Month: June 2009

media innovation doesn't change shape of ad spending distribution

Looking at the top U.S. magazine advertisers from 1913 to 1929 shows a lot of familiar brands.  Proctor & Gamble, the leading magazine advertiser in 1913, was also the largest U.S. advertising spender from 1963 to 1986 and 1991 to 1996.[1]  Quaker Oats, Colgate, Kodak, Kellogg’s Corn Flakes, Goodyear Tire, B.F. Goodrich, and General Electric, among other familiar names, were all leading magazine advertisers in 1913.  Having a brand name become well known is an enduring asset.  Astonishing new communications technologies developed since 1913 haven’t obliterated brand names established with primitive print technology.

The distributional shape of print advertising spending among companies ranked by print advertising spending has changed little with the development of radio, television, and other new advertising media.  In the 1920s, the largest 75 U.S. national magazine advertisers, placed in descending order of advertising spending, are well described by a power law distribution.  The approximating linear slope of the distribution in log(ad spending) vs log(rank) space is -0.47.   The top 75 U.S. print advertisers in 1999 had a corresponding approximating slope of -0.54. The scale of advertising spending has grown enormously along with the economy at a whole.[2]  But the shape of the leading advertiser distribution, like the share of total advertising in GDP and average advertising to sales ratios across companies, changed little from the 1920s to the end of the century.

This regularity is consistent with an analogous regularity in the company-size distribution and with company size determining advertising expenditure.  Economists have long recognized that power laws describe well company size distributions, as well as many distributions of symbolic goods, including given names. If advertising spending is is a multiplicative share of company size (total sales), then the advertising spending distribution will have a distribution like that of company size.

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Notes:

[1] Based on Ad Age’s list of leading national advertisers, 1954-1997, summarized in Robert Coen, “Marketing elite,” p. 128 in Advertising Age Special Issue, The Advertising Century (1999).  The leading advertiser from 1955 to 1962 was General Motors, and from 1987 to 1989, Phillip Morris.

[2]  Total U.S. advertising spending in 1999 was roughly 200 times greater than in 1913.  See the Coen Ad Expenditure Dataset.  The largest print advertising spender in 1999, Macy’s Department Stores, spent roughly 100 times more than the largest print advertising spender in 1913. I estimate the latter assuming that the Crowell list covers 40% of magazine advertising for the leading advertiser (Proctor & Gamble) and that magazine advertising account for half of total print advertising.

Data:  Here’s the top 75 U.S. national magazine advertisers from 1913 to 1929 as an Excel workbook, with advertising expenditure calculated from Crowell’s magazine set and reported in Crowell’s National Markets & National Advertisers.  Here’s data from Ad Age on the Top 200 U.S. advertisers in 1999 as an Excel workbook. The top 75 print advertisers within this latter set probably is a good approximation for the top 75 print advertisers over-all.   In any case, those data are the basis for the 1999 estimate reported above.

success of selection in photography

Robert Frank’s The Americans is a monument to natural selection in photography.  For nine months in 1955-56, Frank traveled across the U.S. and photographed natural (not posed, not arranged for photographing) subjects.  He made about 27,000 photographs in this part of his project.  Then he spent a year selecting, editing, and sequencing photographs from this collection to produce The Americans.  That book contains 83 photographs.  The U.S. National Gallery of Art, which owns the original photographs included in The Americans, has declared it “the single most important book of photographs published since World War II.”

Suppose the Internet and Flickr had existed in 1956.  Suppose Frank had uploaded all 27,000 of his photographs to Flickr and shared them under a permissive Creative Commons license.  A large number of Internet users could have reviewed, discussed, rated, and shared Frank’s photographs. What would have happened?  I doubt that any of the 83 photographs in The Americans would have attracted a large number of viewers.

A basic idea of biological evolution is a trade-off between the number of offspring and parental investment in individual offspring.  Modeling the population effects of this trade-off,  r/K selection theory differentiates between r-selected species, which produce many offspring each with a relatively low chance of survival, and K-selected species, which produce few offspring each with a relatively high chance of survival.  The Americans achieved reproductive success as a K-selected species of photographic work.

Frank’s environment helps to explain The Americans‘ success as K-selected photography. Elite, artistic photography post-World War II was a stable, highly competitive field.  That type of environment favors K-selected species. A more interesting environmental factor is more specific.  The National Gallery’s exhibition press release states that The Americans “revealed a country that many knew existed but few had acknowledged.”  Getting persons to acknowledge particular aspects of reality requires directing attention and concentrating discussion. A small set of photographs does that better than a large set.

momentous day in communications history

In its first sentence, an Act of June 19, 1934 established the U.S. Federal Communications Commission (FCC):

For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nationwide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communication, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is hereby created a commission to be known as the ”Federal Communications Commission,” which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this Act.

In all that the FCC does, this Act provides the pattern for the FCC to follow.  An important aspect of FCC procedure is notice-and-comment rulemaking.  Undoubtedly recognizing its distinguished forebearers, Facebook recently instituted a similar procedure.

Celebrate the seventy-fifth anniversary of the FCC by enjoying the many different ways in which you can communicate.

historic patterns of paying for content

Compared to periodicals, newspapers have developed a business model much less propitious for profitably distributing content in a digital world.  Most of newspapers’ revenue historically has come from newspaper establishments integrated with the business of printing.  A much larger share of periodicals’ revenue has come from publishing establishments not integrated into printing.  Accounting for frequency of issues, newspapers produce much more, lower quality printed paper than do periodicals.  Given the greater weight of paper in their business, newspapers had a stronger incentive than periodicals to invest in paper-distribution systems.  Not surprisingly, newspapers developed special newspaper delivery networks, but periodicals did not.  Newspapers have developed a romance of journalism.  However, the newspaper business historically has been mainly about cheaply printing and rapidly distributing a large amount of paper.

Both newspapers and periodicals have sold general-interest content, but newspapers have relied more heavily on advertising revenue.  In 1880, subscriptions and sales amounted to 51%  and 61% of U.S. newspapers’ and periodicals’ content-related revenue, respectively.  By 2007, these statistics had dropped to 22% and 39% for newspapers and periodicals, respectively.  Within the over-all shift toward advertising revenue, periodicals show that subscriptions and sales can play a relatively large role in supporting general-interest content.  In 1996, subscriptions and sales amounted to 49% of U.S. general-interest periodicals’ revenue.

Content-creation businesses in the future will be more like periodicals than newspapers. Cheaply printing and rapidly distributing  large amounts of paper will remain a viable business.  It’s now the business of companies like FedEx Kinkos.  Future content-creation businesses probably won’t be tightly integrated with particular media and distribution systems.  With appreciation for the businesses of general-interest periodicals in the past, future creators of general-interest content can aspire to having about half of their revenue coming from subscriptions and sales. Of course, just as for periodicals, many will fail.  The periodical business has much greater entry and exit of firms than the newspapers business does. In this way, too, digital content businesses will be more like periodicals than newspapers.

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Data note:   In the U.S. in 1939, 99% of newspaper revenue came from newspaper publishing establishments also engaged in printing.  For periodicals, the corresponding figure is 43%. The data are available and sourced in the newspapers and periodicals business integration spreadsheet.  From 1960 to 1979, the average number of pages per issue of daily newspapers rose from 43 pages to 64 pages.  In 1979, advertising content accounted for 64% of newsprint in newspapers.  See the U.S. Statistical Abstract for 1980, Table 1007. Here’s a spreadsheet with data on newspapers’ and periodicals’ revenue structure from 1880 to 2007. It is also available as an Excel file.