Healthy Gains In Advertising p.47

By: Tony Case Newspaper advertising overall grew 6.4% last year, with retail
inching up 3.8% and classified gaining an impressive 10% sp.

FOR THE SECOND consecutive year, advertising in 1995 grew at a significantly better rate than the economy, and the trend is expected to continue into this year, according to a leading ad forecaster.
In addressing the 23rd PaineWebber Media Conference last month in New York, Robert J. Coen, senior vice president for the ad agency McCann-Erickson, estimated that U.S. advertising business totaled $161.5 billion last year, a 7.7% improvement over 1994, and predicted a 7.8% gain, to $174.1 billion, for this year.
The healthy gains reverse the depressed advertising results of the early part of the decade, when the newspaper industry experienced its worst slump in a half-century.
"For the second year in a row, the stronger-than-expected growth in advertising confirms that the full recovery in advertising is now well in place," Coen said in his annual report. "The role of advertising is reemerging in the U.S. marketplace."
Local advertising budgets, like advertising overall, grew at a more robust pace than the economy, although their strength fluctuated from region to region depending on economic conditions.
Results also varied by advertising category.
Sluggish consumer spending, coupled with devastating financial problems at some major retailing chains, adversely affected local retail advertising. Meanwhile, many newspapers witnessed double-digit improvement in the help wanted and real estate segments. Classified's strong showing helped along revenues, which threatened to be dragged down by skyrocketing expenses, especially those related to newsprint.
Newspaper advertising overall grew 6.4% last year, with retail inching up 3.8% and classified gaining an impressive 10%. Total newspaper advertising business was expected to jump 6.5% this year, to $34.5 billion.
Of all the local media, newspapers continue to reap the most ad business. Last year, local newspaper ad expenditures grew 6.5%, to $32.4 billion. By comparison, local TV rose 7%, to $10.8 billion; local radio increased 8%, to $8.8 billion; and yellow pages advertising grew 4.2%, to $8.8 billion.
National advertising budgets went up more than $10 billion, to $94.8 billion, an 8.5% increase.
National ad expenditures among newspapers grew 3% last year, to slightly better than $4 billion. National was expected to rise another 5.5% this year, to $4.3 billion.
Coen said he was optimistic that advertising would continue to expand in 1996, and that it would experience respectable growth through the rest of the century.
Factors that promise to make 1996 a strong year, especially in the television sector, include the Summer Olympics in Atlanta and the November presidential and congressional elections.
A continuing shift from trade promotions to advertising in the competitive marketplace will benefit newspaper publishers.
"Trade promotions primarily are price-cuts, give-backs to the trade," Coen said. "These things are changing."
Worldwide advertising expenditures in 1996 were expected to reach $377 billion, a 7.3% improvement. Outside the United States, ad spending was projected to reach $200 billion for the first time ever. Ad budgets in most parts of the world, as in this country, are growing faster than local economies.
Also appearing at the PaineWebber conference was Miles Groves, chief economist for the Newspaper Association of America, who predicted that newspaper advertising would improve by 6% in 1996, compared with 6% last year and 7% in 1994.
Groves, like Coen, reported that classified showed the healthiest gains in 1995, at better than 10%. The category was expected to grow another 6% this year. National went up 3%, and was projected to rise 6% this year. Retail, which grew 4% last year, was estimated to improve 5% in 1996.
Groves pointed to the challenges facing newspaper advertising departments ? among them, targeting in the retail segment and increasing competition for classified dollars, especially from new media.
"Newspapers are no longer mass," he said. "In terms of advertising, they're much more targeted, including inserts with targeted distribution, specially zoned editorial and the development of nonsubscriber products."
The economist noted the "dramatic shift" from run-of-press advertising to preprints over the last decade.
Groves estimated that last year, half of all nonclassified advertising dollars were invested in inserts, through which advertisers can reach narrowly defined groups.
Over 90% of newspapers are now capable of distributing inserts by zones that encompass multiple ZIP codes, and better than half can distribute inserts by zones subdivided within ZIP codes. Two-thirds of U.S. newspapers say they want to increase their targeting capability.
Groves illustrated the promising growth of classified in this decade. The category produced $11 billion in 1990, but by last year reaped an astounding $14 billion, or 37% of all newspaper ad business.
But he also noted the vulnerability of classifieds, which may easily be pirated, especially by electronic media. Luckily, newspapers are not fresh to the new media game, and many have developed niche products to battle these competitors. More than 120 U.S. dailies now have sites on the World Wide Web, according to Groves, and many have had electronic products since the 1980s.
Smaller newspapers today have strengthened their business, Groves said, by positioning themselves as "the new media community resource," offering value-added services to both readers and advertisers.
Aside from a strong advertising climate, publishers are seeing good growth in circulation revenue. This year, circulation expenditures ? dollars paid by consumers ? were projected to rise by as much as 3%. This, on top of 3% growth last year and 2.7% improvement in 1994.
The gloomy accounts of declining newspaper circulation put out every time an Audit Bureau of Circulations report is released don't tell the whole story, Groves insisted. He noted that Sunday editions have witnessed steady circulation gains, and on the spending side, figures continue to improve.
Groves attributed greater circulation revenues, in part, to the new professionalism among circulators.
"It's no longer just enough to get the paper on the front door by a certain time of the day," he said. "It's much more involved in terms of taking care of the reader and being responsive to the needs of advertisers."
Also, newspapers have worked to eliminate their "fringe" readership, defined not only by geography, but by type of readers ? i.e., those less important to advertisers. And publishers are concentrating on building long-term subscriber bases to eliminate churn. Newspapers are also moving away from subscriber promotions, because special buys are attractive mainly to the undesirable, fringe customer. "We don't make any money off that," Groves said.
Meanwhile, aggressive pricing strategies ? initiated to combat rising paper prices ? have held down both circulation and ad linage results, the economist observed. The good news: Most experts concur that the newsprint market will soften this year.
?(For the second year in a row, the stronger-than-expected growth in advertising is now well in place. The role of advertising is reemerging in the U.S. marketplace") [Caption]
?(-Robert Coen, senior vice president, McCann-Erickson) [Photo & Caption]
?(Newspapers are no longer mass. In terms of advertising, they're much more targeted, including inserts with targeted distribution, specially zoned editorial and the development of nonsubscriber products." ) [Caption ]
?(Miles Groves, chief economics, Newspaper Association of America)[Caption & Photo]