How much advertising is there?

["Joseph J. Esposito" <espositoj@gmail.com>]

The recent announcement by the New York Times concerning the 
termination of its Times Select premium subscription service has 
deservedly attracted a great deal of attention, on this list and 
all over the blogosphere and "mainstream media."  The Times may 
or may not be successful with its new strategy (my own view is 
that it was the right decision, but the Times's future is by no 
means assured), but of course not all media organizations have 
the brand and cultural centrality of the Times; the Times thus is 
no model for anyone.  What I wonder about is where all the 
advertising revenue is going to come from to support all these 
media businesses, whether they are the Times, Elsevier's new 
ad-supported oncology site, or any of the two dozen new Silicon 
Valley social networking start-ups I stumbled upon in just the 
past month (owners of pets, parents of young children, human 
potential activists, financial planners, etc., etc.), not to 
mention such academic publishing services as Scholarly Exchange.

So we step into the laboratory and ask this question:  How much 
must the world's economy have to grow in order to support all 
these media businesses? A media business aggregates audiences, 
which in turn are sold to advertisers.  The advertisers have 
their own products and services to sell (and not all of them are 
media products, thank god).  If they can't sell their products, 
the advertising dries up and the media businesses scale back or 
disappear.

Let's say a company budgets 10 percent of total revenue to 
advertising. Thus, with sales of $10 million, the company spends 
$1 million on advertising.  For every dollar thus spent on 
advertising, the economy must grow by ten times that amount. 
How many shirts, stents, time share condos, cars, and toilet seat 
covers do we need?

The market isn't there for all this advertising.  The world's 
resources are not there to create the forecast volume of goods 
and services to satisfy the demand created by the advertising. 
We will run out of fossil fuel trying, and then have virtually no 
economy left to advertise anything.

The notion that the sale of advertising alone somehow can support 
the full range of information businesses is crazy.  It may work 
for the Times or South Park, and Elsevier has a shot with its new 
portal, but the fate of most advertising-supported businesses is 
oblivion.  Only the strong, the huge, and the totally distinctive 
survive.  B-level players need not apply.

Joe Esposito