Magazines & the Two-Metric System
By Rebecca McPheters

March 2004

One of the challenges confronting magazine publishers is advertisers’ use of two disparate sets of metrics – measured audience and audited circulation - to evaluate the suitability of magazine titles for inclusion in their schedules. While audience is the dominant evaluative tool, circulation also comes into play. A perceived lack of circulation “quality” can get a publication kicked off of the schedule removed – or can be used to negotiate a lower price. Both buyers and sellers devote substantial time and resources to verifying, analyzing, attacking and defending circulation.

The two-metric system reminds me of the story of the Easter ham. For years, a young girl watched as her mother cut the ham in half before she put it in the oven. When she grew up and had her own home, like her mother, she too cut the ham in two pieces before she baked it. Well, actually, she delegated the task to her husband, who did it with a saw. He was not enthusiastic. “You know this is a lot of trouble,” he complained. “Couldn’t we just have a filet, or a lamb roast - you know, something that you can do by yourself?” he asked. “I mean, why do we have to cut it in half anyway?” “I’m not quite sure, but I know it’s the way it’s always done”, his wife replied. “It’s the Easter ham. Maybe it has religious significance.” When her mother showed up for the holiday meal, she asked her to explain the significance of the two-piece ham. “Oh, sweetheart,” she exclaimed, “I only cut it in two because my oven was so small, it wouldn’t fit in any other way!”

The industry’s continued focus on circulation is analogous to halving the ham. Audited circulation gained credence as a metric – and for good reason – simply because there were no other metrics with which to compare publications. Until the 1960s, when audience measurement of print publications was introduced, circulation was the only game in town. As such, it had considerable utility as an evaluative tool - providing advertisers with assurance that what they bought was indeed being delivered. Now, with the presence of consistent and audited audience measurement by reputable firms like MRI and Scarborough, the use of circulation as a metric is as unnecessary as bisecting the Easter ham.

The value of a publication for advertisers lies in the size and the quality of the audience it provides. How many qualified prospects see an ad? As an industry, we should appropriately be moving way beyond audience to look more carefully at advertising effectiveness. We should be seeking answers to a different question: How many readers will buy the product? Instead, we’re stuck in the anachronistic practice of actually counting copies. It’s not how many copies are purchased, but how well they are read and how likely their readers are to respond to advertising messages that determine the value they offer to the advertiser!

It’s true that old habits die hard, but why has this one hung on for so long? Publishers and advertisers share the blame. Most publishing companies are still organized into three silos: editorial, advertising, and circulation. Each group is responsible for managing it own revenues and/or costs. Consequently, most circulators are still focused on “circulation contribution” or the net contribution of circulation to the bottom line as measured by circulation revenue minus circulation costs. But since the success – or failure – of circulation strategies ultimately affects advertising revenue, they should be focused not on circulation contribution, but on the publication’s bottom line. The distinction is an important one. If the goal is overall profitability, the competent circulator will make very different decisions than if the goal is to maximize circ contribution.

How does this work? In combination with editorial, circulation strategies and tactics are the principal determinants of measured audience. Measured audience is the primary economic lever in magazine publishing, because it determines how appealing a magazine is to advertisers and how likely it is to make an advertisers’ schedule. It also affects how much publishers can charge for those pages. In combination, these two factors – pages and page rates - determine the level of ad advertising revenue that a publication will enjoy. While audience measurement is not perfect – and is subject to statistical variance – in general, it is an accurate reflection of advertiser value.

Publishers have historically resisted understanding the importance of measured audience – viewing it as an unduly complicated process with myriad vagaries, and over which they could exercise no control. In many organizations, circulators are never even shown audience numbers, much less held accountable for them. Audience numbers are naively viewed only as an ad sales tool– and rarely permeate the walls of the advertising silo into the circulation or editorial areas - where they can also have substantial utility.

Having an audience strategy is essential not only to maximizing the value a publication offers to its advertisers, but also to maximizing its profitability. Most publications, i.e. those that are dependent on advertising and audience strategy should replace their “circulation” strategy with an audience strategy.

Advertisers are understandably reluctant to abandon the current system because a circulation focus has helped them negotiate lower prices for their advertising. However, it has also ensured that they actually receive less value, since publishers have been required to devote too much attention to delivering upon their ratebase guarantees and managing to what they have to report on their ABC statements, and not enough in managing audience delivery. Both advertisers and publishers would be better served if this attention were diverted to building better audiences!