Thursday, October 19, 2006

Newspaper Ad Sales Decline

A number of articles in the Wall Street Journal and the NY Times discuss the decline in newspaper advertising. Here's a quote from today's NY Times article:

"Advertising sales continues to sag at major newspaper publishers, judging by the quarterly results reported today by The New York Times Company and the Tribune Company, owner of the Los Angeles Times, Chicago Tribune and Newsday.

For the third quarter, The Times Company’s overall revenue declined to $739,6 million, 2.4 percent less than the comparable quarter last year, mainly because of a 4.2 percent fall in advertising revenue, the company reported. At Tribune, revenue fell to $1.35 billion, a 2.5 percent decline from a year earlier; revenue from print advertising fell 2.2 percent, mostly because of weak sales at Newsday."

The explosion of online media, advertising and classifieds is reducing the share of spend in newspapers. For example overall advertising spend is forecast to be in the low single digits whereas search advertising is in the 20-30% growth range. This makes sense. First, the eyeballs are moving. Fewer and fewer read the newspaper when there is searchable and customizable content on the web. Second, why bother culling through a reams of tiny print when you can search for a car, home, or baseball tickets using a local search engine or a free listing service like Craigslist.

You can even see some desperation on the part of newspapers. I still get the Wall Street Journal paper delivered at home (there are certain places where the laptop is not feasible). I noticed that the vaulted Journal now has cheesy color ads on the front page and editorial section. The need to make up for lost dollars is so great that ads show up where no self repecting editor would have ever allow them. The next thing is to have paid logos/mini-ads of the reported companies in the actual article.

Still, if the content can be of high quality online, smart journalists will do well. The distribution infrastructure will diminish and the online ads can be tracked more effectively. That would command a premium vs. other sources for ad placement. Moreover, like, and ESPN Insider, subscription fees can go directly to the bottom line as opposed to subscription fees that only pay for the actual paper and distribution. In the end it is about strong content, the normal AP reporting has less value online unless it is breaking news.

The challenge will be for the traditional newspaper will be to find it's strongest niche. Today, it was reported that the NY Times is losing money on the Boston Globe, a paper it purchased in $1.1 billion . Why read the Boston Globe when the NY Times general online content is better? So, the Globe has to focus more on deep local analysis and sports outreach online. This is something that it really has not tapped. While there are good articles, polls, and chat online, I know the ads are tuned effectively to the reader. The current online Globe Sports section has this awful bowling ad that eats the screen. If they were smart, they would know I'm a Sox fan from California and give me something more relevant to me - ad to buy 2007 A's - Red Sox tickets.

Because things that were forecasted in the mid 90s are finally happening this whole area will be very exciting to watch.

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