I intended to enter a brief hiatus after producing a thoughtful piece on how advertising rates have moved over time. Alas, the Alameda County libraries no longer carry the Standard Rate and Data Service (SRDS) ad rate references because the series became too cost prohibitive.
My hypothesis is that quoted ad rates have stagnated over time -- the result of evolving advertising media and an explosion of suppliers. Quoted rates are likely flat, but actual rates (analogous to the discounted price of DSL, versus what providers claim you would pay for a competitor) are most likely falling.
Case in point, Google's bid service for major newspaper ads. It's like Priceline for air travel. Put in a bid, see if it's accepted by the Los Angeles Times, San Francisco Chronicle, or whichever rag you've chosen. Ditto for radio. In fact, the radio series has caused a stir with broadcast companies concerned if the
FCC will label the lowest bid as the rate that all political campaigns receive.
Just to keep this post BLS relevant, I ran a quick list of producer price indexes (PPI) to see how prices have changed. According to BLS, cable network advertising services' prices have fallen in price. In July 2007, prices were down 11.9 percent from the previous year. Radio station time sales' prices were down 2.6 percent. So far, the hypothesis seems to hold. BLS does ask respondents for price adjustments such as discounts.
For Daily and Sunday newspaper advertising sales? Up, 2.5 percent from the previous July. Wha?!! In fact, newspaper ad prices have been on a perpetual price climb in the 4 to 5 percent range for ten years now. Granted, the 2.5 percent represents a deceleration, perhaps a harbinger of things to come. In light of revenue losses, does this mean that the great media moguls do not have a sense of price elasticity? Are they raising prices and losing clients?
I doubt that is the case. Hearst did not build an empire on poor economic logic.
Instead, I'd look more closely at the process of collecting PPI data. BLS sends data collectors out with government forms to be filled out by newspaper personnel on a "voluntary" basis. Newspaper staff, fearful of their company's solvency, are less inclined to put a lot of effort into any paperwork that does not fulfill the ultimate mission of profitability. Further, they are now understaffed, having lost co-workers to attrition, or worse. Trading places, how much effort would you put into figuring out how much the company has given to advertisers in discounts?
Like SRDS, how real are BLS figures on ad rates? As a business person, every time I've declined an advertisers' pitch, I've been offered another rate -- sometimes discounted by 50 percent. It's a wild world of advertising out there, looking for some type of arbitrage.
