spend a fortune advertising on each.
The web, which for right now, is essentially a substitute for print media has opened up many, many more outlets for ads, but at a much lower per placement cost. An advertiser can choose to spend a lot of money for 1 placement in section 1 of the New York Times national edition and expect about 1 million impressions. However he can spread that same cost over hundreds of web outlets and hope for 2 or 3 million impressions.
I pity today's ad buyer - trying to figure out, among 10s or thousands of outlets, where to spend his budget.
Reply wiredog August 5, 2009 3:35 PMI have always found it odd that advertisers are willing to pay so much more for ad space in a magazine than they do online. The advertisers have a pretty good of who is reading the magazines (subscribers), and can thus target the ads better. Not so much with free online publications.
The majority of Americans are not computer savvy enough to visit hacker websites to download and install software to block legitimate ads. For Mozilla FireFox you can get AdBlock+ from the Mozilla website the same way you do any plugin.
Reply Daniel Indiviglio (Replying to: wiredog) August 5, 2009 3:45 PMPoint 1: That's true, but beginning to change I think. Enhanced tracking software is beginning to do more to track IP addresses, so at least they understand regional differences. I've also noticed that media websites are increasingly trying to understand more about their readers through polling. I'm not sure why a magazine would be able to be more interactive than a website in determining who its readers are, other than zip code, which IP address may one day replicate.
Point 2: Right now Mozilla's market share is only around 22% of web browsers. I'd imagine the proportion of those users that have downloaded AdBlock means still fewer people than 22% are blocking ads. So that probably suports my claim that that "the majority of Americans are not computer savvy enough" to block ads. Also, AdBlock doesn't eliminate video streaming ads. Those might be harder to eliminate than banners.
Reply ed (Replying to: Daniel Indiviglio) August 5, 2009 4:02 PMWeb advertising is no harder to direct to direct than any other. If you want to sell stuff for Apple computers, advertise in macworld.com. If you want to reach a college educated audience interested in current affairs, advertise on theatlantic.com. If you want to reach total idiots, advertise on dailykos.com.
The problem is that there are so MANY possible outlets.
Reply Bob Montgomery August 5, 2009 4:26 PM Of all the types of TV you can record, sports is among the least desirable, since people like watching sports live. Maybe...I don't have DVR, but one of my co-workers and my father-in-law, both die-hard sports fans, do. And they both routinely record sporting events and then wait 30-45 minutes (after the start of the game) to begin watching. Then they can fast-forward through slow spots and commercials but wind up finishing the game at the same time as if they had watched the whole thing live.
Reply Daniel Indiviglio (Replying to: Bob Montgomery) August 5, 2009 4:59 PMYeah... I've done this too a few times, but I still think, of all the kinds of TV, sports is probably the best to see live, because you don't want to be behind on the news or accidentally see the score and spoil the enjoyment of watching it. Reality TV has a similar live appeal, but I think for sports the live aspect is even more relevant.
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