Newspapers Make Less Money Off Their Sites but Should Blogs Worry?
October 13, 2008 |
There is some piece of bad news in the online advertising revenue field today – and the news seems to be relevant both to traditional and new media outlets. The Newspaper Association of America has reported that online revenue generated by websites of newspapers has finally switched from continuous double-digit growth to devastating fall: financial results from the 2nd quarter ($777 million) are 2.4% lower than the results from the same period last year.
The association started measuring and reporting online revenues in 2003 and since then there has never been a quarter when online revenue demonstrated anything but growth for the newspapers. This is the first time a decrease is reported – and this what has made us think that the entire online advertising industry (and all of us relying on it) is under a terrible threat now that even newspapers that enjoy incredible popularity as news sources (especially those that keep up with the times and add blogs and podcasts to their online properties) experience the results of the financial meltdown. And it looks like the situation is even worse since to the contrary traffic numbers were just fine: in the second quarter the number of visitors newspapers websites received was 12.2% higher compared to the same period last year.
What’s more, this is obviously not the worst thing that could happen to newspapers as it is a well-known fact that online revenue is not the main revenue stream for them. For example, in November 2007 the association reported that online advertising amounted to 7.1% of total newspaper advertising spend. So what really could be a catastrophe is if Alan Mutter’s prediction for $7.5 billion sales plunge for newspapers became a reality.
But should the entire online industry that is largely ad-supported be scared? Actually we have only recently seen reports that are still very healthy (and by healthy I mean growth – a little slower than usually but still impressive) and there are certain things that prove that this problem is valid for newspapers because of the nature of advertising and advertisers they rely on.
First of all, we should think about the types of advertisers that buy classifieds and display ads in the print newspapers and their online versions as well. The largest groups of advertisers here are retailers, auto dealers, real estate agents, and employers seeking to hire new people. It is quite obvious that these are the categories of businesses that will suffer the most in the crisis and only retailers will continue to press with advertising to report healthy results for the holiday season.
The second explanation is the type of advertising that we have grown accustomed to see on newspapers’ websites. Actually the only difference between print and online display ads for advertisers is the simple fact that they can receive reports on click-through-rates for their banners – otherwise both types are very close: advertisers pay for eyeballs mostly without any guarantees that they will attract new customers.
And if there is one thing everyone in the tech blogosphere agrees upon when it comes to online advertising predictions for the recession period, it is the fact that CPM advertising will lose some of its market share to CPC and CPA ads where an advertiser knows for sure what exactly he gets for the money he pays – a purchase or at least some interaction with his site makes such a banner valuable and justified. Unfortunately for newspapers, CPM advertising will suffer on their sites same as it will suffer everywhere so they will certainly need to diversify it if they want to get the revenue back and growing.
Of course we should not even hope that online advertising will remain unchanged – chances are necessary given the generally bad financial environment. And all the publishers will have to think how exactly they should handle advertising on their websites if they want to stay in the business – and restructuring will be the key here for everyone. When an advertiser is looking for a way to get more value for the same money, we will have to come up with the options for such increased value – this is the reality we have to face.
Photo by the toe stubber used under Creative Commons.
