Sir Martin Sorrell has said that the slowdown in digital newspaper advertising growth is proof that publishers should have paywalls.
Speaking at the Society of Editors conference, the WPP chief executive said that a range of factors are contributing to clients reassessing the efficacy of digital ad spend levels, which will make it difficult for publishers solely relying on digital advertising income.
“I personally believe that paywalls are the way to go,” said Sorrell. “If you have content that has value consumers will pay for it. You have to get your mind around the fact that digital [advertising] is going to be less profitable. If that [economic reality] is what you are moving into you’ve got to make cost adjustments. [And] be much more free thinking and flexible about how to make revenue.”
In the past six months newspapers have been hit by unprecedented falls in print advertising of up to 30% in some weeks, an issue compounded by digital advertising growth slowing to as little as single-digit rates at some publishers.
Sorrell said that WPP, the world’s biggest marketing services company which spends $76bn on advertising on behalf of clients annually, has been re-evaluating the efficacy of its advertising spend on giants such as Google and Facebook.
Sorrell pointed to concerns including independent research that showed that advertisers were paying for video ads on YouTube that were viewed by “bots”, computer programs that mimic the behaviour of internet users.
Other issues include that half of video ads are viewed with no sound and that Facebook charges a “view” of a video ad at as little as 3 seconds.
“The measurement system is not adequately detailed enough,” he said. “Our clients have been paying for video views that weren’t there. The hurdle is not high enough for online video. For TV, print, magazines, radio, outdoor the hurdle is much higher. The bots issue, the measurement issue. Maybe people have over-invested [in Facebook and Google], invested at too high a price. And I would tell you that a lot of digital people are worried about it.”
He said that there has also been a re-evaluation of the power of advertising with newspaper brands.
Sorrell has traditionally argued that on the basis of how much time consumers spend with different media advertisers have spent far too much on newspapers.
Figures from the US show that consumers spent about 5% of their time reading newspaper content, yet the medium took 17% of all advertising spend.
He said measurement techniques have developed beyond the simple time versus ad spend ratio which make an argument that newspapers are more valuable.
“Data in Canada, Australia, the UK, the US and elsewhere shows it is not just a question about time spent, it is also about engagement,” he said. “Data from many sources shows that when people engage with newspapers in a traditional form, digital too, the quality of the time they spend is much higher than we first thought.”
Sorrell said that the big opportunity for publishers is in mobile which he said is hugely under-invested – in the US mobile accounts for 24% of consumers’ media consumption time but only 8% of total advertising spend.
“The flipside is [advertisers are] not investing enough in mobile and there stands the opportunity,” he said.
He also said that he was concerned about ad blocking, but it had yet to make a major impact on the advertising market.
“90% of activity on smartphones is using apps which are not subject to ad blockers,” he said. “Do I worry about it? Yes. The same way I worried about [ad-skipping on] personal video recorders. We found a way of dealing with that. Do I think it is affecting things now? No I don’t, not materially. The biggest thing [to counter ad blocking] would be for Google to turn ad blocking off on YouTube. That would be the most potent thing.”