Newspaper ad sales head to 25-year low

Newspaper advertising revenues are on track this year to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005.

Even through the rate of sales decay at newspapers slowed to -5.6% in the second quarter of this year from -9.7% in the first three months, the total $12.4 billion in sales booked in the first half of 2010 were 7.6% lower than the depressed sales in the first six months of the calamitous year of 2009. In 2009, the combined print and online ad sales at newspapers fell 27.2% to $27.6 billion.

The Newspaper Association of America, an industry-funded trade group, provided all sales statistics cited here. The second-quarter sales figures were posted on its website today.

Following a historic pattern than shows newspapers take in roughly 47% of their ad revenue in the first half of the year, it is possible to project that full-year sales for the industry will drop some $2 billion this year to finish at approximately $26.5 billion. Assuming no major positive or negative changes in the economy between now and the end of the year, this will put newspaper ad sales back to the lowest level they have seen since 1985.

As illustrated in the chart below, the decline in print newspaper advertising sales has been deep and broad since the industry achieved its all-time high turnover of $49.4 billion in 2005. Here is how first-half ad sales in 2010 compare with those in the same period of 2005:

:: Employment want-ads swooned 85.2% to $358 million in the first half of this year from $2.4 billion in 2005.

:: Automotive classified dropped 73.3% to $587 million from $2.2 billion.

:: Real estate classified slid 72.8% to $519 million from $1.9 billion.

:: National advertising declined 45.7% to $2.1 billion from $3.9 billion.

:: Retail advertising fell 41.1% to $6.2 billion from $10.5 billion.

:: “Other” classified advertising slipped 9.1% to $1.2 billion from $1.3 billion. Many publishers report that the comparative health of this category has been sustained by the legal notices that are required in many jurisdictions by the real estate foreclosure process.

The only bright spot for publishers in the last five years is that online advertising has climbed 54.3% to $1.5 billion in the first half of 2010 from $955 million in 2005.

Unfortunately, this category represented only 11.8% of total newspaper revenues in the first half of 2010 and its growth has done nothing to offset the prodigious declines in all the other advertising verticals.

Further, as reported previously here, ad sales at newspapers and magazines continued to fall in the first part of this year while television, Internet and radio sales rebounded handsomely from the setbacks they suffered in the deepest throes of the recession.

Next big thing? TV-newspaper staff mergers

Newspaper and TV newsroom mergers could become the next big thing as profit-pressed publishers and broadcasters seek to cut costs and strengthen their digital presence.

But will hybrid newsrooms live up the promises of producing better journalism? The performance of the longest-running major newsroom merger – the combination 10 years ago of the Tampa Tribune and WFLA – is far from encouraging.

The latest cross-media merger was announced yesterday in Salt Lake City, where the Deseret News said it planned to shed 43% of its staff and move into the newsroom of the KSL-TV, an NBC affiliate that also operates AM and FM news radio stations. All four properties are owned by Deseret Media Companies, which in turn is owned by The Church of Jesus Christ of the Latter-day Saints.

The draconian effort to save some semblance of the News comes in spite of the fact that it long has participated in another supposedly advantageous partnership.

Since 1952, the newspaper has been in a joint operating agreement with the Salt Lake Tribune, where the jointly owned Newspaper Agency Co. handles ad sales, production and delivery for both properties. MediaNews Group owns the Tribune and the two publishers split the profits from an operation that is more efficient than would be possible if each paper maintained its own sales and production infrastructure.

But times have been tough for even JOAs, as witness the shutdowns last year of the Rocky Mountain News, Seattle Post-Intelligencer and Tucson Citizen.

At a time when increasingly scarce local advertising revenues are pinching the once-enviable profits produced by newspapers and broadcasters, the arguments for merging newsrooms are clear:

You cut duplicative coverage, headcount and expenses by sending a single reporter to a press conference or a solo cameraperson to a car wreck. You enrich your web and mobile offerings with better video from the TV operation and deeper content from the print side. With any luck, seamless cross-media promotion will build audience in print, on the air, on the web and on the many proliferating mobile platforms. The combined reach and efficiency should be a major selling point with advertisers, too.

The cost-savings are so appealing to broadcasters that no less than 224 television stations in the country today get their news from another station, according to Bob Papper, the chairman of journalism and media studies at Hofstra University, who conducts an annual newsroom census for the Radio and Television News Directors Association.

Although few newspaper publishers to date actually have acted to pool resources with a local TV station, it happened last year in Hartford and a decade ago in Tampa. If newspaper revenues don’t begin to stabilize soon, a growing number of publishers may begin to take this idea as seriously as hundreds of broadcasters already have.

While hybrid newsrooms undoubtedly save money on everything from reporters to real estate, the journalistic improvements promised by Media General a decade ago are not evident at the combined news operation of the Tampa Tribune and WFLA, an NBC affiliate.

As advertised when the Florida newsrooms merged, print reporters indeed learned to work on camera and TV personalities began to contribute to the newspaper. But those efforts, which are presented today for the world to behold at TBO.Com, are, in a word, underwhelming.

Instead of combining the assets of the newspaper and TV station in a single, dynamic website, TBO.Com is primarily a compendium of cheesy police news and out-of-market AP stories. If you follow the breadcrumbs on the website to the separate pages for the TV station and newspaper, you get nothing more than the sort of shovelware that populates the website of a mediocre broadcaster or publisher in a mid-sized market.

At this writing, the lead story and video on the TV site is a cheapie about a man who killed his cousin in a dispute over a necklace. If stories from today’s paper are on the web, they were impossible to find. Neither the newspaper, the TV station nor the website has an iPhone app, although the competing ABC and Fox affiliates in the market do.

The weak execution is understandable in light of the steep cuts Media General has made in staffing at the Tampa properties since they first were combined. Half of the 1,326 people working at the newspaper, TV station and website were cut in 2008 and subsequent layoffs and reorganizations have claimed more positions since then.

The gruel at this newsroom of the future is way too thin to woo discerning readers and advertisers.

Local news rivals doom publisher pay walls

The local news sites being developed by Yahoo, AOL, Huffington Post and a growing number of other online players will dash the hopes of most newspaper publishers of charging for access to their online content.

While newspaper executives have agonized for the better part of two years about whether and how to charge for their costly-to-produce content, every indication is that the portals, local broadcasters and other media companies have no intention of asking anyone to pay for access to the increasingly ambitious local sites they are building.

With a fast-proliferating number of respectable local sites giving away news to build traffic for their ad-supported ventures, newspapers simply won’t be able to charge for access – especially when their own stories are likely to become freely available within minutes at any number of competing sites.

The local news land rush gained a formidable entrant last week when it became clear that Yahoo is getting ready to launch a major local news site in San Francisco. As reported first here and here, Yahoo spent some $90 million to acquire Associated Content to begin filling its local sites with tons of inexpensively produced content.

Yahoo joins such up-and-running efforts as AOL’s Patch.Com, MSNBC’s Everyblock.Com, Huffington Post (example: HuffPost-New York), and the ever-more-elaborate local sites operated by television and radio broadcasters (example: NBC Philadelphia).

This is not to mention the hundreds of local sites operated by individuals (West Seattle Blog), funded by philanthropists (MinnPost) and backed by venture dollars (Outside.In). In the San Francisco area alone, the Graduate School of Journalism at the University of California at Berkeley has identified more than 250 local sites.

Even the juiciest scoop published by a paper in print or online will not remain exclusive for long. It will take only minutes for a heads-up local news venture to match any story appearing in the local newspaper. The “QuickRead” technique developed by the Huffington Post is but one example of the how easily content can be cribbed:

A Denver Post story about accusations of racial profiling by police was featured prominently yesterday on the HuffPost’s Denver page. A click on the story led to a one-paragraph summary of the article and a link to the original piece (see screen grab below). For many readers, the HuffPost summary would be sufficient, thus depriving the Post of the traffic it otherwise might have earned.

Beyond matching newspaper stories, AOL and Yahoo intend to leverage citizen journalists to fill their sites with inexpensively produced original content. In its initial email effort to recruit writers in San Francisco, Associated Content promised $10 for the first article.

Armies of low-paid writers Patch-ing together copy like this yarn about a federal raid on the office of a Connecticut foot doctor likely will provide enough free local content in many major markets to satisfy all but the most voracious and discerning news consumers.

With newspaper advertising revenues this year on track to come in at less than half the record $49.4 billion achieved in 2005, publishers have been toying with the idea for quite some time of charging for access to their websites.

Given that all but the most parsimonious newspaper pays more than $10 per story, you can’t blame publishers for wanting to recover the costs of creating content by charging for the online news that most of them have been giving away for free for 1½ decades.

However, the few brave publishers who have tried to charge for content have met with less than encouraging results.

Newsday famously got only 35 takers when it initially imposed a fee to visit its site (but it did not care, because it still provides free access to subscribers of the newspaper and the Internet service provided by its owner, Cablevision Systems).

The Valley Morning Star in Harlingen, TX, lost nearly half of its web traffic when it started charging for content in July, 2009, according to statistics published at Quantcast.Com. Although the paper resumed free web access in April of this year, its traffic only recently recovered.

Combine consistently demonstrated consumer resistance to pay with a plethora of plausible free alternatives and there can be little doubt that charging for day-to-day news coverage – even sparkling local coverage – is not likely to be a fruitful path for most general-interest newspapers.

Instead of putting cycles into exercises like charging for access to obituaries, publishers need to focus their marketing power, content-creating resources and ad-selling capabilities on developing unique print, web and mobile products that will be valued by consumers and advertisers alike.

For anyone other than publishers of mission-critical business or government news like the Wall Street Journal and possibly the New York Times, pay walls will not fly. It is time for everyone else to move on to more productive pursuits.

Yahoo readies San Francisco news site

Moving quickly to leverage its $90 million-ish acquisition of Associated Content, Yahoo has begun recruiting writers to begin building a local news site for the San Francisco area.

Though hundreds of news shops of every shape and size already cover Northern California, Yahoo will be an instantly formidable competitor because of its vast market reach.

In a breathless email blast to registered contributors at Associated Content, Yahoo said it is “looking for writers living in or near the San Francisco area (like you!) to write compelling, local content — ranging from highlights of your favorite neighborhood destinations to metro-wide, first-person reporting assignments covering the stories and topics not typically found in mainstream news media.”

A questionnaire soliciting personal interests and writing samples from potential contributors indicates that the site will cover crime, local news, politics, weather, traffic, transit, sports, business, local celebrities, personal-interest stories, events and things to do, nightlife, restaurants, social calendar, real estate and development, education.

Those responding to the questionnaire were promised “a $10 assignment to write on any topic about San Francisco!” In the future, Yahoo said “select contributors” will receive “weekly, paid assignments to write articles on SF and their own neighborhoods.”

The Yahoo local site will join literally hundreds of institutional and individual efforts to cover the news in Northern California. Those efforts include:

:: The full complement of traditional commercial mainstream print and broadcast media, as well as some long-standing alternative print media.

:: Handsomely funded non-profit news operations like the Center for Investigative Reporting, Bay Citizen and KQED, that latter of which is a local public broadcaster that just announced plans to expand its local news operation.

:: Some 245 blogs and hyperlocal news sites tracked by the Bay News Network project operated by the Graduate School of Journalism and Knight New Media Center at the University of California at Berkeley.

Though Yahoo may seem to be late to the game, its standing as one of the top five busiest websites means it has far more power than any other competitor to drive traffic to its new local news site. It also has the capability to seek premium prices for the ads run on its local site through a system that targets banners to individuals based on their online behavior.

Flagship newspapers wane in audience mix

The flagship newspaper produces barely half of the weekday audience delivered by some major metro publishers, according to an analysis of data recently issued by the Audit Bureau of Circulations.

While papers like the Kansas City Star continue to pursue the traditional model of publishing only the main title and a free once-a-week advertising product sent to the homes of non-subscribers, the ABC reports that papers like the Chicago Tribune and Dallas Morning News have created such a wide variety of products that the flagship paper produces just 56% of the average weekday circulation in each of their respective markets.

There are two reasons behind the shift in the product mix:

:: The first reason, which is bad news, is that newspaper circulation has nosedived in recent years. This results from a growing consumer preference for Internet and mobile news, as well as aggressive efforts by profit-challenged publishers to cut expenses by trimming the delivery of papers to distant readers and fickle customers who subscribe only as long as they can get deeply discounted rates.

:: The second reason, which is good news, is that foresighted publishers are creating niche products to try to capture readers who historically were unlikely to buy the legacy newspaper – and, of course, the advertisers who covet them as customers.

The Tribune and Morning News are examples of a trend that is likely to gather momentum as publishers forsake the ancient, one-size-fits-all newspapering model in favor of producing portfolios of print and digital products tailored to selected consumers and advertisers.

The reach of the newspapers in Chicago, Dallas, Kansas City and a handful of other markets was revealed last week in an new reporting format provided by the ABC, an industry-funded group that is paid by publishers to audit their circulation. While the ABC to date has released comprehensive audience data for only 17 papers, the organization promised to provide information on more publishers in the future. (The ABC press release contains links to the detailed reports for the papers discussed in this post.)

As illustrated below, the product portfolios of both the Chicago Tribune and Dallas Morning News include publications aimed at young adults and those who prefer to read Spanish-language publications. In a new wrinkle for the ABC, subscriptions to the electronic editions offered by both publishers also are counted in the daily and Sunday audience numbers.

Beyond the products the publishers have in common, the Tribune publishes a free tabloid written by and for teenagers and the Morning News delivers a free, weekly TMC advertising product. TMC stands for total market coverage and such products usually consist of a bundle of free-standing ad inserts delivered to the homes of those who do not subscribe to the paper.

For the time being, flagship newspapers – especially the Sunday editions often responsible for producing half the sales in any given week – are the dominant revenue driver for publishers.

Given the likely future contraction of flagship circulation and the concurrent efforts of publishers to diversify as rapidly as they can, it may not be long before the once-mighty daily newspaper itself is just one of many niche products.

Note to editors: Respect your elders

With most newspapers drawing more than half their audience from people who are 55 years of age and older, you would think they would avoid insulting those readers. But you would be wrong.

Although respectable media practitioners generally have learned to mind their manners when referring to individuals of different races, religions, genders, sexual orientation, physical capabilities and mental capacities, a notable lack of sensitivity persists toward people who have five, six, seven or more decades under their belts.

A couple examples of Chronological Incorrectness occurred over the weekend in the New York Times, which is widely regarded as one of the most carefully edited papers in the land. If it can happen there, it can happen anywhere. So, listen up, whippersnappers.

In the first instance of Chronological Incorrectness, the paper gratuitously stated that an 84-year-old woman quoted in a story was “lucid.” The woman was interviewed in connection with the coverage of the 65th anniversary of the classic sailor-kisses-a-woman picture that was snapped in Times Square on the day World War II ended.

In the initial online posting of the article about the woman on Friday evening in the City Blog, Gloria Bullard, a retired nurse, was characterized as “vivacious and lucid.” By the time the story made it to page one of the print edition on Saturday, “lucid” thankfully was expunged. At last check, however, it remained on the web, as shown below:

What’s the big deal? Glad you asked.

Unless otherwise noted, I presume everyone interviewed for a New York Times article – as well as the journalist conducting the interview – is indeed lucid. To go out of the way to state that someone north of 55 is lucid is to buy into the decidedly false assumption that she is a doddering geezette.

That is flat-out insulting to this individual and all her peers, who also, hands down, happen to be the most faithful customers that newspaper publishers have.

The second instance of Chronological Incorrectness in the Times occurred on the front page of the business section on Sunday in a story about how new management is trying to revive the Archie comic franchise. “At 68,” said the article, “Archie is suddenly looking awfully spry.”

Although the reference to the comic character was lighthearted, the use of the word “spry” is offensive, because it buys into the proposition – quite often unfounded – that those north of 55 are likely to be physically feeble or infirm.

Thanks to advances in medical care (for those fortunate enough to afford it) and greater awareness of the dangers of processed food, the benefits of exercise and the insanity of smoking, today’s 55-plus crowd on average will live longer than any preceding generation.

All signs indicate that this generation also will be actively engaged for many more years to come in the realms of commerce, government, education, non-profit pursuits and almost every other facet of society.

Given the wretched turn in the economy in the last few years, those north of 55 will try to be actively engaged in the workplace – whether they like it or not – for far more years than any prior generation.

In an example of the enduring influence of this generation on the body politic, more than three-quarters of the members of U.S. Senate are north of 55, with four in their eighties, 23 in their seventies and 34 in their sixties.

As to another of the unfortunate misapprehensions about those north of 55, it should be noted that they are not technologically recalcitrant. Far from being fuddy-duddy Luddites, newspaper website visitors – as discussed previously here – actually appear to be early and passionate technology adopters.

Greg Harmon of Belden Interactive, the foremost expert on consumer behavior at newspaper websites, has found in hundreds of surveys across the country that newspaper web visitors look exactly like consumers of the print product.

The reason for this is that newspaper site visitors actually are the same people who read the print product – a not-so-fun fact that should shiver the timbers of publishers concerned about the long-term mortality of their predominant customer base. Eventually, you see, even spry people die.

While smart newspaper editors and publishers are scrambling to diversify the demographics of their audience as fast as they can with any number of print, online and mobile products, the least they can do in the meantime is to respect the people who happen to be their very best customers.

And that, until further notice, would be their elders.

Q2 newspaper sales: Less bad but not good

Advertising sales for most newspaper publishers were less bad in the second quarter of this year than they were in the first three months.

But less bad is not the same as good – and the outlook for the remainder of the year is decidedly murky.

Based on the performance reported to date by the publicly traded publishing companies, it appears that sales for the industry on average will be down about 7% to 8% in the second quarter, making for the least-bad sales spell since the fall of 2007.

Assuming that’s where the second-quarter numbers come in, the period will be an improvement from the 9.7% drop in print and online sales for the industry in the first three months of the year.

And it will be far, far better than the 29.0% sales plunge in the second quarter of 2009, which represented the worst quarter in an unprecedented year when revenues dropped 27.2% for the full 12 months.

Of the seven publicly held U.S. publishers who have released second-quarter earnings statements to date, sales were better in the second period for all but one.

The exception, as you can see from the table at left, is A.H. Belo, where ad sales fell 15.6% after dropping 12.0% in the first quarter. The strongest performer was the New York Times Co., where a 1.1% gain at the flagship paper helped offset declines 0f 9.1% at the Boston Globe and 7.1% at its properties in the South and California.

While the decelerating sales erosion in the first half of the year understandably cheered publishers and editors, it is not clear that the trend will continue, given an apparent slowdown in the recovery of the economy.

As reported Friday by the U.S. Department of Commerce, the gross domestic product slipped to 2.4% in the second quarter of this year from 3.7% in the first period and 5.0% in the last three months of 2009.

Some economists viewed the second-quarter decline in the measure of the nation’s production of goods and services as evidence that the economy could be headed toward a double-dip recession. While not subscribing to the idea of a double dip, economists at the Conference Board, a private research organization, issued this warning last week after observing declines in June and July in their index of consumer confidence:

“Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves. Given consumers’ heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season.”

With classified advertising all but moribund at most newspapers, retail advertising is without question the most vital revenue source.

If retail sales falter in the second half of the year – especially in the crucial fourth quarter when ad budgets traditionally peak for the holidays – the modest progress achieved by the industry in the first part of the year – assuming you call less-bad sales “progress” – could become a distant memory.

Deals showcase newspaper marketing clout

This column originally was published in the July edition of Editor & Publisher Magazine and is being reprinted with permission. To subscribe to the magazine so you can see the full array of industry coverage when it first appears in print, click here.

One of the biggest challenges for newspapers in the age of interactive media is proving that their advertising works.

The San Diego Union Tribune seems to have solved that problem in a small, but meaningful, way – and added an extra $100,000 per week to its gross advertising revenues. The idea sounds like a winner for other papers, too.

The U-T jumped on the social-shopping bandwagon, featuring daily deals in print and on its website for everything from restaurants to summer camps.

The deals don’t just offer discounts of 50% or more on gift certificates for products and services. They also encourage readers to enhance their savings by recruiting friends to buy certificates, giving a participant a $10 credit toward her next certificate for every friend she recruits to the network.

Thus, the paper has created a virtuous circle: Readers who love the deals tell friends, who tell friends…and so it goes. Advertisers love not only the immediate, measurable response but also the welcome jolt of cash that flows into their coffers almost overnight. And the newspaper fattens its top line while unequivocally demonstrating its marketing clout to merchants.

Launched in April, the program called Daily Deal got off to “an extremely fast start” at the San Diego paper, said Mike Hodges, the vice president of its interactive division. “In the 2½ years I have been involved in online newspaper sales, this has trumped all other initiatives.”

Hodges freely admits that he cribbed the idea from Groupon, the original social-shopping network. Coming out of nowhere, sales at Groupon were reported to be $100 million in January of 2010, or 100 times better than its performance 12 months earlier. Living Social, an imitator that launched about half a year after Groupon, rapidly caught up. Today the two companies account for approximately 98% of the online group-buying business.

While the success of the online leaders might seem to leave newspapers as marginal participants in the space, remember that publishers have an advantage that online guys don’t: Concentrated local market reach and the biggest, best-connected ad staffs in every town.

Seeing the same opportunity as San Diego, a number of newspapers have begun offering social-buying opportunities, printable coupons or a combination of both. Websites from the Washington Post to the San Francisco Chronicle – and dozens of points in between – promote daily deals.

Jumping in with both feet, the Wilmington (DE) News Journal uses a prominent refer on the front page of its website to send visitors to half-off coupons for restaurants, plumbers, tanning parlors, garage-floor refinishers, day spas and a liposuction clinic. It even offers discount tickets for the Georgia Aquarium in Atlanta, which is 745 miles away.

Papers like the Omaha World-Herald aren’t in the deal business yet, but they are actively evaluating vendors, according to Pat Lazure, the president of its interactive group.

While many newspapers teamed with one of the established online players to get into the social-shopping business, San Diego decided to create its own brand. “We felt we should own this ourselves,” said Hodges.

After shopping around for a technology vendor, the U-T partnered with Shoutback.Com, an Ohio-based company that provides credit-card clearing and other back-end services that the newspaper didn’t want to reinvent.

Here’s how the program works:

The paper offers deals on Tuesday, Wednesday and Thursday, plus a weekend deal that runs from Friday through Sunday. While the U-T started by offering only a single deal a day, it probably will add a second deal in coming months, said Hodges.

An advertiser pays nothing for the prominent promotion of his offer on the front page of the newspaper, the front page of the website and throughout the website. When the clock strikes midnight at the end of each deal period, the deal expires and the newspaper runs the credit cards of all the customers who have purchased gift certificates. The merchant gets half of the revenue and the newspaper keeps the other half, from which it covers sales commissions and fees to the tech vendor.

Beyond building a nifty revenue stream for itself, the newspaper is building buzz. “Thirty percent of our sales come from referrals from existing customers,” said Hodges, adding that he amassed a database of 15,000 email addresses within two months of launch. Emails tout each new offer.

The project is building excitement among advertisers, too. “We have brought in new ad clients who we previously were not able to attract in print or online,” said Hodges. “The power of our media to generate significant sales in one day shows what we can do.”

Some long-term advertisers even boosted their schedules after trying Daily Deal. “This finally solves the problem of measurability,” said Hodges. “It’s all right there in the open for them to see.”

(c) 2010 Editor & Publisher Magazine

News stocks lag despite dramatic rebound

Although the shares of the publicly traded newspaper companies have advanced impressively from their all-time lows 12 months ago, they still are worth on average about a fifth of their value on June 30, 2005.

The good news for the battered publishing sector is that publicly held newspaper shares rose by an average of 332% in the 12 months ended on June 30 – handily surpassing the 12% gain in the same period of the Standard & Poor’s average of 500 stocks.

But the bad news for investors who loyally clung to their shares for the last five years is that their holdings at the close of trading on June 30 were worth an average of 81% less than they were on the same date in 2005. By contrast, the S&P 500 was down 13% in the same interval. (Details are below; click image to enlarge it.)

The sharp run-up in newspaper shares in the last 12 months can be attributed to the following:

:: By drastically cutting staff, newsprint consumption and other expenses, newspapers were able to improve their profitability in spite of a 28.6% plunge in advertising sales in 2009.

:: Though several of the publicly held companies were heavily burdened with debt assumed in the days when the potential for future growth seemed unlimited, they all managed to stay out of bankruptcy court at the same time nine of their privately owned peers sought refuge in Chapter 11.

:: The immediate future for the business does not appear to be as gloomy as it seemed last year, when such iconic papers as the Rocky Mountain News and Seattle Post-Intelligencer shut their doors. This in part may be because newspapers stopped writing stories about how bad their business was.

Taken together, the above factors evidently persuaded bargain-hunting investors to accumulate newspaper shares at a fraction of their historic value in the hopes of profiting as they bounced back.

Thus, it could be argued that the run-up in newspaper shares represents more of a trading phenomenon than an expansive vote of confidence in the future of the industry.

This thesis is supported by the fact that newspaper shares, despite the impressive rebound in the last 12 months, remain well short of the record peaks they hit as recently as five years ago.

One reason for the continued depressed state of the shares undoubtedly has to be uncertainty about whether the global economy will pull itself out of the worst recession since the 1930s.

But another may be that investors remain to be convinced that newspaper publishers know how to replicate the predictable revenue growth and enviable profitability they enjoyed in the days prior to the explosion of the digital media.

Methodology

For the purposes of this analysis, I looked at the shares of six companies that have continued to derive the preponderance of their revenues from newspapers since 2005. The companies are Gannett, Journal Communications, Lee Enterprises, Media General, McClatchy and the New York Times Co.

I left out GateHouse Media because it did not go public until 2006 and I eliminated A.H. Belo and E.W. Scripps because they each spun off their non-newspaper assets in 2008. News Corp. and Washington Post Co. were omitted because they do not derive the bulk of their sales from newspapers.

How about an iHype ‘tax’ to save the news?

The pesky problem of paying for the news could be resolved rather fast if publishers and broadcasters just charged Steve Jobs a nickel a word for all the free hype they provide to sell his iParaphernalia.

While I admit to being as fascinated as the next guy with Apple’s electronic confections, it is nonetheless staggering to see how much scarce reporting talent and news hole goes into pimping iProducts in the nation’s press.

In a quick survey of the online archives of 10 randomly selected newspapers, I found that far more coverage was devoted to articles containing the keywords “iPad” and “iPhone” than, say, “Foxconn,” the Chinese company where there has been a cluster of suicides among the workers who manufacture Apple’s wunder-gear under what charitably could be called demanding working conditions. Here’s what I found:

In fairness, it must be noted that not all iPad and iPhone stories are favorable, including this piece by Nicholas Kristof on the bloody provenance of some of the components in certain electronic components. Some articles talk about malfunctions in Apple products (and the miserably over-saturated AT&T network on which they attempt to operate) and a few covered the door-busting police raid that Apple encouraged on the home of a reporter who got his hands on a pre-release iPhone4 that evidently had been left in a bar by one of its engineers.

Judging from a scan of the headlines (I made no effort to read the hundreds of articles), the overwhelming thrust of the coverage contributes to building advance excitement for both iGizmos and then fueling the frenzy by describing the real or stage-managed shortages that followed their release.

It’s hard to think of any other company that consistently merits so much fawning coverage for doing the same thing every manufacturer does: Creating a new product, announcing it is going to come to market and then coming to market. Imagine how silly it would be if the press went nuts for weeks on end about the next-generation version of Charmin or a new incarnation of Diet Coke.

Should Jobs decline to pay for all this favorable ink – as you know he would, if asked, which he won't be – the least he can do to repay the kindness of the press would be to give newspapers some badly needed tips on marketing. It would be a major iMitzvah.

Make no mistake: Newspapers are still in trouble

With newspaper share prices up some 380% in the last 12 months, even the ordinarily incisive Economist Magazine last week offered an upbeat appraisal for an industry that many had written off for dead a year ago.

But it is flat wrong to believe that newspapers are on the mend in the United States. In fact, American publishers missed out on the broad advertising recovery that took place in the first three months of this year.

This should trouble anyone who works at a newspaper – and everyone who values the industry’s singular capability, when it is on its game, to enlighten our democracy.

As illustrated in the chart at left, newspaper and magazine sales in the first quarter dropped respectively 9.7% and 3.9% at the same time television expenditures advanced 10.5%, Internet rose 7.5% and radio gained 6.0%.

The ongoing contraction in newspaper advertising – coming on top of a 40% sales skid in the two years ended on Dec. 31, 2009 – adds further support to the thesis that the industry is suffering from major structural changes in the media market that will not reverse fully in even the best of economic circumstances.

The secular shift away from newspaper advertising is illustrated vividly in what happened in the early months of the year in the automotive category, where year-over-year vehicle sales grew by 17.2% through May after a sluggish start in January and February.

While manufacturers and dealers on average increased their ad budgets by 18.6% in the first quarter of the year, automotive classified at newspapers fell 16.0% in the same period. The over-all market data is from Kantar Media, the ad-tracking company formerly known as TNS. The newspaper data is from the Newspaper Association of America.

The story was the same in two other key verticals where advertising should have advanced as the economy perked up:

:: Although the U.S. Census Bureau reported that retail sales were up 6.3% nationwide in the first three months of the year, advertising in the single most significant newspaper category was down 11.2% in the period.

:: Although the National Association of Realtors reported that contracts to sell existing homes were up 21.1% at the end of March, real estate ad revenues at papers were down 27.3% in the first quarter of the year.

The only positive growth posted by newspapers in the first period of 2010 – which also happened to be the first advance in any category in 24 months – was an increase of 4.9% in online advertising. But this pales in comparison to the over-all industry improvement of 7.5% in the same period, suggesting that newspapers are continuing to lose ground in even the vital interactive marketplace.

With advertisers for the most part stepping up their schedules in the hopes of grabbing greater share for their businesses as the economy inches toward recovery, the above trends suggest marketers may well have learned to do without newspapers during the long recession.

Seeking to save money while building visibility for their brands, many marketers experimented during the downturn with such targeted and less expensive media as cable TV, online classified sites and niche print publications. Of course, many also learned that some of the most productive online environments – such as employer-operated job sites and Craig’s List – are downright free.

Now that the economy has improved, they see no reason to rush back to newspapers, where ad prices are high and audience response ordinarily cannot be quantified as easily as it can on Google Analytics (which also happens to be free).

By not keeping pace with the turnaround, newspapers will continue to lose ground they can ill afford to lose. The industry’s $5.2 billion in combined sales in the first quarter of this year were less than half the volume achieved as recently as the comparable period in 2005.

A revenue collapse of this magnitude would be sufficiently catastrophic for any industry. But it gets worse.

In addition to a formidable revenue challenge, newspapers are facing a soon-to-accelerate erosion of their reader base as their superannuated audience ages inexorably toward extinction.

Half or more of the circulation at most newspapers is composed of individuals who are aged 50 and older. This concentration means that newspapers on average have twice as many senior readers as exist in the population as a whole – and that, by logical extension, they are not engaging the younger readers that they must attract for a prosperous future.

While newspaper publishers have been able to boost the battered profitability and beleaguered share prices of their companies by cutting deeply into headcount and news hole, these short-term expedients are no substitute for forward-looking strategies to create innovative print and digital products to revitalize their audiences and attract fresh ad dollars.

No business ever cut its way to success. Newspapers won’t either.

iPad app watch: Hits, runs and terrors

Now that we have bought all those expensive iPads – and we know who all of you early adopters are, too – what are we going to do with them? Here’s the first in an occasional look at what’s hot – and not – in App-Land.

Top Picks

All-Around Best: Safari

Safari has been named the best app for the iPad by several commentators and I couldn’t agree more. The snappy (unless it’s on the ATT network) web browser makes it possible to access a beautiful rendition of any site on the web, including those operated by publishers offering sub-par iPad apps (see below: Time Magazine and the New York Times).

World Class: France 24

This app fully exercises the multimedia capabilities of the new medium with words, pictures and video. It is attractive, well organized and world class, given that it is offered in French, English and Arabic. Runners up: BBC (which offers a live audio stream) and NPR (which doesn’t).

Slick: New York Post Pix

This is nothing more than a collection of captivating pictures evoking scarce intellectual heft (see left), but it has lots of potential to build and monetize an audience. The newly released app features prominent opportunities to share pictures with friends, making it catnip for the social media. It is being monetized cleverly by embedding a movie trailer, an approach that could be used to sell all manner of other products.

Crude But Effective: Il Venezia

This is simply a page-by-page representation of the paper but it is a very satisfying experience because pages can be opened, expanded and navigated rapidly and smoothly on the iPad. Nothing fancy. But it works.

Most Readable in Ideal Light: iBooks

Books are more pleasant to read on the iPad than any other e-reader, so long as you are doing so under exactingly perfect lighting conditions, which is to say away from sun and glare. If you find yourself properly situated, the only other challenge you’ll confront when facing the highly polished iPad screen is finding something to read in the entirely too tiny iBooks catalogue.

Big Misses

Too Expensive: Time Magazine

No one is going to pay $4.95 a week for something you can get for free at www.time.com. Save your shekels and read the mag on Safari.

Too Cheap: New York Times

The might of the New York Times is the depth and breadth of its content. Why would anyone fiddle around with an app that barely scratches the surface of a day’s coverage? It’s easier to go to the website. If you want to try something completely different, I hear they have a print version, too.

Too Dumb: MacGruber

This is the promo site for a cinematic bomb about a long-in-the-tooth secret agent called upon to defuse a nuclear device. The app has all the right ideas: Sound bites, still photos, a game, a trailer and more. But no amount of technical wizardry could save this effort from the sophomoric subject matter at hand.

Biggest Miss of All

Too Awful: The ATT Network

No discussion of killer apps would be complete without discussing the biggest app killer of them all: The balky, sluggish and unreliable ATT network. If you don’t want to be tempted to stomp your expensive new toy to death, stick with the wi-fi version.

This is the latest in a series of Newsosaur posts providing publishers with actionable revenue and content strategies for the tablet iPad. Prior articles packaged in a convenient 10-page PDF are available here for immediate download for $1.99. Proceeds will be used to buy more apps to pick on.

The secret to innovation: Aim! Ready! Fire!

Springtime seems to have brought a refreshing zeal for innovation to the nation’s battered newspapers. And, not a moment too soon, given the 27% drop in advertising sales in 2009.

But, as I learned in my decades of running and financing start-up businesses, it takes more than desire to successfully bring new products and services to market. Product innovation requires discipline and methods that are not common at the typical newspaper company.

Fortunately, start-up skills – unlike blue eyes and the ability to roll your tongue – don’t have to be endowed at birth. They can be learned. That’s why I developed a rapid product development process that is being implemented at a growing number of newspapers. (You can get a summary of it by emailing me at alan [dot]mutter [at] broadbandxxi [dot] com.)

The quickest way to describe the rapid development process is with this simple mnemonic: Aim. Ready. Fire. Here’s how it works:

Aim. First and foremost, identify the audience and revenue streams you want to reach. Then, and only then, think about what products to build and the appropriate platforms (print, web, mobile, tablet, blimp, etc.) on which to deliver them.

This approach differs from the common mistake at many papers of building products and searching for markets for them as an afterthought. In the worst cases, papers build products but neglect to market them altogether. The lack of success likely to attend un-marketed or under-marketed products has the unfortunate side effect of blunting organizational enthusiasm for future innovative undertakings. This would not be a good outcome at a time newspapers need to be more creative than ever to attract fresh audiences and revenues.

Ready. Once you have identified a potential audience, revenue stream and product, it’s time to do your homework by building a detailed and hard-nosed business plan that includes, but is not limited to, an objective economic and demographic evaluation of the potential market; a bottoms-up revenue projection; a thorough cost analysis, and a comprehensive plan to take the product to market.

After completing your homework, you will know who in the organization has to do what, when they have to do it and – most importantly – how much it is going to cost. If this exercise shows the idea to be too complicated or costly to be worth the trouble, then this is the golden moment to abort the mission. If you go forward, the shared expectations provided by a well-conceived business plan should assure reasonably smooth execution. It also should avert embarrassing discussions about unanticipated cost overruns.

Fire. This is the phase when you take a prototype product to market to test its appeal so you can tweak the offering to optimize customer acceptance. Many newspapers stumble at this juncture, because they spend too much time and money trying to build a perfect product.

While perfection may be the ultimate goal, the launch (or beta) version of a product only has to be “good enough” to prove, or disprove, the concept. If the product catches on, you’ll have time to add all the bells and whistles you want. But there’s no reason to waste valuable time and resources on something you might have to junk. So, don’t get fancy. Speed the product to market, objectively gather consumer input and refine the product as necessary.

Once you have an honest assessment of its capability, either fill it with snazzy new features and a beefed-up marketing budget – or kill it if it doesn’t fly.

While failure is not the hoped-for goal, it is an option. Far more Silicon Valley start-ups flop than become the next Netscape, Silicon Graphics or Friendster. Come to think of it, we haven’t heard much lately from those once-big names.

You can enhance your chances of success by systematically developing and launching a product aimed at a carefully identified market. If your first innovative venture doesn’t succeed, however, do an honest after-action assessment of your mistakes and try, try, try again.

(c) 2010, Editor & Publisher

Journalists running start-ups face tall odds

Fed up with furloughs and down-sizing – or forced involuntarily out of their jobs – journalists across the land are taking matters into their own hands by starting their own news sites.

While I applaud these brave and commendable efforts, I fear a good many journalistic entrepreneurs are doomed to fail because they are not objectively confronting the steep odds they face – or putting nearly enough thought and effort into giving themselves a fighting chance to succeed.

After talking to one enterprising journalist after another, I have found almost uniformly that they are making the mistake that has proven to be the downfall of many an entrepreneur: Instead of trying to build a business, they are trying to give themselves the job they always wanted.

The passion for the product they are creating causes entrepreneurs to work so hard on their journalism that it distracts them from the real job of building an enterprise that not only sustains itself for the good of the community but also provides a sustainable lifestyle for the journalist himself.

In an effort to calibrate the daunting, come-from-behind challenge faced by virtually every journalism start-up, I decided to compare the traffic of three recently launched news sites with the online audience of the incumbent newspaper in each of the markets they serve.

I looked at one site apiece from a rural, metro and statewide market, but I am not identifying the sites because I don’t want to single out the idealistic and hard-working entrepreneurs who generously described their efforts. Here is what I found:

The newbie journalism sites generate such low traffic that they fall below the radar of many rating services. But Alexa.Com ranks websites through a proprietary formula that takes into account unique visitors and page views. This system, though not 100% transparent, makes it possible to gauge the relative size of one website to another.

In the Alexa system, where Google ranks No. 1 for having the most traffic, the rural journalism start-up, which has been in business for more than a year, ranks at about 17,000,000 vs. 350,000 for the site of the dominant newspaper in the market.

The metro start-up, which is about half a year old, ranks about 174,000 vs. 640 for the incumbent local daily. The statewide start-up is 1,300,000 vs. 2,100 for the primary paper in the market.

With all the brand power, market presence and resources at their command, many newspapers struggle to extract full value from the investment they have made in their websites. So, you can imagine the challenge faced by a small, essentially unknown start-up with limited staff and financial wherewithal – especially when their focus is on journalism, instead of business.

While journalists at news start-ups think nothing of routinely devoting more than a dozen hours a day to running down stories and tweaking their websites, the pace typically leaves them with neither the time nor the energy to think about such key success factors as building audience and developing a healthy financial basis for their endeavors.

These issues ought to be Job One for any start-up, regardless of whether it intends to operate as a for-profit or non-profit venture. But they usually take second place, if they are seriously in the running at all.

To be sure, the operators of start-up news sites have the sound bites down. Stop me if you have heard them before:

:: “We are better than the local paper.”

:: “We are counting on site contributors and visitors to spread the word about us.”

:: “We have (or are seeking) foundation support.”

:: “We intend to sell advertising or sponsorships.”

:: “We are hoping for reader contributions.”

:: “We might publish a subscription newsletter.”

Although the sound bites fairly cover the possibilities for achieving ongoing viability, conversations with most operators quickly reveal that they actually have no concrete plans for pursuing them.

The journalists are so busy being journalists – and, frankly, too confident that the quality of their coverage will be sufficiently compelling to attract an ever-growing audience – that they put scant effort into marketing, promoting and monetizing their sites.

Unless they invest as much deliberate effort in building audience and revenues as they do into chasing stories, the journalists run the very real risk of going broke and/or wearing themselves out before they achieve the critical mass necessary to ensure the long-term viability of their ventures.

Working without a proper business plan and hoping for best is a well known recipe for disaster. Unfortunately, that’s what most start-ups are doing.

Picturing the BP blob at a town near you

A clever bit of programming has provided a visual aid to illustrate the unfathomable damage being caused by the 880-fathom-deep gusher pumping untold gallons of oil into the Gulf of Mexico.

This visual aid is a customizable Google Map at a website called IfItWasMyHome.Com, which makes it possible to superimpose the latest known contours of the BP oil spill over any location in the world.

As you can see from the screenshot below, data from the National Oceanic and Atmospheric Administration currently shows the goo to be covering an area equivalent to the space bounded by New Hampshire, Massachusetts, Connecticut and New York State.

The map was put together in an evening by Andy Linter, a software developer in Royal Oak, MI, who welcomes anyone to go to his site, move the spill over the geography of your choosing and then publish a screenshot of the result.

“The idea for the app really came from my wife, Kristen,” said Linter in an email. “She saw a picture of the oil spill overlaid on New York in the paper, and commented to me that this still didn't put things into perspective for her. That night, I created a quick image of the spill centered on our hometown. Both of us were shocked at the result, and Kristen suggested I show the picture to more people.”

It wasn’t long before the map started making its way around the Internet.

Would that BP had someone as clever as Andy Linter to cap its runaway well.

Yahoo signals major challenge to newspapers

Yahoo appears to be getting ready to produce local websites filled with original content that could compete with newspapers, posing a particular challenge to the hundreds of publishers who now sell advertising for the powerful portal.

The apparent intention to target the sweet spot for publishers was signaled last month when Yahoo announced plans to buy Associated Content for $100-ish million to gain access to some 380,000 individuals who are willing to write articles, take pictures and produce videos for rates starting at $2 per effort. The deal is scheduled to close later this year.

Insiders here in Silicon Valley say the odds are strong that a good number of those content producers will be deployed to cover local news in the hope of assembling ever-larger audiences for the premium-priced advertising that Yahoo sells via the rich user database it has amassed over the years.

Assuming the fare produced by Associated Content is sufficiently respectable to attract and retain substantial audiences, then Yahoo’s ability to deliver targeted ads – combined with its overwhelming market presence on the web – will give it significant advantages against the incumbent newspapers operating in most markets.

This could make Yahoo the most formidable single competitor yet to take on newspapers. Here’s why:

As one of the largest and oldest portals on the web, Yahoo knows at least a little something about almost everyone who ever has gone on line. In fact, it knows lots more than a little something about most of us. Using that information, Yahoo can target advertising not only to a person’s location but also to her demonstrated online behavior.

Publishers know the extent of Yahoo’s power only too well, inasmuch as some 800 of them partnered with the company through the Newspaper Consortium in the last few years to sell targeted advertising that enabled them to charge as much as $15 per thousand page views for banner ads that, absent targeting, might have gone for maybe a buck or two per thousand.

The concept is described below in a YouTube video posted by the Peoria Journal Star, one of the affiliates of the consortium.

To date, the publishers who took full advantage of Yahoo’s targeted audience data were able to generate handsome improvements in their online sales. Yahoo, in turn, benefited not only by having access to abundant ad inventory on high-traffic local websites but also by leveraging the thousands of well-connected ad sales people fielded by the hundreds of participating publishers.

The nature of this mutually beneficial relationship could change – not necessarily for the better for newspapers – if Yahoo starts running local news sites of its own.

After mustering the Associated Content crew to produce local stories at far lower cost than any newspaper, Yahoo can use its vast reach on the web to point users to its own websites. As one of the five largest destinations on the web, Yahoo’s traffic of some 70 billion page views a month is more than 100 times greater than of NYTimes.Com, the busiest newspaper website of all.

Here’s how a major foray by Yahoo into local-news could put members of the Newspaper Consortium in a pickle:

If publishers let their reps sell advertising for Yahoo’s local sites, the newspapers potentially can tap into a welcome new revenue stream for themselves. In so doing, however, the publishers face the danger that a great deal of the traffic now attracted to their own sites could be diverted to Yahoo, instead.

With digital media being the future for local newspaper franchises, strengthening Yahoo’s hand as a competitor for online and mobile local news would be strategically suicidal for newspapers.

Even if publishers decide their short-term economic interest requires them to continue selling ads for Yahoo, the nature of this relationship could be strained, if not changed. With Yahoo having the power to produce and promote local sites on its own, the balance of power in the current, reasonably symmetrical partnership will shift to Yahoo.

Where will that put consortium members? Will Yahoo demand a larger revenue share from publishers in exchange for access to its targeted audience data? Or will Yahoo simply terminate the relationship with publishers so it can engage alternate sales agents to pursue the local news business?

Assuming Yahoo and the publishers find a basis for sustaining their partnership, newspapers in the consortium will be in the position of being deeply beholden to the portal for the technology necessary to remain competitive in the increasingly important realm of targeted advertising.

Publishers in the consortium conceded too much when they elected a few years back to outsource the development of this sort of strategically decisive technology to Yahoo instead of getting together – as they could have done – to build it themselves. Now, those decisions may come back to bite them.

Newspapers that are not members of the consortium could be even worse off than those who partnered with Yahoo. In the event of a competitive thrust by Yahoo into their markets, they could be dangerously ill prepared and frighteningly over-matched.