Newspaper web sales lag by every measure
The inability of newspapers to capture and retain their fair share of digital advertising likely is one of the reasons that a growing number of publishers are thinking about charging for access to their websites.
Frustration over fast-shrinking online market share also may be why some publishers were so outspoken at their annual convention last week about the revenues they believe they are losing to online aggregators and to web publishers who violate newspaper copyrights by running unauthorized stories on their sites.
Several indicators illustrate the failure of the newspaper industry to thrive online. The following facts emerge from an analysis of sales data reported by two trade groups, the Newspaper Association of America and the Interactive Advertising Bureau:
:: Interactive revenues for newspapers dropped by 1.8% in 2008 to $3.1 billion at the same time over-all online ad sales in the United States surged 10.4% to a record $23.4 billion. See Sales Growth graph below.
:: Where there was only a $6.1 billion spread between annual newspaper sales and total online revenues in the United States in 2003, the gap widened to $20.3 billion in 2008. See Annual Revenue graph below.
:: The newspaper share of online revenues, which peaked at 16.2% in 2005, has declined annually ever since, dropping to an all-time low of 13.3% in 2008. See Market Share graph below.
Although it is reasonable to expect that newspaper market share would shrink in light of the explosive rise of online competitors ranging from YouTube to teeny blogs earning a few bucks a month from a handful of keyword-ad clicks, this argument seems insufficient to explain why online newspaper advertising declined last year when the sales of the over-all industry rose by more than 10%.
One of the reason newspapers trail the over-all online industry is that they offer no search advertising, the largest and fastest-growing category of online advertising. Those are the keyword-driven ads that appear next to searches at Google, Yahoo and Microsoft and other search sites.
Another reason for the under-performance of the industry is that newspapers are inordinately dependent (discussed previously here) on generating online sales from their traditional print advertisers, a business that is in both secular and cyclical decline.
As of the end of 2008, print advertising sales had dropped 23% from a record high of $49.4 billion as recently as 2005. Deep print sales declines likely occurred in the first quarter of this year, too.
The worst part about the print-to-web “upsell” strategy is that a substantial portion of online newspaper revenues historically came from classified ads sold to three verticals suffering mightily in the economic downturn: recruitment, automotive and real estate.
Even before the collapse of the economy battered each of these categories, advertisers increasingly had been shunning high-priced newspaper advertising in favor of sites like Craig’s List, sites targeted to job seekers in particular professions and sites optimized for selling houses or cars.
The only way newspapers can turn around their lagging digital sales performance – assuming it can be turned around – is for them to develop web and mobile venues that are less like newspapers and more like the interactive, viral and fun environments operated by their competitors. (More tips here.)
Newspapers also will need to develop more sophisticated online revenue solutions than selling the dollar-a-holler, backfill ads they use to fill the substantial banner inventory that many of them seem unable to sell on their own.