Bill Gates predicts hard times for traditional media advertising

The Seattle Times covered Bill Gates speech at Microsoft's Strategic Account Summit 2007, a gathering of Microsoft's top global advertising customers. Bill made the case for Microsoft's AdCenter, and predicted hard times ahead for traditional media advertising. Here is a link to a webcast of Bill's speech. (Picture courtesy of CNET Networks)

"We're saying newspapers will go online, and there will be massive innovation that comes out of that. We're saying that TV, the biggest ad market in the world, will completely go online and have the kind of targeting interaction that you only get out on the Web today," he said. "As dramatic as things happening on the Web are, that's actually what all advertising ... will be in the future." "I have a lot of friends in the newspaper industry and, of course, this is a tough, wrenching change for them because the number of people who actually buy, subscribe to the newspaper and read it has started an inexorable decline."

You might recall a quote from my blog last year "Are newspapers and magazines dying?"

At its peak in 2000, The Mercury News had a Sunday circulation of 326,839 subscribers, according to the newspaper. Last September, the company counted 278,470 Sunday subscribers, a drop of about 15 percent. Revenue from the company's help-wanted ads fell to $18 million a year from more than $118 million, according to the paper. The newsroom was whittled to 280 people from 404, a 30 percent decline.

The Seattle Times story included these statistics "

Advertisers will spend about $445.5 billion globally in 2007, according to ZenithOptimedia's most recent quarterly forecast. Of that, online is expected to get 7 percent of the pie compared with newspapers' 28.3 percent. By 2009, online is forecast to grow to 8.7 percent, while newspapers' share dips to 27 percent.

I was surprised by the ZenithOptimedia predictions, and expect the transition to online advertising to move much faster. However, every 1% of market share is worth $4.5 Billion so it is a lot of money no matter how you slice it.

Here is another Gates quote from the Seattle Times story;

The traditional Yellow Pages are doomed as voice-activated Internet searches combined with on-screen interfaces on smart mobile devices get better and proliferate, Gates said. The company's recent acquisition of voice-technology provider TellMe is accelerating the trend.

Microsoft's recent acquisitions of MotionBridge and Screentonic, coupled with the acquisition of TellMe will support Gates vision of search and advertising on smart phones.

Newspapers and magazines are the first traditional media to feel the pinch from web based advertising, but it will eventually affect radio and television as well. Traditional media is not going away and will not be totally disrupted by web advertising, but growth and profit margins will be adversely impacted. There is plenty of time for traditional media to adjust and take advantage of the shift. Sadly, few will do so.

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Comments

[Marc Cohen]

I think Bill is correct that traditional media is in decline. However, I would include the Internet as a traditional medium. I just read about a study that found click through rates in Europe have declined steadily over the last two years. Microsoft is really late to the Internet, especially search. I would suggest Microsoft look at truly new advertising media such as ad-supported downloaded music.
Check out the Ad-Supported Music Central blog:
http://ad-supported-music.blogspot.com/