The recently tabulated results of advertising expenditures in U.S. by TNS Media Intelligence tells a familiar story, with few surprises. Looking at the five years from 2002 to 2006, advertising in “measured media” overall increased 23.7%, from $121 billion to almost $150 billion. This was just slightly ahead of the growth of the total economy, which expanded by 23.1%.
But the story is, as usual, in the details. First, the big picture. As is certainly no surprise, Internet advertising is for real. From 6% of the total in 2002-2003, it zipped to 12.4% in 2006, eclipsing radio and closing in on newspapers and magazines. TNS only includes display advertising in the Internet totals. I have approximated revenues from search-based advertising, using most of Google’s revenue from 2004-2006 as a rough (and likely understated) estimate. For example, in 2006 Google had $10.6 billion revenue. I included $10 billion. Search revenue from Yahoo, Microsoft, Ask and others would only accentuate the Internet trend.
We also see that television, which includes both broadcast and cable, is in the same relative market share decline as is the print media. According to the TNS compilation, all media sectors except newspapers showed some growth in actual dollar revenue. A finer grain analysis of the data, however, indicates that most of the revenue growth for television has been in cable, although even that has slowed in recent years. The other hot spot is in Spanish language media, which nearly doubled its overall share of the total from 1.6% in 2002 to 3.0% in 2006. Nearly 90% of last year’s $4.8 billion was for television (and is included in the total figure for TV).
Of course, TNS’ method of accounting does not take into consideration the large chunks of the Internet’s advertising that does get into the pockets of newspaper and magazine publishers as well as television and radio outlets, through their own Web operations. But the value of this exercise is seeing what is going on with traditional media formats vs. the newer ones, aggregated as “the Internet.”
I have focused here on market share. So long as the overall advertising pie continues to grow legacy media can continue to see revenue growth, though at a slower rate than the pie. But any media company’s strategy needs to include a way of capturing a substantial share of the sector with the highest growth. And that is once again confirmed as being in the online world.
Various compilations of advertising revenue shows wildly different numbers, though the trends are fairly consistent. For example, the Newspaper Advertising Bureau (NAB) just reported that newspaper advertising revenue for 2006 was $46.6 billion, a decline of 1.7% from 2005. This is far higher than the $28.0 billion reported by TNS, but consistent with the decline noted by TSN. NAB also found that the online revenue of newspapers was $2.7 billion in 2006. It is noteworthy that although this was 32% ahead of the previous year’s online revenue, it lagged the 34% revenue growth rate for online revenue overall. That is, newspapers are not quite holding their own with their competitors in the online world.
Differences in numbers can be attributed to what is counted. TSN, for example, does not include direct mail, which has elsewhere been shown to be a robust 15%-16% of advertising dollars. It may also reflect what is being tracked. TSN, for example, looks at advertising expenditures. The NAB is computing advertising revenue. For my purposes, the absolute dollar amount is less critical than the trends and the consistency of any one source's data collection.
March 2, 2007
The challenge of media competition from ground level
This letter to The Wall Street Journal yesterday succinctly sums up the state of competition in the media world today and the rapidity with which the landscape is changing. It helps explain why the National Association of Broadcasters, of all special interest groups, is opposing this particular flavor of radio merger.
XM and Sirius
March 1, 2007; Page B7
The thought that a merger between XM and Sirius could create a monopoly is absurd ("Making Radio Waves," Review & Outlook, Feb. 21). They would offer only one of many content options for consumers. It's a moot point anyway. By the time the merger is completed, satellite radio will have won the battle with radio but lost the war. When I subscribed to XM three years ago, I immediately quit listening to traditional radio. Satellite radio is simply a superior choice. However, now that my 927 favorite songs reside on my iPod, I have little need for radio of any kind. Why scan the dial in hopes of finding a song that I like when my iPod contains only songs that I like?
Tarpon Springs, Fla.
posted by Ben Compaine |