The End of the World … Again

Folio: The Magazine for Magazine Management, Sept 1, 2004 by Rex Hammock

Byline: Rex Hammock

On Tuesday, July 27, magazine publishers awoke to news that - as Yogi Berra might put it - sounded like deja vu all over again, circa 1999. Opening their Wall Street Journals to page B-7, they read the vaguely familiar prediction that Internet advertising will be swamping magazine advertising within three years. "A new report from Jupitermedia's JupiterResearch predicts that dollars spent on online advertising - defined as a paid message featured on a Website, online service or other interactive medium, such as instant message or e-mail - will match dollars spent on magazines by 2007, then surpass them in 2008," the story read.

Buried in the article was the recollection that five years ago, Jupiter predicted the explosion of online advertising should have happened already. Indeed, the research firm had predicted then that online ad revenue would now be near twice the $6.6 billion that Jupiter predicted for 2003. With the Journal story pointing the way, the subsequent 24-hour news cycle, brought a flood of stories on the Jupiter Research report, typically with a headline and an angle focused on magazine versus online advertising. From wire service reports to business-to-business columnists, the word spread in tipping-point fashion: "online advertising will soon overtake magazine advertising."

Unfortunately for the reporters, the researchers and those who read and heard the story, the news that online advertising will overtake magazine advertising is wrong and based on a flawed premise. And, to be fair to Jupiter, the report really does not portray a horse race between magazine and online advertising. Rather, it is a broad category-by-category predictive model, which indicated a resumption of rapid growth for Internet marketing revenue (which stalled in 2000, falling in 2001 and 2002 to 25 percent below 2000 levels). It also predicts continuing low single-digit growth for print magazines. Jupiter did not foresee the cascading news coverage of the report that stuck to the angle created in The Wall Street Journal story.

Not that Jupiter's analysis is flawless. For example, it apparently does not factor in b-to-b magazine advertising at all. Jupiter's report predicts that magazine advertising in the year 2007 will be $13.8 billion and will reach $16.1 billion in 2009. Yet Veronis Suhler Stevenson, the media merchant bank that has been tracking advertising expenditures for over three decades, predicts magazine advertising will be over $28 billion by 2007 - because it tracks all consumer and b-to-b advertising expenditures. The Jupiter Research study wound up comparing online advertising to consumer magazine print advertising only.

So the study seems to undercount magazine revenue in two categories: b-to-b and online. "What the report doesn't mention is that the brands that make up the interactive advertising market are also media brands, including magazines," says Ellen Oppenheim, executive vice president and chief marketing officer of the Magazine Publishers of America. "By not recognizing media brands they are not taking into account the benefits that magazines are getting from the growth in Internet advertising." Oppenheim says syndicated research puts online consumer-magazine advertising at $200 million a year. American Business Media estimates that online products will generate 6 percent of trade publishing revenue this year.

Few reporters stopped to ask about those missing numbers - even though their own papers are increasingly reliant on online growth. And, ironically, by the first week of August, journalists covering the IPO of Google were using the same research to raise doubts about the prospects for future success for the search-engine giant. In the report, Jupiter Research predicts online advertising growth in the year 2009 will slow to only 11 percent annually, half of its current pace, and too small to sustain the growth models some investment analysts have developed to predict Google's future.

So, in the course of two weeks, the same research that led to headlines implying the demise of magazine advertising also was used as an indication of the limitations of online advertising's potential. But the question remains whether ad buyers, who already have reservations about print media, will keep the original headlines in mind. "I think the world of advertising is evolving," says Oppenheim. "There is always infatuation with what's new. And what's new is often unproven - the measures that are less clear than in media that are more mature." Deja vu, indeed.