On the one hand, advertisers have greatly benefited from the decline in the cost of advertising relative to gross domestic product (GDP), with much of the gains being passed onto consumers. On the other hand, traditional print publishers—who had grown accustomed to decades of rising advertising rates—are finding themselves chasing the plunging price of digital ads, as the natural forces of supply and demand drive down the price of digital ads.
This paper lays out some of the key facts underlying this debate. We show that the share of GDP going to advertising in media has dropped by roughly 25% in the United States, and other countries such as Australia, France, and Germany. The main reason: Digital ads cost less than their equivalent print counterparts. We calculate, based on several assumptions, that for every $3 that an advertiser spends on digital advertising, they would have to spend $5 on print advertising to get the same impact. The benefits of these lower prices flow directly to advertisers and consumers.
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