Sunday, February 20, 2005

If the bull's eye fits, wear it

"This is scary stuff and should not be dismissed," says Miles E. Groves, the economist whose meticulous research goes directly into the "in box" of just about every leader in the newspaper industry.

The "scary stuff" is that newspapers -- again -- lost advertising market share last year, falling to about 18% of roughly $250 billion in total annual ad outlays. As recently as 2000, newspapers controlled 21% of all U.S. advertising dollars.

A 3% reduction in market share amounts to $7.5 billion in vaporized revenues. To put things in perspective, that amount of dough would let the New York Times Co. purchase 18 more About.Coms, if it were so inclined. Looking at it another way, $7.5 billion is enough to pay the salaries of 150,000 reporters making $50k per year.

There are many reasons for the slide in the industry's market share, ranging from the ill health of the airline industry to the consolidation of retailers to competition for classified ads from Craig's List, Monster and eBay.

But Miles believes one of the biggest factors in the erosion is that the industry's traditional advertisers have a hotline to their consumers over the Internet and no longer need the newspaper to reach them.

"The telephone company, utilities, banks, mortgage companies, major retailers -- and a list that continues on indefinitely -- now use the web as a direct connection to their customers," says Miles. As these companies get better at what's called customer relationship management, the need "for mainstream media" will diminish, says Miles.

Online banking, as but one example, has been the fastest-growing Internet activity in the U.S. over the last five years. Today, 53 million Americans, or 20% of the population, use some form of online banking service, according to Pew's Internet & American Life survey.

Newspapers and other media will be useful in trying to lure Wells Fargo customers to the Bank of America (assuming they didn't merge while I was writing this). But a bank is not going to buy much newspaper advertising to pitch to its own clientele when it can reach them more efficiently on the web.

Most companies selling things are investing heavily in developing faster, better and cheaper ways to reach the right customer with the right proposition at the right time. Beyond ATM and credit cards, we haul Safeway, Blockbuster and even hardware store membership cards in our wallets. Every swipe brings our unique customer profile into sharper focus.

If newspaper companies want to survive, they have to join the game, says Miles. Newspapers must leverage their formidable print and online strengths to develop direct-market products to deliver qualified prospects to web-savvy advertisers. "Media companies that are not part of the evolving story will suffer, as marketing dollars go to those venues that can help," warns Miles.

If newspapers don't get serious about target marketing, they will be the ones wearing the bull's eye.


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