Is Advertising Finished?

Does anyone know what this is?

The Pew Research Center’s Project for Excellence in Journalism recently revealed that as newspapers transit from print to online digital, ad revenues for online, which it was once hoped would come to supplant ad revenues from print, aren’t.  That is, they are not providing newspapers with the income that they need to stay in business.

In 2011, according to Newspaper Association of America statistics, online advertising was up $207 million industry-wide compared to 2010. Print advertising, though, was down $2.1 billion. So the print losses were greater than the digital gains by 10 to 1.

What happened?

Online advertising was once considered the Holy Grail of the digital revolution. It was going to solve all the problems of revenue.  But, perhaps like the Holy Grail, it simply does not exist.

Looking at it objectively, advertising is really a remnant of the old linear world.

In a world of passive experience (ie, TV, newspapers, magazines or radio – we make it, you watch it or read it), advertising made sense.  You are stuck with us in this linear environment, so every once in a while we are going to interrupt your stream of content with an ad.  We learned to tolerate them.  And merchants were willing to fork out the money to pay for the ads, on the premise that they drove business.  And maybe they did.

But that was the linear world.

The web introduced us to the non-linear online world.

It was and is a very different place.

Think about an ad.

The object of an ad is to motivate a person to see the ad, then, get in their car, drive to the store and buy the product.  That’s a lot of work.  And a lot of chance of ‘slippage’.  Even if you read the ad or see it, and even if you like the product, what are the odds that you then go out and buy it?  Out of 100 people who see an ad in a newspaper or online, what percentage do you think actually then go and buy the product?  Maybe, 1%?  Maybe a lot less than 1%? Probably.  How many ads have you seen for Maytag Washing Machines in the past 10 years? How many Maytag washing machines have you bought?  Exactly my point. It is not the most cost-effective way to drive the sale of your product.  But in the world of linear newspapers and TV, it was all there was.

The web changed all that.

Now, suddenly, you could ‘click and buy’ the product right then and there, and have it shipped to you directly.

Ever hear of Amazon?

Exactly.

A pure non-linear web based company.

Imagine now if when you went to Amazon.com all you got were a bunch of ads for the stuff you could buy from Amazon, but then you had to get in the car and drie to the Amazon Store.  Would you do it?  Probably not.

There is a reason Amazon had $68 billion in revenue last year.

It works on the web.  You see it and you buy it. It cuts out the store.

It also cuts out the advertising.

When you think about it, the whole notion of advertising online really doesn’t make any sense. Not in a world in which you can click and buy on the spot.

So back to our failing newspapers and online magazines (poor Time and Newsweek!).  They were all based on the premise of advertising revenue.  But there is no advertising revenue…. because advertising, in an onilne interactive world, really doesn’t make sense.  It’s a left-over from the linear print world.

But newspapers and magazine companies keep flailing a dead horse.

Wouldn’t it make more sense for online newspapers to simpy get into the business of immediate online transactions?

A few have done it already. Note Shop Harpers Bazaar, the online ‘store’ for the fashion magazine.

The Daily Mail (UK), has also gotten into this business. When you pass the cursor over photos on their ‘newspaper’ website, you are given the option of buying the clothing they are wearing.

So why not a “Shop NY Times” or a Shop Time Magazine… while there still is one?

Copyright Michael Rosenblum 2013