Newspaper digital ad share hits all-time low

The share of the U.S. digital advertising market garnered by newspapers shrank to the lowest level in history in 2011, according to newly published data. 

With the growth of digital formats like highly targeted search, mobile and social advertising vastly outpacing the ability of publishers to develop competitive new products, newspapers sold only 10.3% of the $31.7 billion in digital advertising purchased in 2011.

When the Newspaper Association of America first started counting online sales in 2003, newspaper websites carried 16.7% of all the digital advertising in the United States.  As illustrated in the green bars in the graph below, the industry’s share of online sales has declined ever since.

The national online sales data comes from the Internet Advertising Bureau, a trade association that hires PriceWaterhouseCoopers – the same folks who tabulate Oscar votes – to do an annual survey of the rapidly expanding digital marketplace.

While the data released by IAB last week show that total digital ad revenues in the U.S. increased by 21.2% in 2011, statistics reported earlier this year by the NAA show that digital sales grew at a les brisk 6.8% at newspapers in the same 12 months. 

With the total digital advertising market expanding three times faster than interactive newspaper sales, it is easy to see how publishers lost market share in 2011. 
But, wait, it gets worse.   The 15-point gap between digital sales growth at newspapers and the entire market in 2011 is the biggest such difference since newspapers started reporting online ad sales.  The next-worse disparity between newspapers and the entire market was when publishers trailed the growth of the over-all market by 12 points in 2008.
The widening gap in sales momentum shows that publishers, notwithstanding their avowed efforts to boost interactive revenues, fell farther behind their digital competitors in 2011 than any point in history. 

The reason the general digital market is growing faster than interactive advertising at newspapers is that the digital natives sell many more products – especially search and targeted display advertising  –  than the run-of-site banner ads and classified “upsells” that most publishers have on offer. But the sales growth at newspapers trails the online industry in even in the two primary ad categories where publishers  are trying to compete.

In the case of banners, the 21.5% leap in online display ad sales reported by the IAB for 2011 is three times greater than the 6.8% increase in all digital categories reported by the NAA. The situation for classifieds is similarly disappointing. While newspapers dominated classified advertising in the pre-Internet era, the IAB reports that digital classified revenues grew by 8.1% in 2011 at the same time print classified at newspapers sales fell 11.0%.

When I reported earlier this month that newspapers since 2005 lost $27 in print advertising for every dollar they gained in digital sales, my friends at the Poynter Institute said it would be fairer to publishers to look at the success of their going-forward digital initiatives than their past failures to respond to this emerging market.

The objective data reported above are the most up-to-date information we have to  gauge the real-time performance of the publishing industry.  By any measure, the numbers unfortunately show that newspapers are falling ever farther behind the digital competition.