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.