Thursday, March 31, 2005

Online rescues top line for newspapers

Newspaper companies mainlined online revenues to add more than a full percentage point worth of growth to their sales in 2004, according to newly released research from Banc of America Securities.

Thanks to an average increase of 36.7% in sales from online operations, the publicly held newspaper corporations achieved an average 5.9% revenue growth last year. Absent the online contribution, revenues grew an average of 4.8%, according to an analysis of annual reports by John Janedis at Banc of America.

"We think online could be the long-term wildcard to meaningful profit growth in the years ahead," says John. "While newspaper ad growth in 2004 was generally below expectations, the online component for the group has been driving total ad growth."

As illustrated in the graph below, online revenues contributed to 47% of the increase in ad sales last year for both the New York Times and Knight Ridder. Online contributed more than 20% of sales gains for both Tribune and McClatchy.

The table below compares the velocity of growth in online vs print advertising, where online sales increased by an average of 36.% and print sales grew by 4.6% (compared with an average 6.3% increase for all media). As discussed earlier in this space, newspapers last year, just like in other recent years, lagged substantially behind television and outdoor in ad sales growth, whose gains were double and triple those achieved by newspapers.

Notwithstanding the significance of online sales to the top line of newspapers, many publishers, as previously reported here, are cutting back on their investments in new media. To quote the Project for Excellence in Journalism:
Our data suggest that news organizations have imposed more cutbacks in their Internet operations than in their old media.... Where the investment has come, is in technology for processing information, not people to gather it.
What are publishers thinking?

3 Comments:

Anonymous Joe Zekas said...

Do you have any fix on what portion of these gains is solely attributable to Google? Is it possible that there's little or no real growth in online revenue apart from Google deals?

10:09 PM  
Anonymous Anonymous said...

It's not possible because most of the growth is from the newspaper online classified ads. They haven't even begun to monetize their local content through contextual ads. That's all gravy to the mix.

6:55 AM  
Anonymous mark fletcher said...

The conversations about the future of newspapers and the likely impact of online need to consider the impact on the distribution channel of newspapers. In Australia around 90% of newspapers are sold through newsagencies - a channel of 4,600 retail and distribution businesses established for this purpose. Almost all are privately and individually owned. The future of newsagencies as we know them is inextricably linked to the future of newspaper and magazine publishing and distribution - yet we are not part of the publisher conversation about future models for mainstream media.

2:51 PM  

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