Advertising Agencies Reduce Reliance on Newspaper Ads

Article excerpt

The two main sources of income for newspapers have both reached near all-time highs. Combined subscriptions to daily and weekly newspapers stood at 137 million in 1996.(1) Advertising revenues have risen as well, increasing by 7 percent in 1997.(2)

Newspaper executives, nonetheless, are concerned. Newspaper readership has not kept pace with increases in the U.S. population. Thus, while readership has increased, penetration -- or the percentage of the households that subscribe to a newspaper -- has not.

Similar concerns surround advertising revenue. While ad revenue is growing, newspapers are losing ground to television on the percentage of advertising revenue the two media attract. Television now receives a higher percentage of ad revenue than do newspapers. Thus, while ad revenue is on the upswing, reliance on newspaper advertising is declining.(3)

The reasons behind this decreased reliance on newspaper advertising are the focus of the present study. A national mail survey of advertising executives examines the extent to which agencies are decreasing their reliance on newspaper advertising and asks the executives to rate several concerns that have been identified as some of the reasons for this decreasing reliance. Further, we compare the concerns across those agencies that have reduced their reliance on newspaper advertising, those that have increased their reliance on newspaper advertising and those that have not changed their reliance. Thus, we will look at whether certain concerns are more significant with advertising agencies that are actually decreasing their reliance on newspaper advertising. Finally, we compare concerns across large, medium and small ad agencies.

The results could have far-reaching implications for the newspaper industry. Responses may identify problems with the image of newspapers and potential shortcomings in the use of newspapers as an advertising vehicle. In addition, the results could point to areas that the newspaper industry will need to address if it wants to reclaim the leadership position in advertising revenue.

Newspapers provide an important source of information about the key issues and events of the day. Attracting increased advertising revenue will ensure that newspapers will continue to survive to provide this important service to members of society.

Background

Since 1993, U.S. newspaper advertising revenues have steadily increased, fueled by a robust American economy. The good news is that revenue is expected to continue to grow beyond the year 2000, with the millennium bringing in even more advertising spending.(4) More specific reasons cited for this growth include: expanded classified advertising sales growing at an average annual rate of 10 percent, increased national advertising as a result of new product introductions and improvements in rate and sales management programs provided by large newspaper organizations such as Gannett.(5)

In spite of this resurgence and in spite of being the largest advertising revenue shareholding medium for decades, newspapers have recently fallen behind a relative newcomer, television. In 1997, television passed newspapers to establish primacy in advertising spending.(6) Even though newspapers were inched out by only a small margin, this gap is widening as television continues its move into the future with a 1997 share of 23.8 percent to newspapers' share of 22.2 percent. Thus, while the raw dollar figures spent on newspaper advertising are increasing, editors and publishers are concerned that newspapers are getting a smaller percentage of advertising revenue.

The decline in reliance of newspaper advertising can be traced back to developments from two decades ago. Beginning in the 1970s when technology began to change the face of media, newspaper companies with high capital improvement and unionized labor costs fell behind when all other media were profiting. …