The recent announcement by the New York Times concerning the
termination of its Times Select premium subscription service
has
deservedly attracted a great deal of attention, on this list
and
all over the blogosphere and "mainstream media."
The Times may
or may not be successful with its new strategy (my own view
is
that it was the right decision, but the Times's future is by
no
means assured), but of course not all media organizations
have
the brand and cultural centrality of the Times; the Times
thus is
no model for anyone. What I wonder about is where all the
advertising revenue is going to come from to support all
these
media businesses, whether they are the Times, Elsevier's new
ad-supported oncology site, or any of the two dozen new
Silicon
Valley social networking start-ups I stumbled upon in just
the
past month (owners of pets, parents of young children, human
potential activists, financial planners, etc., etc.), not to
mention such academic publishing services as Scholarly
Exchange.
So we step into the laboratory and ask this question: How
much
must the world's economy have to grow in order to support
all
these media businesses? A media business aggregates
audiences,
which in turn are sold to advertisers. The advertisers have
their own products and services to sell (and not all of them
are
media products, thank god). If they can't sell their
products,
the advertising dries up and the media businesses scale back
or
disappear.
Let's say a company budgets 10 percent of total revenue to
advertising. Thus, with sales of $10 million, the company
spends
$1 million on advertising. For every dollar thus spent on
advertising, the economy must grow by ten times that amount.
How many shirts, stents, time share condos, cars, and toilet
seat
covers do we need?
The market isn't there for all this advertising. The
world's
resources are not there to create the forecast volume of
goods
and services to satisfy the demand created by the
advertising.
We will run out of fossil fuel trying, and then have
virtually no
economy left to advertise anything.
The notion that the sale of advertising alone somehow can
support
the full range of information businesses is crazy. It may
work
for the Times or South Park, and Elsevier has a shot with
its new
portal, but the fate of most advertising-supported
businesses is
oblivion. Only the strong, the huge, and the totally
distinctive
survive. B-level players need not apply.
Joe Esposito
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