Friday, August 31, 2007

Print ad sales hit 10-year low

After six straight quarters of accelerating declines, newspaper print advertising sales in the first half of this year fell to the lowest level in a decade, according to statistics released today by the Newspaper Association of America.

Print revenues in the first six months of this year totaled $20.3 billion, the lowest since the $19.7 billion in sales recorded in the first half of 1997. Print ad sales in the first half of this year were 8.3% below the depressed level recorded in the same period in 2006. (UPDATE 9/3/07: Based on the sales shortfall, I predict here that print ad sales this year will be $3.5 billion lower than the depressed 2006 level level.)

Although the NAA touted a 19% increase in online ad sales to $796 million in the second quarter of the year in a spin-rich press release on the eve of the Labor Day weekend, print ad sales represented a bit more than 93% of the industry’s total volume of $22.49 billion in the first half of the year.

So, let's get one thing straight: Improving online sales, while a good thing, won’t help an industry whose primary revenue base has been eroding at an ever-quickening rate for six straight quarters.

The sales plunge in the first six months of the year, which occurred despite a robust economy, was paced by a 14.8% collapse in revenues from the three principal classified advertising categories – auto, real estate and recruitment. Sales of the Big Three classified categories were $6.8 billion in the first half of this year vs. just shy of $8 billion in the prior year.

The extent of the classified sales debacle is illustrated in the graph below. What the graph doesn’t show is that auto classifieds have not shown positive sales growth since the first quarter of 2004.

Help-wanted advertising last gained sales in the first quarter of 2006, but here's the back-story: Recruitment advertising, which hit an all-time record of $8.7 billion in the final year of the dot-bomb era, amounted to only $4.7 billion at yearend 2006. Thus, $4 billion in revenues have vaporized in this single category in half a dozen years.

Real estate, which had been the one bright spot in classified advertising while the housing bubble inflated, has deteriorated with a vengeance since the start of this year. Remember that the sub-prime mortgage meltdown occurred after the period covered by these numbers. With the real estate market all but paralyzed, the year-to-date declines are almost certain to be equaled – or surpassed – for the balance of 2007, if not beyond.

With consumers worried about the level of their household debt and the declining value of their homes, it stands to reason that advertisers will be more conservative about their spending in the second half of the year than they were in the first six months.

Ergo, no relief in sight.


Blogger Terry MAGUIRE said...

I wonder if the total amount spent on these three categories in ANY MEDIUM is not dropping by at least the same amount? In other words, unlike historic situations where newspapers faced other more traditional competitors that sold advertising space of some kind, what we see now are competitors who charge much less or nothing at all. What that means is that these revenue pipes are running dry and that some other revenue-producing offerings are needed in order for newspapers to retain profitability. That historic profitability has in part paid for the quality of the best reporting. If we don't value that quality enough to pay for it directly as customers (as is the case in some countries overseas; a single copy of the International Herald Tribune now costs more than $2.50, for example), the only option is for newspapers to find some new revenue generating lines of business very fast. Then again, I could have written that admonition years ago, and did.

12:02 PM  
Anonymous Anonymous said...

On the bright side, it makes me sure of my decision to resign from a dead-tree pub and go online.

12:27 PM  
Blogger Jim said...

You nailed it. And I wish the NAA would stop the spin, which you also rightly pointed out. But I still think Gannett's in play, despite what you wrote in your previous post.

2:02 PM  
Anonymous Anonymous said...

What is frustrating is that in almost any market you care to name, the local newspaper is still the best media buy there is.

4:29 PM  
Blogger Joe Jaz said...

Mr. Owens,

Frustrating for whom?

5:49 PM  
Blogger Rex Hammock said...

Your subject line, "Print advertising..." is a bit misleading. Print advertising includes magazines. While some categories of magazines have seen advertising declines (B2B, for example), they have not -- as a whole -- suffered the declines reflected in the newspaper statistics you cite.

8:26 PM  
Blogger Newsosaur said...

Rex is right that other forms of print advertising are faring better than newspapers -- the more targeted, the better.

Because I write mostly about newspapers, I think the context is clear for most readers. Apologies to anyone who was confused.

8:41 PM  
Anonymous Anonymous said...

Some thoughts on what newspapers have left to sell...

Giving it some thought as an interested outsider, it occurs to me that traditional newspaper publication is at least partially a *distribution* business - that is, the physical papers are still delivered to a fairly large number of point locations throughout a MSA.

Granted, this distribution end of the business is costly, mostly lamented in the Internet era, and being scaled down as we speak.

But perhaps these attitudes miss the point a bit - namely, that there may be other businesses looking for MSA-centric point distribution that can piggyback on what remains of the newspapers' in-place distribution networks.

For instance, the Brits have apparently been using newspapers to *heavily* distribute CD-based music samplers.

I don't think I've seen this in the US yet - FSIs of printed materials - yes, of course - for years, but not much else in terms of other materials.

Just a thought - wanted to get a discussion started, and was interested in hearing what the peanut gallery thought...

(And, btw, if newspapers think they have it bad - look at the annual unit sales of CDs in the music biz - they're homing in on a 50% unit sales decline over the last 5 or 6 years...)

2:00 PM  

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