Transitioning to the New Equilibrium

Following up on yesterday's post, it is not hard to see an upcoming rebalancing of ad spend per media, with even more significant dollars shifting from print to online and mobile.  To review, where advertisers spend their budgets to place their messages is not yet proportional to where consumers are spending their time.  I assume this was more or less in balance for years between print and broadcast channels, but overall advertisers have been slower to shift habits than consumers from print to online.

There are surely many reasons for this, including uncertainties and undefined opportunities of an emerging market, risk tolerance, and general inertia.  Online and mobile (especially) ad markets are just not as developed as print.

But let's play out this scenario and assume more perfect market conditions.

Assumption 1: Consumption habits stay roughly the same for the next few years.  (Just to keep this easy, but we know mobile will increase and print will likely continue to decrease.)

Assumption 2: Total ad spend stays the same, or at least we are playing a zero sum game.

Assumption 3: Advertising adjusts to match where consumers are spending some time.

Conclusion 1: Print media would see more than half of its advertising disappear.  A lot of it would reappear in mobile media and some to online.  I'll call this the normalization of ad spend.

But that still might not be the right equilibrium.  I half joked when I mentioned that half of traditional advertising is wasted, per the infamous quote.  Well, is that untrue?  A fair amount of print media is still produced for a broad, if not mass audience.  The same can be said about broadcast.  But the Internet (and mobile) platforms naturally create more personal, and therefore more targeted, content and audiences.  It is reasonable to believe that once the ad markets develop, the Internet and mobile media will be more effective on average than print.  So...

Conclusion 2: The new equilibrium will see an even further drop in ad spend to print media to the benefit of Internet and mobile.  Is it unreasonable to imagine this scenario where ad spend in print drops to a sixth of what it is today?

Of course, this implies disaster for print publishers.  In this scenario only the ones that are truly niche and targeted would retain an audience useful for advertisers.  But in reality almost every print publisher today is in the midst of transitioning audience to online platforms and products in hopes of serving them in targeted ways so that they would simply experience this shift internally from one platform to another.  But even if they do successfully transfer their audience online, they can't just publish as a digital version of a print product, they have to compete against the millions of other websites, aggregators, and personally targeted content available to consumers.

Thankfully for transitioning publishers, these markets are far from perfect so this scenario is not going to play out overnight.  There is time and hope.

(Note: my data with calculations and estimates are available here.)

UPDATE: I am not the only one who has drawn the same conclusion, The Washington Post has as well and it is getting a lot of attention.  I have had the 2009 version of this chart on my wall for two years as a conversation starter,  so I have to say I am surprised it took this long for some one else to notice the same thing and make noise.

The New Equilibrium of Subsidizing Media

Advertising spending is expected to significantly grow this year, according to a report by eMarketer.  That is great for media--both producers of and consumers of.  That is in the aggregate. Within categories we are looking at continued, permanent realignment.


The other headline within the report is that 2012 will be the first year that total online ad spend will surpass print ad spend.  Of course, that is not surprising as innovation is rapidly occurring in digital media--still on the web and even faster with all of the mobile and tablet device development.  And consumers are adopting, flocking to, and loving these new ways of consuming content.  The only headlines about print are seemingly about shrinking circulation and attempts by publishers to switch their readerships to online before it is too late and they are lost to new digital competitors.

This also has been forecasted.  In Mary Meeker's online trends presentation from 2010, there was an ominous and unavoidable slide that showed the time spent per media by consumers against the ad spend by media by advertisers.  eMarketer's updated report from December 2011 shows the continuation of the trend. The obvious conclusion is that advertisers are still spending a disproportionate amount on print media compared to where their audience is.  And given the old saying that half of mass advertising is wasted, and online advertising at least promises a more targeted approach, it is reasonable to expect the equilibrium of ads to consumption should actually have a higher digital spend proportionally at the expense of print.  So 2012 may simply be the inflection point.

So the growth of advertising, and therefore the subsidization of media growth is a great thing.  Media is not dead. Even journalism is not dead.  Money is out there for life and growth, it just won't be going to the same balance of players as before.  As a consumer, I'm fine with this.  As a traditional media participant, this is the serious challenge and new reality.

Unsupported Device: Exclusively Packaging News

Although it is not unprecedented, I was momentarily taken aback when I followed a link to The Economist Group's new election site and was told that "It looks like you're trying to access Electionism from an unsupported device." The funny thing is, I was using a newish PC laptop running the latest Firefox browser.

The reason, of course, is that this is a new tablet app, and because it is a web app (designed in HTML5 and avoiding Apple's App Store) it has a URL, but is not designed for non-tablet browsers.  I am sure there are other examples, and there are surely many more examples to come.

The interesting aspect here is how to look at the product.  Is it content?  Or just packaging of content?  Without spending much time with it, I assume it is the latter.  Based on my quick sample, most if not all of the content comprising the site is available elsewhere (sources include The Economist, CQ Roll Call, and twitter feeds) and this is simply a new way to package it together and design the UI for slick tablet navigation.  But if in fact there is unique content, or if the combination created in this environment is compelling enough to tell a unique story, what does it mean that the publisher is excluding the majority of its potential audience?

It might not mean much.  It is a reward for tablet adopters, who are probably among their most loyal customer segments, and this platform gives them an opportunity to experiment and innovate, which we all know publishers need to do more.  And with limited resources there are trade offs of where to spend development energy and dollars, so cross-platform products are not always feasible.  There is also no special advertising or paywalls as of today, so the product does not have a price for consumers or a revenue stream for the business.  It might just be a case of a new platform allowing for a new package of content given different consumption habits of tablet users.

Coincidentally, today also saw the news that The Daily will soon be available on some Android devices.  While it will no longer be limited only to the iPad, it will still only be available to consumers with tablets, which is a very small slice of the total news market, especially for The Daily, which is a more general interest publication, but is creating a lot of original content exclusively for the product.  Again it is a strategic bet on the market by Rupert Murdoch, that while I think it has a slim chance of succeeding, it just might work if they innovate on story telling and packaging and have good enough content to win readers over as they adopt the new devices and see that their current news providers are a step behind.  Of course, other publications already producing similar content could quickly catch up by learning how to package and adapt storytelling for new platforms and audiences with changing consumption habits.  We'll see who wins.  If we look back 10-15 years we can see the rise of CNN.com and Yahoo news as news destinations over newspapers online that were slow to learn how to produce and package content differently for new platforms.