Mags Pick Up Steam, May Blow Off Soon

Magazines are doing better than expected in terms of ad pages and revenue as they move into fall, says Merrill Lynch analyst Lauren Fine, but she warns that the uptick probably won't last into the fourth quarter. July ad revenues were up 3.7 percent over the same month last year, and August and September revenue and ad page figures are "surprisingly strong," Fine says, but this is due in part to a seasonal increase in fashion advertising. Overall consumer mags will likely suffer from continuing declines in automotive ad pages, Fine says.

Indeed, auto pages are plummeting, according to stats from the Publishers' Information Bureau. PIB data shows July auto ad pages declining 11.4 percent from the same month last year, and for the year to date they have declined 16.1 percent from 2005. These losses dwarf other ad categories like food products, which has declined 3 percent for the year to date--and are more evidence of a long-term migration of auto ad dollars from print to online media. Newspapers have also seen auto ad revenues decline steeply.



These sorts of structural factors will likely override short-term upswings, leading to continued instability and change, agrees Bill Holiber, president and publisher of U.S. News and World Report, whose recent college ranking issue boasted the most ad pages in its history. "Our business is a month-to-month business, and the cycle of business from one quarter to the next is extremely unpredictable and volatile," Holiber says. The recent good news notwithstanding, "we don't see that changing any time in the near future."

According to Holiber, the mercurial nature of magazine ad demand is due in large part to the advent of the Internet--and not just because online ads eat into print revenue. "The computerization of every aspect of their businesses has really had a huge impact on the way marketers look at advertising," Holiber asserts. "They're really managing their business very closely, in terms of sales and how things are going on the bottom line. Knowing the state of the supply chain, and the demand or the lack of the demand, they're able to manage their business so closely--basically in real time."

"It's no surprise," Holiber concludes, "that trickles down to the way they apportion ad budgets and marketing in general. Now that they have the technology to get a real-time view, it's allowing constant adjustment."

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