In the b-to-b sectorâthe hardest hit of all in 2001âmedia advertising plunged nearly 20%. The 2001 decrease marks the sectorâs first drop in at least a decade, according to Veronis Suhler. And the outlook for the remainder of 2002 isnât rosy either. Veronis Suhler predicts spending on b-to-b media advertising will decline again this year, by 11.7% to $9.6 billion, and that it will begin to increase (4.9%) in 2003.
More worrisome for publishers is the reportâs prediction that for the period 2001-2006, ad spending on b-to-b magazines is expected to grow at a compound annual rate of just 2.2%, to $12.1 billion. This compares with 3.6% growth during the period 1997-2001. (Matthew Schwartzâs story on the Veronis Suhler report appears on Page 2.)
For the technology media sector, the loss of dot-com advertisers has had a profound impact, with once-mighty brands struggling to keep ahead of their lenders. (See Page 1 for Sean Callahanâs story on the latest machinations by Ziff Davis Media Inc. to restructure its debt and avoid bankruptcy.)
Bob Crosland, managing director of AdMedia Partners Inc., a New York-based investment banking firm specializing in media, advertising and marketing, takes the long view: âThe reason we call them âbusiness cyclesâ is that, by definition, the top of the market is always excessive and the bottom is always excessive.â Crosland says the media business hit tops in decade-long cycles in 1979, 1989 and 1999.
Meanwhile, the finger-pointing has already begun. Reporting on the July departure of Bertelsmann Chairman-CEO Thomas Middelhoff, The New York Times wrote, âHe is the latest prophet of digital convergence to fall from his media industry perch, joining Jean-Marie Messier of Vivendi Universal and Robert W. Pittman of AOL Time Warner.â
A more accurate assessment is that these media mogulsâand their less-prominent counterparts throughout the publishing industryâare grappling with thorny questions about the impact of the Internet on traditional publishing. Among the top ques-tions: Can traditional publishers effectively organize themselves to take advantage of the interactive medium? Where do online and offline properties intersect? And can publishers, in this brave new world, become software companies, providing increasingly sophisticated online tools to their âusersâ (a.k.a. readers)?
The fact that nobody, including the merged AOL Time Warner, has cracked this nut yet does not mean these questions are irrelevant to publishers, advertisers or readers. Once the economy recovers and the nightmarish advertising recession ends, these questions will remain, awaiting answers.