Newspaper Web Sites Had A Banner 2006, Increasing Revenue 31.5%, But Their Print Revenue Was Down 1.7% And There’s The Problem -- That 1.7% Drop Is More Money Than That 31.5% Gain

Philip M. Stone March 20, 2007

US newspaper advertising figures for 2006 tell the tale better than words. Print advertising was down by some $800,000 which is 1.7% less than the year before, and Online continues fantastic growth with 31.5%, about $637,000 more than the year before, but the end of the day the Internet’s gains failed to surpass print’s losses.

Those numbers released by the Newspaper Association of America indicate that the financial revenue health at newspapers is getting markedly worse. The 2006 figures are memorable only because it was the first year that when print and Internet numbers are added together that newspapers actually suffered total revenue losses from the year before. For 2006, the loss was a mere 0.32%, but a reduction all the same, whereas 2005 was 2.47% better than 2004, and 2004 was 4.5% better than 2003.

There is no way to gloss over that print’s decline has now gotten to the point  that, popular as newspaper web sites are, their additional income, even with 30% plus annual growth, is not enough to replace print’s continuing revenue declines.

And that is what probably prompted Merrill Lynch media analyst Lauren Rich Fine to say in a report last week, “When will the gains online offset the declines in print? In fairness, we do not believe there is an answer to that question yet.” She’s actually being rather polite.

All the signs are pointing to print’s decline continuing. Consider General Motors, the country’s second largest advertiser. Last year various tracking firms said GM reduced its advertising spend by some $600 million. GM actually said the cut wasn’t that much and their added expenditure in digital activities had not been tracked, but for traditional media it is still a $600 million decline. Television, magazines and newspapers all will have shared in that cut and GM gives every indication it will increase its digital spend for 2007, probably again at the expense of traditional media.

Procter & Gamble, the country’s largest advertiser, has been saying for more than a year now it intends to put more money into that advertising that is clearly measurable. Not good news for newspapers that are desperately trying to come up with measurement systems that advertisers will accept.

And then there is the huge Johnson & Johnson that last year cut some $250 million of its traditional media advertising, down to $1 billion according to TNS Media Intelligence. With J&J that probably means television was the big loser, but no doubt the rest of traditional media shared in the pain.

But it’s not at the national advertising level that newspapers suffered the worst. According to the NAA numbers, the likes of Craigslist continue to do their damage –classified revenue was down 7.1% in the fourth quarter from the year before, national was down 3.8%, and retail down 0.9%.

Dissect the print losses even more and it gets really ugly. Jobs were down 13.7% and automotive was down 11%. And with the downturn in home sales and all the subprime loan fears, real estate is taking a beating, too.

And it seems to be going from bad to worse. For February USA Today, the country’s largest circulation newspaper, reported a 14% decline in ad sales. Overall Gannett, the country’s largest newspaper publisher, reported an overall 3.8% fall in February advertising for all of its newspapers – it put the blame on bad weather – but that kind of sales retraction for whatever reason can only cause more concern in the boardroom. National advertising that had dropped 4.8% in January really bombed in February, down 13.8% because advertisers shifted spend to the Internet. Classifieds dropped 6.3%. Gannett, considered to be one of the tightest run media companies, has seen its shares plummet 7.2% this year.

Dow Jones  said advertising revenue at The Wall Street Journal, the country’s second highest circulation newspaper, fell 10% in February from a year ago, and that’s in spite of the fact it now sells advertising on its front page for a lot of dollars, which it didn’t do a year ago. Wall Street’s view – shares are down 8.5% since the beginning of the year.

All the NAA talks about in its news releases these days is how well online is doing. There’s not really a good word to be said about print except that it needs to be considered as just one platform available to newspaper advertisers. Hence NAA President and CEO John F. Sturm’s news release comment, “Advertisers recognize this multiplatform connection and value newspapers’ leadership role in online innovation. The latest data show that on average, spending on newspaper Web sites accounted for 5.4% of all newspaper ad spending. We expect this upward trend to continue as publishers continue to capture a large and growing audience on the Web, and find these sources of revenue contributing more to the bottom line.”

What we know from all the numbers thus far is that overall,5.4%, built on the back of 30% plus online growth each year, isn’t good enough.

What is also a bit amazing is that newspaper associations seem to have given up the ghost when it comes to improving print’s fortunes. When ftm wrote  recently that the $2 million American Press Institute (API) Newspaper Next project set up to reverse print’s fortunes was really too little, too late, we were chastised by the API’s Elaine R. Clisham, who wrote, “that very often the solutions to address those needs, wants and frustrations (of newspaper readers) will NOT be in the form of a newspaper.  One of the main learnings from Newspaper Next is that we in the newspaper industry have to learn to imagine information solutions very differently than just a newspaper if we are to survive, and so in all our workshops and on-site engagements we spend a lot of time working with newspaper executives to coach them to conceive solutions that may have nothing to do with ink on paper. “

So whatever is lacking in print for the reader will apparently be solved online. And advertisers are diverting more of their advertising online. Get the feeling that print is being left out somewhat in the cold?

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