Follow-Ups: Media, Walmart

We’ve written often on the decline of traditional media, and the effect it may have on trade promo, as retailers and suppliers look for alternatives. Recently a number of articles have piqued our thoughts on this point:

This article (on a study sponsored by the Newspaper Association of America) notes that newspapers are still cited by a majority of adults as their primary source of shopping information:

59% of adults identify newspapers as the medium they use for planning, shopping and purchase decisions, making newspapers the leading advertising medium cited by consumers for these activities.

Additionally, 73% say they read newspaper inserts, and 41% cited newspapers as their “primary medium” for checking advertising, almost double the 21% for the second-place medium, the internet.

That’s the good news. On the other hand, ad spending in newspapers dropped an incredible 29% in the second quarter:

It's the deepest downturn yet during a three-year free fall in advertising revenue-newspapers' main source of income. The magnitude of the industry's advertising losses have intensified in each of the last 12 quarters.

The question for newspapers is how much of this decline is due to the recession, and how much is the result of permanent shifts to other media. I did a little research based on an item I read about the effect of the introduction of that other disruptive new media, television, on existing entertainment forms of the era. Here’s a chart on the attendance at major league baseball games in the 40s and 50s:

After shooting up when World War II ended, attendance dropped as television started becoming commonplace in homes. The interesting point is that even after the initial drop, the recovery that followed was slow – baseball attendance did not reach twenty million again until the early sixties (when the leagues expanded). Not what newspaper, radio, and TV people want to hear, I’m sure.

A few weeks back, we wrote about Walmart’s recent request that suppliers give them a share of the suppliers’ marketing budget equal to Walmart’s portion of their sales. This blog entry looked at the subject from an interesting perspective. We are all used to the idea that the store is now an advertising/promotional medium, but Walmart’s move might lead to the retailers becoming, in effect, ad agencies:

As always, Walmart is a fringe case. They basically commanded Saatchi & Saatchi X to exist, and it did. Then, when it came time to roll out the Smart Network, they once again built an ad sales agency out of thin air (Studio2). If the cost-supplement initiative really takes off (and the Robinson-Patman issue gets resolved), I could easily see the same thing happening, with a new entity formed to allocate and spend the billions of dollars pumped in via product makers. Not too long ago, Walmart said in-store media is their most important channel, so who knows how far they'll take it when someone else is footing the bill.

What's the most likely outcome here? As Walmart and others heap more trade promotion fees on their suppliers, the overall percentage of ad dollars they control could increase dramatically. This raises several questions:

Will retailers (or at least the largest of them) continue to manage the advertising funds themselves, as they have in the past? Will existing agencies step up to the plate with services tailored to these growing programs? Or, will entirely new entities be spawned for the sole purpose of handling retailer-specific spending accounts?

If I were in the ad agency business, I’d find this rather scary. The rise of the store-as-medium has played a significant part in the current problems of traditional media. The store-as-agency might create similar problems for agencies.