"Daily newspapers must quickly build new business models"
Economic forecasts Josef Trappel expects advertising growth to return soon, despite the gloomy climate. For the head of media and communications at Prognos in Basel, daily newspapers have no choice but to turn their attention increasingly to young readers.
Economic forecasts Josef Trappel expects advertising growth to return soon, despite the gloomy climate. For the head of media and communications at Prognos in Basel, daily newspapers have no choice but to turn their attention increasingly to young readers.
WW Mr. Trappel, when will the upswing come? Last fall, you predicted that advertising spending would grow by six percent in 2003. That would be nice, of course, but it's definitely not going to happen. What is your new forecast for the current year?Josef Trappel Forecasts are always an estimate of the possibilities and opportunities that arise from the information available at a given time. In the nineties, we had the situation several times where two bad years were followed by a very good one. This pattern could repeat itself now. However, there are external risk factors, such as the threat of war against Iraq. From today's perspective, an economic recovery is at best still conceivable in the course of the second half of the year. But that would be very late for an advertising upswing.
So should we expect zero growth this year, or even more likely a further decline in advertising investment?
The macroeconomic environment is not so bad that we have to brace ourselves for minus growth again. At the moment, we expect stagnation or even slight growth this year.
The long-term advertising market study from your company predicts that advertising spending will develop at a brisk pace in the period up to 2012. Advertising spending is expected to grow by an average of more than three percent per year. Doesn't the current trend force you to revise this long-term forecast downward as well?
No, we still expect this growth to occur. Our long-term view is based on the intensified competitive constellations, which will inevitably and sustainably increase the demand for market communication. This is especially true for some very advertising-intensive sectors such as the IT, telecom and financial industries. These are characterized by increasingly similar products that can ultimately only be differentiated through marketing communication. The same differentiation problem preoccupies many other sectors as well, for example the automotive industry, the electricity markets, or the entire food industry. We are therefore convinced that advertising volumes will grow in the long term.
Might the economic future not be more uncomfortable than is currently hoped?
I cannot answer this question, because we are not economic researchers. In the medium to long term, we expect moderate economic growth of around two percent.
Among the media, there are also encouraging examples such as television, which has vigorously expanded its share of advertising spending over the past ten years. But not quite as quickly as was expected a few years ago. Will the much-vaunted race to catch up with the German advertising market, for example, still become reality?
Germany was a special case that will not be repeated here. That's because in our neighboring country, television's advertising boom was directly linked to the triumph of private television. There is no such thing in sight in Switzerland. Of course, TV advertising will also increase in our country. But not at an accelerated rate, but rather at a slower rate. This also has to do with the fact that TV usage in Switzerland is still much lower than in our neighboring countries. Advertising follows usage, and because this only grows slowly with TV, the growth rates for TV advertising also remain subdued.
The other highflyer of the last ten years has been billboard advertising. Can it expect a continuation of its unique enduring success?
Outdoor advertising will continue to develop well in the next few years because it is creative and new forms of offering are constantly being added. Catchword electronic advertising or e-boards in train stations - here one can definitely speak of a certain pent-up demand, also compared to other countries. Outdoor advertising has an important emotional component, which makes it very attractive. Nevertheless, outdoor advertising will not grow into a hype. The really big growth rates were recorded in the mid-1990s, but since then they have slowed down again somewhat.
The main losers in the past decade were the daily newspapers. The situation was particularly dramatic in 2001 and 2002: they accounted for 82 percent of the total loss in these two years. Will the importance of daily newspapers as an advertising platform continue to dwindle at the pace we have just experienced?
You have to put things into perspective a bit, because the daily newspapers are
by far the biggest advertising medium in Switzerland. That's why they suffer the most when the industry as a whole is doing badly. But they are also hit particularly hard because they have greatly increased their cost structures in the good years. However, the situation of daily newspapers should not be overdramatized; the rest of the media industry, which lives from advertising, has also experienced a fairly dramatic slump.
How can daily newspapers make up ground?
Newspapers have structural problems that are primarily related to
of the younger readership. Advertising has a strong affinity with younger target groups. That's why daily newspapers need to fundamentally rethink their business models. It's not as if young people don't pick up newspapers as a matter of principle. The example of 20 Minuten teaches us otherwise. But that doesn't mean that I recommend launching a free newspaper. But the daily newspapers must make an effort to build sustainable new business models that are also increasingly aimed at young people. But that will take time. According to our long-term advertising market study, the printed media will not have found any recipes for halting their decline by 2006.
Daily newspapers have lost nearly ten percent of their advertising dollars in the last ten years, while TV close-up has caught up with general-interest magazines.
WW Mr. Trappel, when will the upswing come? Last fall, you predicted that advertising spending would grow by six percent in 2003. That would be nice, of course, but it's definitely not going to happen. What is your new forecast for the current year?Josef Trappel Forecasts are always an estimate of the possibilities and opportunities that arise from the information available at a given time. In the nineties, we had the situation several times where two bad years were followed by a very good one. This pattern could repeat itself now. However, there are external risk factors, such as the threat of war against Iraq. From today's perspective, an economic recovery is at best still conceivable in the course of the second half of the year. But that would be very late for an advertising upswing.
So should we expect zero growth this year, or even more likely a further decline in advertising investment?
The macroeconomic environment is not so bad that we have to brace ourselves for minus growth again. At the moment, we expect stagnation or even slight growth this year.
The long-term advertising market study from your company predicts that advertising spending will develop at a brisk pace in the period up to 2012. Advertising spending is expected to grow by an average of more than three percent per year. Doesn't the current trend force you to revise this long-term forecast downward as well?
No, we still expect this growth to occur. Our long-term view is based on the intensified competitive constellations, which will inevitably and sustainably increase the demand for market communication. This is especially true for some very advertising-intensive sectors such as the IT, telecom and financial industries. These are characterized by increasingly similar products that can ultimately only be differentiated through marketing communication. The same differentiation problem preoccupies many other sectors as well, for example the automotive industry, the electricity markets, or the entire food industry. We are therefore convinced that advertising volumes will grow in the long term.
Might the economic future not be more uncomfortable than is currently hoped?
I cannot answer this question, because we are not economic researchers. In the medium to long term, we expect moderate economic growth of around two percent.
Among the media, there are also encouraging examples such as television, which has vigorously expanded its share of advertising spending over the past ten years. But not quite as quickly as was expected a few years ago. Will the much-vaunted race to catch up with the German advertising market, for example, still become reality?
Germany was a special case that will not be repeated here. That's because in our neighboring country, television's advertising boom was directly linked to the triumph of private television. There is no such thing in sight in Switzerland. Of course, TV advertising will also increase in our country. But not at an accelerated rate, but rather at a slower rate. This also has to do with the fact that TV usage in Switzerland is still much lower than in our neighboring countries. Advertising follows usage, and because this only grows slowly with TV, the growth rates for TV advertising also remain subdued.
The other highflyer of the last ten years has been billboard advertising. Can it expect a continuation of its unique enduring success?
Outdoor advertising will continue to develop well in the next few years because it is creative and new forms of offering are constantly being added. Catchword electronic advertising or e-boards in train stations - here one can definitely speak of a certain pent-up demand, also compared to other countries. Outdoor advertising has an important emotional component, which makes it very attractive. Nevertheless, outdoor advertising will not grow into a hype. The really big growth rates were recorded in the mid-1990s, but since then they have slowed down again somewhat.
The main losers in the past decade were the daily newspapers. The situation was particularly dramatic in 2001 and 2002: they accounted for 82 percent of the total loss in these two years. Will the importance of daily newspapers as an advertising platform continue to dwindle at the pace we have just experienced?
You have to put things into perspective a bit, because the daily newspapers are
by far the biggest advertising medium in Switzerland. That's why they suffer the most when the industry as a whole is doing badly. But they are also hit particularly hard because they have greatly increased their cost structures in the good years. However, the situation of daily newspapers should not be overdramatized; the rest of the media industry, which lives from advertising, has also experienced a fairly dramatic slump.
How can daily newspapers make up ground?
Newspapers have structural problems that are primarily related to
of the younger readership. Advertising has a strong affinity with younger target groups. That's why daily newspapers need to fundamentally rethink their business models. It's not as if young people don't pick up newspapers as a matter of principle. The example of 20 Minuten teaches us otherwise. But that doesn't mean that I recommend launching a free newspaper. But the daily newspapers must make an effort to build sustainable new business models that are also increasingly aimed at young people. But that will take time. According to our long-term advertising market study, the printed media will not have found any recipes for halting their decline by 2006.
Daily newspapers have lost nearly ten percent of their advertising dollars in the last ten years, while TV close-up has caught up with general-interest magazines.
Interview: Daniel Schifferle
