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Digital analysis

Future of online advertising lies in collapse of print

It may seem negative to define the growth of a medium against the collapse of another, but here's why.
Future of online advertising lies in collapse of printFor most media organisations, online advertising* currently accounts for less than 20% of the advertising pie, with print still taking the lion's share. My 20% estimate is high. A world-wide, median figure is more like 15% of ad revenue.

The question is: why are advertisers still choosing a medium that is under severe pressure as opposed to competing media that deliver a better service and (mostly) bigger reader numbers?

Here are some reasons:

  1. Institutional bias in media companies: the company has been doing it that way for decades. Managers and employees have an innate bias to push the thing they know and push the thing that makes them revenue and meets their targets in the short term — even though it may not be in the company's long-term interest. It's where the revenue is, although not the profit.

  2. Institutional bias in advertising industry: the same goes for advertisers and advertising agencies. You'll find the same institutional and arguably, cultural, bias directed towards certain media. You'll often hear excuses such as Internet penetration and low click-through rates as an excuse not to go online. You hear other excuses about mobile, like it's “too early”.

  3. Online advertising still crude: Online advertising is by far superior to many other media in terms of measurability, targeting and flexibility, yet it's woefully crude. There's a lack of investment and innovation in the online advertising model and industry. It would be investment that aims to transform online advertising into a medium that is creative, properly targeted, properly cross-platform, and intelligently geared for multimedia.

Why is this? Because traditional media networks, from the buyers to the sellers to the advertisers, are still pushing money through traditional channels — even though it may not necessarily translate into best value for the advertiser or good profit for the media owner.

Innovation is slow

So, innovation in the media sector is slow. Innovation is left to companies outside the traditional networks. Companies such as Google are left to innovate. (And we should be saying: “Thank goodness Google bought Double Click. Maybe we'll see a shakeup here.”)

So how is this cycle going to be broken? Well, it lies in the cost structure** of a newspaper. Despite the gloom, many newspapers are still raking in advertising money and are seeing growing circulation numbers. Where they are actually suffering is cost.

The costs to produce a newspaper and to print advertising are out of control. When these costs point to bankruptcy — the institutional bias will be broken.

Imagine a print sales force of 30-strong being told one day: “You guys must only focus on selling on our (much bigger) website. Start hustling.” Do you think that online advertising sales would remain a mere 10% of print sales? I think not.

Every little scrap of that website, from banners to sponsors to commercial features, would be exploited. New models, nooks and crannies would be found on which to place an advertiser. Creatives would blossom as agencies demand more. Sales agents would fight for the online property and they'd tell their clients that this is where things are headed, and this time they'd really believe what they say. They'd crow about how this is the future — and then say: sign on the dotted line.

Business is content

Media companies won't care whether its offline or online or in the great cloud. They're making a killing out of their content on a variety of platforms. Their business is content; their business is attracting an audience to that content, and monetising that content. It's just paper. Get over it.

*Desktop web, mobile phone or whatever digital device connected to the Internet.

**This differs from company to company. Newspapers playing in target markets of high Internet penetration will suffer more than those playing in emerging markets of low Internet penetration. In fact, emerging market papers should be excluded from these claims as they operate in a market that's still lucrative. Dailies will suffer more than weeklies. Weeklies have more sustainable cost structures.

Adapted from original blog post published 30 April 2009.
    
 

About Matthew Buckland

Matthew Buckland is GM of Publishing at 24.com. He's the former boss of the M&G Online and co-founder of blog aggregator Amatomu.com and group editorial blog Thought Leader. He has spoken locally and around the world on online media issues, including New York, London, Amsterdam, Germany, Dublin and Kenya. He's a prominent blogger, blogging regularly at www.matthewbuckland.com on new media, Web 2.0 and technology issues.
metatron
I agree.-
And once the numbers really start to decline it will have a snowball effect here too.

Why dirty your fingers with messy print paper when you can access the same information for free and on the go?

The large bulk of the advertising came from realestate and motor industries, no longer the case, these industries have all turned to online advertising and soon mobile.
Posted on 26 May 2009 14:39
4Line
I hope it does-
I for one hope it does. My entire business is online
Posted on 26 May 2009 15:57
myphotographer
hi k-
more people in sa have cellphones than computers and internet access via gprs means that things will continue to go this way, more rapidly too as technology increases and phone prices decrease with internet access being the norm.

not 50 years, more like 5 years max,

you would do well to read this

http://communities-dominate.blogs.com/brands/2009/02/bigger-than-tv-bigger-than-the-internet-understand-mobile-of-4-billion-users.html


and also google .mobi

did you read the amount of impressions that soccerladuma.mobi received?
Posted on 26 May 2009 15:59
Colin
Yes it will-
For sure the shift will continue. Thinking that something will not happen in 50 years just goes to prove Darwin correct!
Posted on 26 May 2009 15:28
Alan Hammond
Some major publishers can't sell online advertising-
Have a look at some online-only publishers like mybroadband.co.za and moneyweb.co.za (yeah I know they have radio as well). See how many ads they have (lots) compared to Businessday.co.za (none).
Business Day manages to sell some advertising on the their email newsletters but I can only see house ads on their site!
Clearly the advertisers are out there as they are advertising on the other sites.
As Matt says, until old fashioned media companies get their sales teams focused on online things are going to change very slowly.
Posted on 28 May 2009 12:27
rory
place for all-
The writer puts forward a compelling case for online and only an idiot would not see the growth in online. However to believe that print will disappear is wishful thinking simply because some people like the detailed content as opposed to the brief content of online. As a publisher myself I make use of both media and it works exceptionally well with the reader/user appreciating the role of each medium and using it accordingly.

They, in fact, compliment each other. QED!
Posted on 5 Jun 2009 14:02
london digital native
get ready for it, it will happen-
It's not about singling out online as a medium, but rather how effective it is as part of multi-media stacking, and what ROI it can deliver. It is about big publishers starting to get their sales reps to start thinking that they are selling content, rather than selling magazines, newspapers or a website. It's more about selling the audience, all the insights of that audience and how it engages with content - no medium does this better or more targetted than online! It wil only get better once the number of uniques increase so that advertisers can start to use behavioural targetting and other performance tools. Most big FMCG advertisers in SA are global ones, and their international counterparts are increasing their online spends, without radically changing the budgets invested in other media channels, SA will follow! Content owners and their sales forces should get ready for it!
Posted on 2 Aug 2009 18:21
richard whittingdale
then we must do something proactive-
agree!!!
Posted on 3 Aug 2009 08:51
mdm
it's elementary-
Newspapers allow advertisers to reach a target market. That's why newspaper subs are so important - u can tell your advertisers the names, addresses and LSMs of your subscribers.
As yet, the interweb can't compete with that... Most advertisers want to reach a specific audience... internet advertising right now is very much "spray and pray".
Is waar swaar...
And the truth of the matter is it takes money to do good journalism... it also strikes me as somewhat churlish to pray for the death of something that currently pays your salary ... and provides u with content.
Posted on 2 Oct 2009 19:35
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