The Fall of Advertising and the Rise of Newstand Prices

This post at the Harvard Business Online Conversation Starter blog on price rises at the Wall Street Journal and the FT has some interesting ramifications.

The traditional selling point of PR has been that it derives its credibility from third party editorial while advertising is less credible because it’s paid for. Whether or not the perceived lack of credibility is contributing to the decline of adspend, it is interesting that this trend is translating into reduced profitability for even the most established traditional print newspapers and thus driving readers online. Both the WSJ and the FT, of course, derive subscription revenue from their websites but the move online occasions other changes in the business model. Online newspapers in general increasingly incorporate more commentary and debate among readers both on the website itself and in the extended web of trackbacks and links.

The result is that the value of credible third party commentary climbs even higher, as that commentary is in turn commented upon and amplified by the most credible of spokespersons – Someone Like Me. The result is a kind of positive feedback loop – the more credible people find third-party content the less companies are prepared to spend on less credible forms of communications. The vendors of those less credible forms of communication move into media that have a lower cost of production, which in turn has the effect of increasing their credibility.

And the value to companies of well-crafted communications strategies that incorporate the unique characteristics of the new medium also increases by default.

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