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The Collapse Of The Papers

Wednesday, July 18, 2007  |  posted by Hugh Hewitt
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The sharp drop in advertising revenue at newspapers is the subject of a WSJ.com article this AM. (Subscription required.) Key graphs:

Last fall, newspaper executives and analysts were caught by surprise by the severity of a slump that took hold last summer. Since the beginning of this year, the rate of decline in advertising revenue has accelerated. Total print and online ad revenue was down 4.8% to $10.6 billion in the first quarter from a year earlier, according to the Newspaper Association of America, compared with its full-year decline in 2006 of 0.3%…

In the first quarter, revenue for every major ad category — classified, national and retail advertising — was down. The sharpest declines were for classifieds, where spending dropped 13.2% — not so much a result of competition from the Web as of economic woes affecting certain categories of advertisers. Real-estate classifieds, until recently a bright spot for the industry, have plunged along with the property market. Auto and employment classifieds are also sinking. Financial-news outlets such as the Journal are being hurt by a slump in technology advertising.

“Right now, you’ve got a perfect storm,” says Edward Atorino, an analyst with financial broker Benchmark Co. He predicts total ad revenue will fall 4.3% this year. The decline will be one of the steepest in history….

Publishers are putting initiatives in place to generate a larger portion of ad dollars through the Web. Still, analysts say that growth in Web revenue is beginning to slow and isn’t enough to offset the decline in print.

Newspapers’ online ad revenue increased 31.5% in 2006 to $2.7 billion. In the first quarter of 2007, online ad revenue increased 22.3% to $750 million. Still, online represented just 5% of the $49.3 billion in total newspaper ad revenue in 2006.

It is hard to imagine online newspaper revenues keeping up with the decline in print advertising revenues simply because advertisers have a world of options online, almost all of them more narrowly targeted and thus more efficient for the purpose of sending a message to the targeted market.

Similarly, marketing campaigns on blunderbuss television networks as opposed to more narrowly targeted cable shows may be easier for ad execs to implement, but can’t possibly have the same impact as a carefully constructed and narrowly targeted campaign that assures the available ad dollars are all going to hit the intended demographics. Radio advertising also refines the audience for the advertiser. Blogs and web sites that can prove up the background of their readers cost a lot less than the online papers and provide a much more reliable demographic.

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