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Panpa Bulletin : August September 2007
PANPA Bulletin August-September 2007 49 commentary Newspaper display revenues are suffering as much from the internet as classified Surprised by the suggestion? The link between internet pen- etration and variance in classified is well established, but comparisons of display revenues, and the use of the in- ternet show that not only is the impact greater but the correlation is stronger. While it is true that in most countries display revenues continue to grow faster than inflation, they continue not to grow as fast as overall marketing spend. In the case of display revenues, a one per cent increase in internet penetra- tion causes a 1.2 per cent reduction in the rate of growth of display revenues and a 1.4 per cent reduction in classi- fied growth. While less pronounced, the internet is having an ever increasing impact not just on newspapers but on broadcast media as well. The reality is that few publishers spend enough time monitoring their competitive position versus other me- dia, preferring to only track their direct competitors in print. I have written before about the need to stop thinking purely about advertis- ing and start to measure all forms of marketing. Non-advertising marketing expenditure has grown at twice the rate of advertising over the last ten years. And newspaper businesses are well placed to develop revenues in these fast growing activities such as direct marketing, One of the problems of course is defining what is advertising. Take a major food retailer for example. Twenty years ago, 90 per cent of this company's marketing activity took the form of advertising. Ten years ago, a third of this had shifted to direct marketing and in store promotions, store cards, loyalty programs, and other direct to consumer communication. Today, these compa- nies typically spend a third on direct marketing, a third on advertising and a third on the internet. We may visit a retailer's website to buy our groceries but we do not think to measure this as part of their marketing spend, yet the money invested in this used to be advertising. What is more, much of the site features promotions for products sold by the retailer, which is funded by manufacturers. We don't measure this either, because the store's website is not a medium. Walmart stated some time back that they envisaged becoming one of the world's largest advertising media companies. By this they meant that they would be attracting advertising revenue to their websites and in-store promotions. Of course, to many observers, such shifts spell bad news for the newspaper business. But the effect is being felt across all traditional media, display and classified. And it need not be bad news, providing publishers move to exploit these shifts positively rather than sim- ply defending the traditional position. The newspaper continues to be the world's most powerful medium, relative to its size. In the US, for every hour citi- zens spend with their newspaper they are subjected to eight times the level of advertising of their TV equivalents. For every hour the American nation spends with their TV, they receive US$40 mil- lion dollars of advertising. An hour with the internet generates US$65 million, while an hour with the newspaper gen- erates US$316 million. Where the internet is proving too potent is its linkage between the communication and the transaction. Newspapers can do lot more to not only demonstrate their level of effectiveness -- as I've written before our investment in research is lamentable -- but also in- crease it by making the advertisements work harder. Perhaps most encouraging for us is that experience of the internet does not negate the wish to turn to the news- paper website. Research consistently shows that the longer people have been using the internet the more likely they are to turn to their newspaper brand online. The newspaper website is an ideal springboard to other online activi- ties, and is ideally placed to generate search and referral revenues, which are proving to be the kernel of online revenues. What we must get better at is devel- oping sites that are relevant and useful, not simply digital reincarnations of our printed products, although more and more newspapers are adopting such policies. From here we will be able to develop new channels of what were display revenues in their previous life. As retailers and other advertisers discover the value of the internet, so we must do more to reflect them. © Jim Chisholm 2006. Jim Chisholm is Joint Principal of iMedia, the Joint Venture Advisory Service of IFRA, the world's largest publishing trade organisation. He can be contacted at jim.chisholm@ imediaadvisory.com Why aren't we missing the missing millions? V V