Print Outlook Surprisingly Bright
Fine, first vice president/managing director, corporate strategy & research at Merrill Lynch & Co., prefaced her remarks about the state of newspaper advertising by acknowledging that early forecasts of 3% growth in 2003 ad revenues "may be too optimistic." She stressed, however, that the perception of newspapers as a medium in decline was not accurate.
To prove her point, she noted that newspaper circulation is down less than 8% over the last ten years. By comparison, the top five magazines are down 18% and the eldest three networks experienced an even greater percentage decline in viewership over the same time span.
"Newspapers are rising to the challenge," she said. "[They are] a lot more innovative" than most observers think.
As far as the challenges facing the newspaper business, Fine cited increased competition for the local retail dollar from cable and radio. A few years ago, she recalled, "Every local retailer had to be in the newspaper"; now newspapers have to work harder to secure those dollars. Another concern is that newspapers haven't fully digested the fact that "consumers read them in part for the advertising... [they are] unique in that regard," she explained.
Fine pointed to one glaring area of weakness: the help-wanted ad segment, which had the highest profit margin of all newspaper ad categories. Owing to the economy and cannibalization by online job boards as well as the newspapers' own web sites, help-wanted listings are headed for another year of double-digit percentage losses (the category tumbled 50% in 2001 and 30% in 2002). Taken in tandem with other issues on the cost side (labor, printing), these losses will force newspapers to look even harder for new sources of profit, Fine said.
As for magazines, Starcom Worldwide executive vice president and media director Karen Jacobs painted a picture of an industry that is still witnessing "explosive growth" despite a few difficult years. "There are more magazines and more choices for consumers, and thus for advertisers," she said. To illustrate this, she noted that once the "dot-com effect" is removed from the equation, magazines have seen "a significant increase" in paging over the last ten years.
Among the positive trends Jacobs cited were the stronger relationships forged between advertisers and publishers, who - whether or not motivated by financial necessity - are finding new, mutually beneficial ways to coexist. Even advertorials, that long-loathed Frankenstein of promotional entities, are "starting to look like real marketing programs," she quipped.
As for offering predictions for the months and years ahead, Jacobs cracked, "I have no gypsy blood in me." Nonetheless, she thinks that magazines will downsize their rate-base guarantees and thus focus more intently on a core audience. This, she believes, is a positive development for magazine advertisers: "They're more into [reader] involvement than eyeballs." Jacobs also foresees magazine content becoming increasingly advertiser-friendly. She notes that the "product placement and embedded product deals" seen on television "have yet to hit the print world," and believes there are opportunities to push the boundaries without compromising editorial independence.
Most importantly, Jacobs believes that "magazine currencies" - namely, the tactics used to measure magazine readership and provide a basis for ad rates - will, and should, be overhauled. In reference to the current currencies of circulation and readership data, she said flatly, "I don't find either a terribly good measurement."
What matters most, she believes, are reader engagement and ROI. "Advertisers need to understand how their dollars are giving them results," she said. "We have to shift the conversation in that direction."