…is due to advertising moving online, according to Cringely.
Okay, that’s not exactly an original idea. What I found interesting is his assumption that overall advertising revenue will shrink because of digital media and better feedback:
According to Forrester Research, online advertising totals only about five percent of the $400 billion spent on advertising of all types each year in the U.S., yet online consumption takes 30 percent of the media consumption time in most households. This is an interesting statistic that is generally interpreted to mean that the online ad market will eventually grow to $120 billion.
I don’t think so.
If this was the case, it would be a simple matter for print publishers to abandon paper and continue to grow as all-electronic media, but it doesn’t work that way.
Here’s a part of the problem that has been for the most part missed by media and business analysts: A website is not really an electronic magazine. It can contain all the stories of its print equivalent, but IT CAN’T CARRY AS MANY ADS.
For magazines to qualify in the U.S. for shipping by Second Class Mail, they must have a measured advertising-to-editorial space ratio of no greater than 75 percent. Second Class Mail is the difference between life and death for a print magazine, and to qualify for it, they carefully manage that ad-to-edit ratio so that just slightly less than three times as much space is taken for ads as for stories.
Now compare this to the edit-to-ad ratio for most web pages. The densest web page will have one banner ad at the top, eight to 10 Google ads down the right side, and maybe another Google ad or two at the bottom. That sounds like a lot, but on a strict real estate basis, it is very hard to exceed an ad-to-edit ratio of 50 percent, and most web pages have three times as much editorial content as ad space – the exact reciprocal of the experience with paper publications.
While this may not seem like a critical point, it is one, because it means that there is no way a print publisher can switch to all on-line without shrinking in just about every respect. Revenue drops because of fewer ads. You can make some of that up by simply producing more pages of content, but there is a limit to that effect. Ultimately, production and editorial standards falter under smaller budgets and what was once glamorous becomes just another job.
But wait, there’s more!
Back in 1994, I proposed to my employer at the time that we start a strictly online publication to cover just Microsoft. We called the e-magazine MicroSquish and took it so far as to make a dummy issue and do some very interesting market research. The World Wide Web was only a couple years old at the time, and I was unconvinced that it presented a suitable delivery platform in an era of dial-up Internet accounts and 2400 bps modems. So MicroSquish was conceived as a downloadable publication to be distributed in the new PDF format. It looked just like a print magazine, right down to the 75 percent ad-edit ratio. And just to be cool, we built into the technology the ability to report back data from readers. We could not only track who read each issue, but how many times it was read and which parts. We figured this data of who read what and in what order would be very useful to advertisers and ad agencies. But we were wrong.
Ad agencies 12 to 13 years ago didn’t want to know whether or not their ads had actually been read, they told us. This was simply because if an advertiser discovered that few, if any, people were actually reading their modem ad on page 113, they might just pull the ad and save their money. The entire ability to sell an ad-edit ratio of 75 percent was based on this deliberate ignorance. Ad agencies and publications alike knew that many – even most – advertising dollars were simply wasted, but it wasn’t in their interest to admit that, so they didn’t.
Contrast this to pay-per-click, which is brutally honest, where every successful ad has efficacy and advertisers have a pretty darned good idea what they are getting for their money. This reality is precisely why magazines, newspapers, and television are losing revenue to pay-per-click. It is a trend that is likely to continue, and can only result in a degradation of production standards on the print side to match the reduced revenue potential of the online business, where BS gives way to measurable, though impoverished, results.
It is not a pretty picture. More pay-per-click means more online content but ultimately less money for producing that content. Print publications fade from sight or continue primarily as art forms, rather than businesses. It will take another decade to happen, but happen it will.