Tracking the effect of advertising expenditures on paper use.

Advertising expenditures in the United States increased by nearly US$ 100 billion during 1994-2003 with an estimate for 2003 of US$ 248 billion. Today, print media accounts for 30% of the total expenditure. Within print media, advertising in newspapers and direct mail is the biggest item. Both are at US$ 45 billion--identical to broadcast television. Newspaper and broadcast television advertising expenditures have developed at the same rate. Both have lost market share to cable television, radio, and the Internet. Direct mail is a steady performer. Magazines and yellow pages have lost market share to other areas. The future outlook is positive. Expert estimates for 2004 growth in ad expenditures range from 3% to 6.5%. The key driver is a surging economy reinforced by political advertising and the Olympics. The Hispanic media is also a large growth driver.

Advertising expenditures for magazines during 1994-2003 increased from US$ 7.9 billion to US$ 16.7 billion. Advertising revenues are critical for magazines. Advertising categories differ with automobiles and pharmaceuticals topping the list with greater than 20% growth. The travel and financial categories are lagging.

Growth opportunities for consumer magazines are in health advertisements, a resurgence of travel and automobile advertisements, new title launches, and consolidation and leveraging of advertisements across multiple titles. Threats include a weak economy, a weak advertising market, postal rate increases, gasoline surcharges that raise delivery costs, newsstand distribution problems, and growing competition for leisure time. Business publications are vulnerable to economic activity and consolidation of advertisers.

Paper consumption volume change has been flat in magazines. The principal issue concerning paper consumption is not the loss of viability of magazines as an advertising medium but big increases in advertising page rates. These are consuming most advertising revenue. During the first seven months of 2003, revenues increased 9.6%, and the number of advertising pages improved by 1.6%. The total forecast for paper use for 2004 is a 4.8% increase over 2002.

DIRECT MAIL TO GROW

Advertising expenditures for direct mail have increased from US$ 29 billion to US$ 49 billion in 2003. Domestic mail pieces handled in the United States during the first half of 2003 were flat for a second consecutive quarter. Catalogs and direct mail offers gained more than 3% indicating an increase in direct marketing activity during the spring selling season. Many catalogers and direct mail marketers continued mailing despite a tepid economy and the military action in Iraq.

NATIONAL ADVERTISING IN NEWSPAPERS

Newspapers are key outlets for advertisers. Total newspaper advertising decreased from 27% of all advertising spending in 1983 to less than 19% in 2003, but expenditures grew from US$ 34 billion to US$ 46 billion. National advertising comprises the bulk of the growth driven by telecommunication, factory automotive, and coupon marketing. Classified advertising revenues--mostly local--continue to be weak largely due to the emergence of online job posting websites. While newspaper publishers anticipate an advertising growth rebound, future demand should remain slightly negative.

YELLOW PAGES TREAD WATER

Ad expenditures for yellow pages has grown from US$ 9.8 billion in 1994 to US$ 13.9 billion in 2003. Typically, most advertisements are for local services and businesses. The demand for uncoated groundwood used in telephone directories is slightly negative to static.

Newspapers      22%
Magazines        5%
Yellow pages     7%
Direct mail     20%
Broadcast TV    20%
Cable TV         3%
Radio            7%
Misc.           16%

2003
$248 billion

Newspapers      19%    $46
Magazines        5%    $12
Yellow pages     6%    $14
Direct mail     19%    $49
Broadcast TV    17%    $43
Cable TV         7%    $17
Radio            8%    $20
Internet         2%     $5
Misc.           17%    $42

U.S. advertising expenditure 1994-2003

Note: Table made from pie chart.

Editor's Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, a provider of marketing and consulting services. For more information, please contact Soile Kilpi by email at [e-mail], or by phone at [phone].