Winners and Losers: The Changing Media Ad Landscape, 1980-2011

Anyone who follows the media business cannot fail to be impressed by how much -- and how fast -- the media landscape has changed in recent decades. In addition to the rapid evolution of media technology and consumption habits, one of the most remarkable trends has been the upheaval in the advertising landscape.

They include the rise of the Internet, the continued expansion of cable TV, and the dramatic decline of print -- especially newspapers. Plus, broadcast TV and radio are struggling to hold on to their share, in a situation where the only certainty is further change, as a continuing economic downturn accelerates long-term secular shifts.

The following is a quick overview of the changing media landscape, including winners, losers and everyone in between. Data is drawn from a variety of sources, including overall estimates from ZenithOptimedia, Magna Global, SNL Kagan, and Kantar. Industry-specific data comes from the Interactive Advertising Bureau, the National Cable & Telecommunications Association, the Cable Advertising Bureau, the Outdoor Advertising Association of America, the Television Bureau of Advertising, the Radio Advertising Bureau, the Publishers Information Bureau, and the Newspaper Association of America.

Winning Like Charlie Sheen: The Internet

Unless they happened to be living under a rock for the last decade, most marketers know that digital advertising has held first place in terms of growth -- still dominated by the Internet, but now growing to include ad-supported media delivered via mobile Web and apps.

From 1997 to 2010, Internet advertising revenue soared 2,788% from $900 million to $26 billion, according to the Interactive Advertising Bureau. In the last five years, revenues almost doubled from $3.8 billion in the first quarter of 2006 to $7.3 billion in the first quarter of 2011.

This rapid growth has translated into a large increase in online advertising's share of total ad spending, from less than 1% in 1997 to 16.7% in 2010. In just the last five years, the proportion more than doubled, from 9.2% in the first quarter of 2006 to 18.7% in the first quarter of 2011.

Of course, this remarkable progress has not been without its setbacks.

In its infancy, when the Internet was still viewed as an experimental medium, online advertising was more vulnerable to economic woes than other media. After expanding at a breakneck pace from 1996-2000, when it grew from nothing to $8.2 billion, online ad revenues fell 12.2% to $7.2 billion in 2001 during the recession, and then 16.7% to $6 billion in 2002.

Overall, ad spending fell just 7.1% to $138.3 billion in 2001, then increased 2.7% to $142 billion in 2002. But it proved equally resilient afterwards, setting a new record of $9.6 billion by 2004 and expanding steadily every year since then.

Moreover, after maturing in the middle years of the last decade, during the current economic downturn, Internet advertising has displayed greater staying power, generally faring better than other media despite some inevitable losses.

From 2008-2009 online ad revenues dipped a mere 2.6% from $23.4 billion to $22.8 billion, compared to an overall ad-spending decline of 14.7%, from $172.6 billion to $147.9 billion. Then from 2009-2010 online ad revenue grew 14% to $26 billion, while overall ad revenues grew 5.2% to $155.6 billion.

This growth continues to be mostly dominated by pure-play Internet companies, including search giants Google and Yahoo, a host of online display ad networks, and social media sites led by Facebook.

Traditional media companies have all jumped into online advertising, but as we will see, even after a decade, Internet ads remain a surprisingly small part of the bottom line for most.

First Runner-Up: Cable TV

After the Internet, cable TV has enjoyed the biggest expansion among all media in terms of ad revenue and share, jumping from just $58 million in 1980 -- or less than 1% of total ad spending -- to $27.1 billion in 2010, a 17.4% share.

Unlike online advertising, it was relatively unaffected by earlier recessions, when it was already an established medium, increasing steadily (or at least holding its own) through downturns in 1990-1992 and 2001-2002.

The most recent recession had an inevitable impact due to its sheer magnitude. After growing 6.4% from $25 billion in 2007 to $26.6 billion in 2008, cable TV ad revenue slipped 8.6% to $24.3 billion, before rebounding 11.5% to $27.1 billion. But cable TV's share of ad spending has continued to increase, indicating underlying strength -- at least for now.

The lion's share of cable TV advertising spending goes to cable networks. According to the National Cable & Telecommunications Association, total cable network ad revenues surged 156%, from $8.83 billion in 1999 to $22.6 billion in 2010. That's compared to local and spot advertising, which increased 44% from $2.67 billion to $3.86 billion over the same period.

Heavily dependent on automotive and retail ad spending, local and spot advertising were unsteady even before the latest recession, slipping from $4.29 billion in 2006 to $3.46 billion in 2009 before rebounding slightly in 2010, thanks in part to more political ads.

Although its progress has been impressive, cable TV advertising also faces a potential long-term threat from "cord-cutting" consumers -- including people who are canceling their cable subscriptions to save money and replacing cable programming with video-on-demand alternatives, like Netflix, Hulu, and Redbox.

While the trend has been small and inconsistent, the threat of cord-cutting appears to be growing. After increasing 2% in 2008, the overall number of U.S. households subscribing to cable began dropping in the second quarter of 2010, according to SNL Kagan, which said 216,000 households dropped their subscriptions, followed by another 119,000 in the third quarter.

The numbers turned around in the fourth quarter, when the industry added around 250,000 new subscribers, followed by another 475,000 in the first quarter of 2011. Losses resumed in the second quarter of 2011 with 193,000 subscribers ditching pay TV services, according to figures compiled by Broadcast Engineering and GigaOM. Meanwhile, a recent survey by OMD found that 7% of respondents said they have already cut their pay TV subscriptions -- including cable and satellite -- while another 17% said they would be willing to do so.

Ad Spending 1980-2010

Second Runner-Up: Outdoor

In terms of total revenue, outdoor advertising has grown slowly -- but steadily -- since Universal McCann started tracking advertising spending in the first half of the 20th century. But its share of total ad spending has fluctuated quite a bit over this period: from 2.5% of all ad dollars, the proportion slowly fell to its lowest point at 1.28% of the total in 1999 -- then suddenly rallied to around 4% by 2007, where it remains.

Outdoor ad revenues began to perk up in the first decade of the new century due to the rapid growth and evolution of digital signage and network technology, allowing flexible delivery of video advertising reaching the consumer on the go. In 2009, the industry got another boost from the Traffic Audit Bureau's new "Eyes-On" metric, which has been widely accepted as the new currency for outdoor ad ratings.

Part of outdoor's growth is undoubtedly due to technological developments at all levels of the business. The big boys of digital outdoor advertising -- full-size digital billboards -- require substantial investment and are generally installed and operated by large outdoor advertising companies, including Clear Channel Outdoor, Lamar, CBS Outdoor, van Wagner, or their regional competitors.

Similarly, two large national companies -- NationalCineMedia and Screenvision -- dominate cinema advertising, where they are increasingly angling for part of major brand advertisers' TV budgets.

Smaller place-based video networks have proliferated, powered by technological advances and falling prices for DOOH equipment. Many place-based video networks leverage "captive audiences" in places like office building elevators (Captivate, the WSJ Network), the gas pump (OutCast, PumpTop TV, Gas Station TV), and health clubs (HealthClub MediaNetwork, Zoom Media's Digital Fitness Network).

The same captive principle applies to patients cooling their heels in the lobby at the doctor's office (AccentHealth, Windstone Communications' MD Outernet) or even in hospital rooms (Interactivation Health Networks' Patient and Newborn Channels).

Although big-name companies can achieve substantial revenues, the proliferation of place-based digital networks of all sizes is also flooding the market, resulting in a major increase in "remnant" DOOH ad inventory, which is often made available to direct marketers for sales-based revenue-sharing deals.

Still, digital OOH advertising revenue continues to grow at a healthy pace in the U.S., and is on course to increase 16.7% to around $2.2 billion in 2011, according to a February forecast from PQ Media -- which would make it just over a third of projected total outdoor revenues of $6.4 billion.

At the same time, the outdoor industry more broadly may be benefiting from increased advertiser confidence, due to the Traffic Audit Bureau's "Eyes-On" metric, which was introduced in 2009 after development and testing supported by an industry alliance of outdoor ad companies, agencies and clients.

Although overall outdoor ad spending still has not quite returned to pre-recession levels, first-half revenues of $3.3 billion are back up to 87% of the 2008 first-half total ($3.8 billion), and outdoor's growth rate is beating the industry average in year-over-year comparisons. Looking to the future, static signage does face long-term technological obsolescence, but overall, outdoor revenues are less threatened by technological disruption than other media. That's due to substantial barriers to entry -- especially the high cost of installing and operating digital signage on a large scale.

Thus, digital billboards are likely to remain the exclusive preserve of big outdoor advertising companies, which can upgrade portfolios of large-format outdoor inventory at their own pace. It will be even easier for them to maintain price discipline because most cities and states are thinking about delaying (or even freezing) approvals for new outdoor ad installations, whether static or digital. Most approvals for new digital billboards have been for upgrades to existing static signage.

Hanging In There: Broadcast TV

The majority of TV ad revenue continues to come from traditional broadcast advertising, which grew steadily until recent years. Between 1980 and 2007, TV ad revenues increased from $11.5 billion to $47.1 billion. But the recession hit hard and 2010 revenues, at $44 billion, were still below their earlier peak.

The medium's share of total ad dollars had actually been shrinking since the mid-1990s, dwindling from a peak of 35% in 1994 to a low of 26.1% in 2007. Ironically, this trend reversed somewhat during the downturn, creeping back up to 28.3% of the (much-diminished) total advertising pie in 2010.

But after a noteworthy rebound in 2009-2010, the growth rate for total broadcast TV ad revenues reversed yet again. According to the Television Bureau of Advertising, total revenues from spot and network TV fell 7.4% from $10.9 billion in the first quarter of 2010 to $10.1 billion in the first quarter of this year.

On the digital front, many big broadcast TV players have yet to realize substantial digital revenues from advertising. From 2009-2010, CBS Interactive, which includes online video and audio properties such as CBS.com, CNET, Radio.com, TV.com, Last.FM, CBS-powered AOL Radio, and Yahoo Launchcast, saw total ad revenues increase 18% from $550 million to $649 million -- equaling about 4.6% of total CBS Corp. revenues of $14.06 billion in the latter case.

Disney Corp.'s interactive division, which includes ABC.com and ESPN.com, reported total advertising revenues of $198 million in 2010 -- or just half a percent of Disney Corp.'s total revenues of $38.06 billion that year. In the second quarter, Disney's total interactive media revenues of $251 million (including gaming sales) came to just 5% of its media networks division revenues of $4.95 billion.

However, some broadcasters are starting to see significant digital revenues from licensing for digital on-demand services. In the second quarter of 2011, CBS Corp. cited digital licensing and distribution agreements with Netflix as one of the main drivers of digital revenue growth, with total content and licensing revenue increasing 21% to $889 million.

Likewise, Comcast attributed broadcasting revenue growth in the second quarter of 2011 partly to licensing of recently acquired NBC content. Looking ahead, News Corp. President and COO Chase Carey declared in the company's second-quarter conference call: "The explosion of digital distribution is going to make content, particularly hit content, more valuable than ever," adding: "We'll do business with new emerging digital platforms like Netflix" -- but only after "we establish clear rules about what is library product."

 Ad Spending
1980-2010 %

Feeling Threatened: Radio

Like broadcast TV, radio was already a mature medium in 1980, with a two-decade lead on its younger broadcast sibling. As a result, its growth in previous years, while steady, was less spectacular -- and it suffered more substantial losses beginning in the middle years of the last decade, as the rise of the Internet combined with the recession to threaten broadcast revenues.

Like other traditional media, radio benefited from long-term economic expansion through the 1980s, 1990s and into the new century, and total radio revenues rose from $3.7 billion in 1980 to $19.6 billion in 2004. But the medium stalled at that level from 2004-2006, as competition from online advertising began to take a bite.

Ad spending began to fall as the recession took hold, decreasing 2% to $21.3 billion in 2007, 9% to $19.5 billion in 2008, and 18% to $16 billion in 2009 -- for a total drop of 24.2% from 2006-2009 before recovering 6% to $17.3 billion in 2010.

So far, radio's recovery in 2011 has been anemic at best, with first-half ad spending up 1.2% to $8.4 billion, per the Radio Advertising Bureau.

The combined impact of competition from online advertising and the economic downturn has been reflected in the medium's shrinking share of total ad spending. After increasing from 10.9% of total ad spending in 1980 to 13.3% in 2002, radio's share returned to 11% in 2010 and 9.7% in the first quarter of 2011.

Like other traditional media, radio broadcasters have pinned their hopes on digital advertising associated with interactive, on-demand platforms, like Clear Channel Radio's iHeartRadio. But online advertising remains a small part of total revenues. Per the RAB, digital ad revenues came to $615 million in 2010, or just 3.6% of overall advertising.

Feeling Threatened: Magazines

Based on the changes in ad spending over the last couple of years, magazines are in a similar situation: like radio, competition from online advertising was already making itself felt before the recession hit, and the economic downturn has only served to accelerate the process.

Magazine advertising revenue grew at a respectable pace for most of the last three decades -- increasing from $3.15 billion in 1980 to a peak of $13.9 billion in 2008, but then fell sharply to $10 billion in 2009 and $9.3 billion. (These figures are about 20% lower than rate-card revenues reported by the Publishers Information Bureau, which are often inflated, given discounts granted by magazine publishers behind closed doors.)

After peaking at 9.4% in 1993, magazines' share of total ad spending has dwindled to about 6% in 2010. Ad pages, which are often considered a more reliable indicator, slumped 15.6% from 286,932 in 2000 to 242,093 in 2004, according to the PIB, before recovering somewhat to 255,667 in 2007.

But the recession hit consumer magazines hard, with total ad pages tumbling to 172,240 by 2010 -- down 32.6% from 2007 and 40% from their peak in 2000.

Overall circulation figures do not correspond to changes in ad pages, but newsstand sales (which are, again, viewed as a more reliable indicator) show an unmistakable downward trend roughly parallel to the ad page declines. A survey of 70 leading titles tracked continuously by the Audit Bureau of Circulations from 2002-2008 shows that total paid subscriptions increased slightly from 104.1 million to 106.7 million -- but newsstand sales for the same titles tumbled 31% from 22.3 million to 15.4 million over the same period.

It's hard to know what proportion of the magazine industry's total advertising revenue comes from digital ads, but results from individual publishers suggest that, like other traditional media, the share remains low.

Under Siege: Newspapers

Magazines are at least faring better than their print cousins in the newspaper industry, which grew alongside other traditional media during the 1980s and 1990s, but then witnessed a breathtaking decline over just the last few years.

Total newspaper ad revenues grew from $15.5 billion in 1980 to a peak of $49.4 billion in 2005, but then collapsed to $25.8 billion by 2010 -- shedding 47.8% in just five years, according to the Newspaper Association of America.

Like other traditional media, newspapers suffered from competition from online advertising, but they were also hit hard by the economic downturn, which especially slammed classified revenues in all the main categories of real estate, automotive and help wanted.

The real estate bubble left a particularly harsh aftertaste, tumbling from $5.2 billion in 2006 (the peak of the bubble) to $1.1 billion in 2010. Continuing trouble in the real estate market means there's little hope of a turnaround. In the first half of 2011, real estate classified revenues have declined another 19.8% from $520 million to $420 million.

Meanwhile, automotive classified revenues peaked at $5.2 billion in 2003, but then declined steadily to $3.3 billion in 2007 before plunging to $1.24 billion in 2010. And once again, continuing weakness in car sales holds out little hope of a turnaround in this category. From $587.5 million in the first half of 2010, total automotive classified revenues dropped 9% to $534.7 million in the first half of this year.

Recruitment (help wanted) revenues have also dried up. Losses here actually began earlier than the other classified categories. After peaking at $8.7 billion in 2000, recruitment revenues tumbled to $4 billion in 2003, then recovered to $5.1 billion in 2005 before plummeting to $756 million in 2010. As unemployment continues to hover around 9.1%, from the first half of 2010 to 2011, recruitment revenue was stagnant, edging up from $358 million to $362 million.

Like radio and magazines, online ad revenues remain a relatively small part of total newspaper advertising. In the first half of 2011, total digital revenues of $1.61 billion represented just 13.9% of total ad newspaper ad revenues of $11.55 billion.

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