Untested factoids

Henry Blodget, a disgraced securities analyst who delivers presentations, blogs about washroom attendants and runs a gossipy web site generally focused on business, recently tried to make a point about Google being “bigger than both the magazine and newspaper industries”.

Before we look under the hood, I’ll make my core point. It doesn’t matter how big Google is. The newspaper and magazine markets are just small and growing too slowly. The biggest problem with legacy print media is its size, not its digital competition.

Back to the chart: The revenues Blodget used for Google include everything – advertising, affiliate sales, product sales, interest income. Although there is scant explanation for the 2012 number (the slide claims “Google, NAA, PIB” as sources), it appears to be Google’s total revenue for 2012 ($46.039 billion) multiplied by the share of revenues derived from the U.S. market (46%):

$46.039 billion x 0.46 = $21.178 billion

A cursory check of Google’s 10-K for 2012 (available online, for free) shows that the company breaks out advertising revenues for its own and its partner sites. Why not use one of these numbers to show Google’s advertising might? Well, one reason is that it would change the narrative.

Advertising revenue from Google websites in 2012 was $31.221 billion. Borrowing the 46% share from the total revenue calculation, you can do the math:

$31.221 billion x 0.46 = $14.362 billion

By comparison, the newspaper number that Blodget picked up from the Newspaper Association of America (NAA) for advertising revenue in 2012 appears to be $18.931 billion, which represents total advertising revenue for “daily & Sunday newspaper print”. It excludes digital advertising ($3.37 billion) and a category called “niche publications, direct marketing & non-daily publication advertising” ($2.9 billion). Include those and newspaper ad revenues came to $25.316 billion in 2012.

Bizarrely, Blodget then uses Publishers Information Bureau (PIB) revenue data to claim that the U.S. magazine industry earned $19.475 billion in advertising revenue in 2012. Here are three things you want to know about that number:

  1. It is false. PIB revenues are calculated at the open rate. After discounting and agency fees, publishers may see about 30% of that revenue.
  2. Everyone knows that it is false.
  3. It represents only consumer magazines, and a cross-section of them, at that.

Google didn’t pass consumer magazines’ ad revenue in 2012. It did that in 2007 or 2008. If Blodget was looking then, he didn’t include it in this presentation.

[As a side note: Even though the number is available, Blodget excluded ad revenues ($1.599 billion) for Sunday magazines. Again, let’s decide on the story and customize the numbers to fit.]

Very few people will sit down and examine Blodget’s claims. His site promotes the chart (reporter Jim Edwards calls Google’s rise “staggering”) without question. We’ll probably hear renewed calls for the government to “so something” about Google (and Amazon, while they are at it).

The search for factoids, these magical inflection points, blinds us to the things we should be doing as publishers. Blodget could have used his moment to say that magazine ad revenues, significant as they are to the publishers who earn them, are trivial in total. As the digital world continues to shift from branded to programmatic advertising, those revenues will become something akin to a footnote.

Magazine publishers should be figuring out how to live in a post-advertising universe. Newspaper publishers should be asking themselves why their digital advertising revenues are increasing by single digits (3.7% in 2012) when the rest of the online world grows at a multiple of that figure. And readers of Business Insider should be weaning themselves off untested factoids.

About Brian O'Leary

Founder and principal of Magellan Media Consulting, Brian O’Leary helps enterprises with media and publishing components capitalize on the power of content. A veteran of more than 30 years in the publishing industry and a prolific content producer himself, Brian leverages the breadth and depth of his experience to deliver innovative content solutions.

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