Some of the worst defeats for newspapers in 2009 came in online advertising. Although a relatively small part of the business, the industry posted smaller percentage revenue declines than print ads. Newspapers' losses revealed the hollowness of preceding years double-digit growth, which were built almost entirely on online classifieds chained to print listings and supported by a bubble economy.
In the middle years of this decade, newspaper publishers proudly pointed to quarterly year-over-year growth rates of 30% to 40% in online revenues -- matching, and at times even exceeding, the growth rate of online advertising in general.
As print revenues peaked and began to decline in 2005-2006, online revenues became the all-important bright spot on newspaper ledgers. They were the good news that publishers could cite in their quarterly earnings results to take the sting out of the ominous trend in print.
But this expansion would prove unsustainable: From an annual growth rate of 31.5% in 2006, newspapers' online revenues slipped to an 18.8% growth rate in 2007 followed by a 1.8% decline in 2008, while online revenue in the first three quarters of 2009 declined 15.5% compared to the same period in 2008, according to the Newspaper Association of America.
This compares with general Internet advertising growth rates of 35% in 2006, 25% in 2007, 10.6% in 2008, and a modest 5% decline in the first three quarters of 2009, per the Interactive Advertising Bureau.
Newspapers' online revenues were vulnerable for several reasons.
First, they were concentrated in online classifieds, which were even more dependent on the health of the broader economy than search and display. The collapse of the real estate, automobile and job markets from 2006-2009 systematically gutted all three of the main classified revenue streams.
Second, online classified sales never became independent of newspapers' print product. Most of the online business was based on "up-sells" from print listings, so the implosion of the print business took the online business with it.
Other types of Internet advertising -- including search and display -- have failed to deliver substantial ad revenues for most newspaper publishers, even as online audience figures grew to enviable heights. Between the first three quarters of 2007 and the first three quarters of 2009, newspaper online revenues declined 14.5% while the total audience of newspaper Web sites increased 31% (from 23.5 billion page views to 30.8 billion).
Acknowledging their failure to monetize large audiences through advertising, some newspaper publishers have recently indicated that they intend to start charging online visitors directly for at least some kinds of content.
But analysts who follow the newspaper business are skeptical. Last month, Fitch Ratings warned that only a few industry leaders, like The Wall Street Journal and The New York Times, have a reasonable hope of succeeding with this strategy.
In areas such as national, international, business and entertainment, news content has become commoditized, with the majority of metro dailies offering content so similar that readers don't feel a need to pay for it. Thus, Fitch expects most newspapers that experiment with pay walls will reverse course after seeing online audiences dwindle. That's especially true since other news outlets are likely to continue offering their content for free.
COMMENTARY: It's been a tough slog for the nation's newspapers, and the same fate has occurred to print publications, with many memorable magazines succumming to the recession in 2009.
Rising newspaper printing costs (remember when it cost 25 cents for a newspaper, now its 75 cents), and the growing trend by readers to rely more on the Internet for their daily news and information, has been the death knell for the newspaper industry.
The cost-benefit is much higher online than offline, and the difficulty of most newspapers to monetize online content after the financial meltdown was the key reason why online advertising has stalled.
Courtesy of an article dated December 30, 2009 appearing in MediaPost Publications Media Daily News
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