Web ad sales slump at newspapers
As if plunging print advertising sales weren’t bad enough, newspapers also suffered a significant slowdown in new media revenues in the first three months of this year.
Nearly overshadowed by the double-digit print declines reported widely throughout the industry, the interactive slowdown results from the stubborn determination of most publishers to try to sell online advertising to the very same people who are forsaking print advertising.
But the plan isn’t working.
In the same three months that sales leaped 41.5% at Google, online revenue at newspapers in the first quarter of this year ranged from a gain of 10% at McClatchy to an increase of 7.5% at Lee Enterprises to a decline of 3.3% at Media General. This compares with the online gains of 17%, 54% and 66% that McClatchy, Lee and MEG respectively reported in the same period a year ago.
How could Google be doing so much better than newspapers? And why are interactive sales decelerating at newspapers when they are booming at Google? The answer to both questions lies in the difference between the types of the ads sold by Google and by newspapers.
Nearly all of Google’s sales come from the keyword ads that run on the right-hand side of search results, as well as the millions of other websites that carry Google ads in exchange for a split of the revenue generated when someone clicks on an ad. This business is growing explosively because advertisers love the idea of paying for an ad only when someone cares enough to click on it – and because marketers prize the precise (and free) metrics that Google provides to monitor their campaigns.
By contrast, most newspapers generate something north of two-thirds of their online advertising revenues by selling listings in the three major classified categories: auto, employment and real estate. These would be the same ad verticals where print sales, respectively, have fallen 14%, 28.8% and 25.8% since 2005, according to the annual industry statistics compiled by the Newspaper Association of America. (For an in-depth look at the collapse of the recruitment market since 2000, see this post.)
While Google is minting money by selling truly interactive advertising, newspapers for the most part continue to base their online businesses on the idea of “upselling” web versions of classified ads to marketers who are rejecting the one-to-many print model at an ever-faster rate.
Companies like Lee and Media General may have thought they were on to something a couple of years ago when they affiliated with Yahoo’s HotJobs to gain a host of new online recruitment offerings. Though the expanded product line indeed enabled the publishers to produce enviable sales gains in 2007, the publishers have no comparable new products this year to replicate last year's one-time feat.
Worse, you can pretty much count on each of the major classified categories to continue eroding as long as the economy remains in a recession. The big question, of course, is how much business will return when the economy revives.
In the same years Google ventured deeper into banner, video and other popular new forms of interactive advertising (including mobile), newspapers inexplicably continued to put their faith and energy into trying to shore up the classified-advertising business despite its obvious and seemingly irreversible secular decline. (One way newspapers could get beyond their heavy reliance on classified advertising is discussed here.)
Now that online growth is shrinking at the same time print revenues are shriveling, publishers will be harder-pressed than ever to muster the economic resources necessary to assure the economic vigor of their enterprises.
If the new media are supposed to be saving the newspaper business, then newspapers had better act quickly to start saving their new media franchises.
Nearly overshadowed by the double-digit print declines reported widely throughout the industry, the interactive slowdown results from the stubborn determination of most publishers to try to sell online advertising to the very same people who are forsaking print advertising.
But the plan isn’t working. In the same three months that sales leaped 41.5% at Google, online revenue at newspapers in the first quarter of this year ranged from a gain of 10% at McClatchy to an increase of 7.5% at Lee Enterprises to a decline of 3.3% at Media General. This compares with the online gains of 17%, 54% and 66% that McClatchy, Lee and MEG respectively reported in the same period a year ago.
How could Google be doing so much better than newspapers? And why are interactive sales decelerating at newspapers when they are booming at Google? The answer to both questions lies in the difference between the types of the ads sold by Google and by newspapers.
Nearly all of Google’s sales come from the keyword ads that run on the right-hand side of search results, as well as the millions of other websites that carry Google ads in exchange for a split of the revenue generated when someone clicks on an ad. This business is growing explosively because advertisers love the idea of paying for an ad only when someone cares enough to click on it – and because marketers prize the precise (and free) metrics that Google provides to monitor their campaigns.
By contrast, most newspapers generate something north of two-thirds of their online advertising revenues by selling listings in the three major classified categories: auto, employment and real estate. These would be the same ad verticals where print sales, respectively, have fallen 14%, 28.8% and 25.8% since 2005, according to the annual industry statistics compiled by the Newspaper Association of America. (For an in-depth look at the collapse of the recruitment market since 2000, see this post.)
While Google is minting money by selling truly interactive advertising, newspapers for the most part continue to base their online businesses on the idea of “upselling” web versions of classified ads to marketers who are rejecting the one-to-many print model at an ever-faster rate.
Companies like Lee and Media General may have thought they were on to something a couple of years ago when they affiliated with Yahoo’s HotJobs to gain a host of new online recruitment offerings. Though the expanded product line indeed enabled the publishers to produce enviable sales gains in 2007, the publishers have no comparable new products this year to replicate last year's one-time feat.
Worse, you can pretty much count on each of the major classified categories to continue eroding as long as the economy remains in a recession. The big question, of course, is how much business will return when the economy revives.
In the same years Google ventured deeper into banner, video and other popular new forms of interactive advertising (including mobile), newspapers inexplicably continued to put their faith and energy into trying to shore up the classified-advertising business despite its obvious and seemingly irreversible secular decline. (One way newspapers could get beyond their heavy reliance on classified advertising is discussed here.)
Now that online growth is shrinking at the same time print revenues are shriveling, publishers will be harder-pressed than ever to muster the economic resources necessary to assure the economic vigor of their enterprises.
If the new media are supposed to be saving the newspaper business, then newspapers had better act quickly to start saving their new media franchises.
posted by Newsosaur at 7:30 AM
1 Comments:
As much as I love newspapers, most of them had become so bloated, arrogant, lazy and complacent that the current fall was inevitable. The fact that they still have no idea how to make a transition to online publishing - with content or advertising - is simply pathetic.
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