Thursday, December 20, 2012

Digital ad share dives sharply at newspapers

Reflecting the apparent acceleration of a troubling and long-running trend, the share of digital advertising earned by the nation’s newspapers plunged precipitously in the third quarter, according to an analysis of new data released this week. 

While total U.S. digital advertising expenditures surged 18% in the third quarter of this year to a record $9.3 billion, online advertising at newspapers rose a comparatively modest 3.6% to $759 million.  Thus, the 1,300-plus dailies in the land collectively captured a mere 8% of the digital advertising dollars spent in the most recent three-month period – a sharp drop from the 10% of the market they held in 2011. 

As reported previously here, newspapers collected 15% of digital ad dollars as recently as 2007. But their share of the burgeoning market has tumbled ever since, owing to a lack of such popular products as targeted and search advertising.   

The Internet Advertising Bureau, a trade association, reported that digital sales in the third quarter were fully $600 million greater than the all-time record set in the second quarter of this year.  The newspaper data is tabulated by the Newspaper Association of America, an industry-funded trade group.   

As illustrated below (click to enlarge), the growth of digital advertising at newspapers was reasonably competitive with the broader digital marketplace until the economy slipped into recession in late 2007.  Ad expenditures contracted for both newspaper and native digital publishers during the downturn, and the year-to-year percentage gain in newspaper advertising actually matched that of the Net natives in the second quarter of 2010. Since then, however, the growth rate of advertising sold by the pure-play digital competitors has rocketed ahead of publishers.  

One reason for the sluggish digital recovery at newspapers is the collapse of advertising for employment, real estate and autos since the economy contracted.  Prior to the downturn, publishers relied heavily on “upselling” web classified listings to print advertisers.  While recruitment and real estate advertising remain weak, publishers still have not seen an increase in auto advertising even though vehicle sales are at a 4.5-year high.  

Another reason publishers are trailing the digital natives is that they generally sell run-of-site banner advertising that cannot be targeted to the demographics or interests of specific individuals.  Unlike the ads appearing next to Google search results, which are explicitly targeted by the keywords selected by marketers, newspaper ads are sold in packages of 1,000 impressions at a crack. Unlike ads at LinkedIn or Facebook, which can be targeted with the enormous amount of personal information voluntarily contributed by each user, newspapers can provide little information to advertisers about the individuals visiting their sites. 

While some experts believe that the density of keyword ads at Google produces ad yields as high as $95 per thousand impressions, the commoditized nature of newspaper banners typically keeps their rates at $12 to $15 per thousand impressions.  Because publishers often are unable to sell substantial portions of their inventories, they are forced to fill the space with remainder ads that typically deliver only $1 to $2 per 1,000 impressions.  

The final reason newspapers are trailing the over-all digital market is that most of them have what charitably could be called rudimentary mobile and video ad offerings. Because publishers have not invested in harvesting information from their users or modernizing the technology on their web and mobile sites, the only thing they have to sell are static and untargeted ad formats. 

Given all of the above, the most logical explanation for the steady and continuing erosion of the newspaper industry’s share of the digital market is that a growing number of sophisticated local and national marketers aren't very interested in dollar-a-holler web and mobile advertising. 

It’s none too soon for publishers to resolve to do better in the new year. Happy holidays.  


Blogger frank h shepherd said...

The beginning of the end for many dailies... they have lost much relevancy in print... now they are losing relevancy in digital... sad but true. Chinese water torture comes to mind...drip by drip they will go down the drain... only delivering pre-prints at 80% profit margins keeps many of them a-float...and when they lose that edge the drip by drip will become a rushing torrent...newspapers biggest mistake was to ignore the threat of the internet for a long period of time AND trying to recover with the same set of staff members who grew up in print... they did not "change the culture by hiring young, digital experts and letting them run with the ball with their own strategic plan and set of stragies and action steps...... big, bad mistake that, to me, is the fatal mistake...

5:11 AM  
Blogger The Writers Fancy said...

Frank is correct. I spent 31 years in the industry. I left in frustration as I watched people who were barely able to manage email make major strategic decisions regarding digital. Newspaper publishers are getting exactly what they deserve.

8:57 AM  
Blogger Peter Erikson said...

I, too (unfortunately), have been in the industry for about 31 years, and it's as if newspapers are still using the old Royals and Selectrics they had when I first came on the scene. The computers in many newsrooms are years out of date, as is the software. The approach to advertising and innovation is the same: old And remember when every paper had a real copy desk? Very few have anything more now than a small regional desk that's like a headline mill. Bad writing and bad editing equal a bad product. Forget print NOW (and, yes, I know, there are still millions to be made from print advertising, but it's a fraction of what used to be there and will vanish in a few more years). Embrace the Web, put up a pay wall and integrate interactive ads into the experience. Once the system figures out what individual users click on most, in terms of both content and ads, personalize their daily "paper."

12:50 PM  
Blogger Unknown said...

I believe that the damage was self inflicted as the newspapers took their capital expenditure in technology (and other areas) to vurtually nil as they hunkered down to weather the storm. I talk to newspapers that are using Adobe Acrobat 7, circa 2005 and just shake my head. That is just one example and there are many more out of date software suites. The only way they will recover is to dramatically increase the capital allocated to in-house technology and start figuring out how to have a presence in the current frontier, "mobile". And they best be sure that when the next frontier shows up on the horizon, they are not caught flatfooted, too afraid or uneducated to jump in. They had a HUGE advantage with their "feet on the street" in local markets and have just about whithered that away.

6:09 AM  

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