Economics & Research Blog
Content's Being Created, but Revenue Data Show that if Content is King, it's of a Small Country
The latest Quarterly Services Survey by the Department of Commerce continues to show a rise in advertising agency revenues,
By Dr. Joe Webb
Published: March 13, 2012
The latest Quarterly Services Survey
by the Department of Commerce continues to show a rise in advertising agency revenues, and the steady decline of publishing revenues. The divergence shows the dramatic change in media, even though the data series only begins in 2004. Somewhere along the line, the memo that said “content is king” got lost. Publishers have content, of course, but their ability to gain revenues in the new media environment has not been evident except in occasional cases. Ad agencies, however, have increasing revenues. If content is king, it's of a very small country as far as traditional publishing is concerned. (click chart to enlarge)
Advertising agencies get their revenues from client fees, billable production, and commissions from placing ad space or broadcast time. Years ago, public relations was a minor part of agency operations, and agencies felt they needed to keep their PR operations separate from advertising to mirror the separation of editorial and paid space operations of broadcast and print media.
All that has certainly changed. Now, PR is a critical part of agency operations because of the importance of search engines, social media, and web sites (PR employment is up almost 50% in the last seven years). Direct mail operations in agencies have grown to include e-commerce campaigns. Agency production capabilities now includes videos for web sites and all types of digital formats.
Publishers, on the other hand, have had great difficulty shifting their revenue mix. In some cases, publishers had significant fixed costs, especially newspapers, that made it difficult for them to reallocate their resources. Those fixed investments limited their abilities to make a full commitment to new formats and abandon the old ones, especially if those fixed investments (presses, production operations, buildings) were financed by debt that was still in force. Agencies, however, tended to have little fixed investment, and were always more adaptable to market changes because of their constant use of freelance professionals as they were needed. That did not mean that the shift to new media was not traumatic, which it was, but it appears that they have made the shift whether it was pretty or not.
The advertising agencies industry revenue is now larger than that of the commercial printing industry. It is likely that sometime in 2012, ad agency employment will surpass that of the commercial printing industry.
Publishers problems will continue, and the growth of agencies will continue in the short term. The nature of that growth will depend on their ability to bring new approaches to consumer markets that are more in charge of when and how they will interact with brands at a time of their choosing.