Newspaper ads tracking to $10B sales drop
Based on the 29.0% skid in advertising sales in the second quarter of this year that was reported on Friday, consolidated print and online ad sales likely will be no better than $27 billion this year. They could even be worse, depending on the state of the economy.
The projected performance compares to total ad revenues of $37.8 billion in 2008, when sales plunged by 16.6%, which until now had been the worst decline on record.
Assuming the $27 billion projection proves true for 2009, the rate of the industry’s sales decay will have accelerated by 1.5 times in just 12 months. The quickening, sickening quarter-by-quarter sales collapse is illustrated in the chart below (click to enlarge).
Dashing the hopes of publishers for a respite in the ongoing meltdown of their business, the sales decline in the second quarter accelerated in every category but classified advertising, according to data provided by the Newspaper Association of America.
As sales for the period tumbled to $6.8 billion from $9.6 billion in 2008, the quarterly percentage declines in retail, national and online ad sales each fell by a higher rate than ever before. National plunged 29.6% to $1.1 billion, retail skidded 24.9% to a bit under $3.6 billion and online slid 15.9% to $653.1 million.
Classified advertising fell by “only” 40.4% in the second quarter, as compared with a record drop of 42.2% in the first period of the year, bringing sales for the quarter to a bit less than $1.5 billion. To put this in perspective, each of the big three classified verticals as recently as two or three years ago was capable of generating a billion dollars in sales on its own.
Recruitment advertising, a billion-dollar category in every quarter as recently as 2006, fell in the second quarter by 66.3% to $202.2 million. Real estate, which was pumping out billion-dollar quarters as recently as 2007, fell 45.8% to $335.6 million. Auto, which also was capable of generating quarterly revenues of close to a billion dollars as recently as 2007, fell 42.7% to $332.1 million.
The brightest spot for classified advertising was the "other" category, where people sell stuff like like puppies, surplus floor tile and the like. Sales were down 11.7% from the prior year at $620.3 million.
My projection for a $10 billion sales decline in 2009 assumes the industry will produce half of its annual sales in the first six months of the year, as it has done with great reliability throughout recent history. Print and online ad sales amounted to just short of $13.5 billion in the first half, representing a 27.6% drop from the same period in 2008.
When you double the first-half sales, the industry appears to be on track to produce some $27 billion in ad revenue for the entire year. This assumes the drop in sales will not accelerate in the coming months and that the econmy will not stage a sudden and vigorous turnaround by the end of the year.
The last time newspaper ad sales were as low as $27 billion was 1986. On an inflation-adjusted basis, the $27 billion in sales achieved back then would be worth $52.3 billion in 2008 dollars.
By that measure, it is fair to say that the industry today is only half the size it was two decades ago. And there are no signs the decline has been arrested.