Is Advertising Dead? The Story The New York Times Missed

The New York Times Company acknowledged Thursday that the advertising-based business model that served it so well for over a century is dead. Weak earnings forced the company to develop a strategy that will rely more on subscription fees and paid content. This shift at America's paper of record is a clear sign that the publishing industry can no longer rely on advertising as a core source of cash flow. Companies that produce content will become more like Netflix, which charges subscribers for the content they want to access. While advertising won't completely disappear, it will likely be relegated to an ancillary role at best.

Small-business owners should pay attention to the lessons being learned the hard way by The New York Times and the entire publishing industry. Above all, it's important to emphasize that no business model lasts forever. It's easy to become complacent and enjoy the financial fruits of a product, model, idea or piece of intellectual property that has worked in the past. But our economy is dynamic and innovative, which necessarily implies change. Many small-business owners sense these shifts only after a competitor takes a key client, or their pricing becomes uncompetitive or some other factor impacts them adversely. It is far harder to change course after your cash flow has been impacted or revenues are lost. Anticipating shifts in the economy, your industry or among your customer base that adversely affect your ability to generate revenues is key for long-term survival.

In the case of the Times, it had nearly two decades of notice but choose to ignore what was obvious to everyone else. That company has the benefit of a global brand and significant cash flow to help survive what was clearly a strategic error in ignoring industry trends. Small businesses aren't that well equipped with financial and marketing buffers. If your company fails to act accordingly and find new ways to make money when the old ways start to fail, the result will likely be bankruptcy and failure.

[Bloomberg]

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