Online Newspaper Revenue Growth Exceeding Overall Online Ad Growth

Philip M. Stone August 22, 2005

Three new independent reports say that online newspaper revenue, which grew some 38% in 2004 and reached the $1 billion benchmark, is on course to grow at least as much in 2005.

And it is not only print media’s online newspaper sites doing well. Purchases of complimentary sites are flourishing, too. News International, for instance, that just recently paid $580 million for Intermix, parent of MySpace, (and accused by many analysts of overpaying), may be laughing on the way to bank as MySpace registered 10.8% of all US online display impressions in July, up from 7.9% in June and 6.3% in May, according to Nielsen Net/Ratings.

With the MySpace and Scout Media purchases, News International increased its online audience from 16 million to some 50 million, and Rupert Murdoch recently announced he has put another $1 billion aside for Internet purchases, obviously concluding that not only does he want to be a major Internet presence, but it is far quicker to buy your way there than to grow organically.

The New York Times that bought about.com in March for  $410 million says ad revenue for the site rose 73% in July and 33% year-to-date.

And it is not just on the US side of the Atlantic where media groups are buying heavily into the Internet, although at prices not as high as the headlined US purchases.  In the UK, for instance, United Business Media paid $56.5 million for three sites, two of them American.  And Trinity Mirror is said to be looking at a $90 million purchase of online recruiting agency Hot Group that helps the young find jobs.

Of course, all these figures have to be put in perspective. The $1 billion earned by newspaper sites in 2004 is, after all, a mere drop in the Internet ocean. “Yahoo!, Google, AOL and MSN alone generate more than eight times as much advertising revenue as the entire online newspaper industry,” according to Ezra Palmer, editorial director at eMarketer and the author of a new report pointing out the growth of newspaper sites.

He says that even though the general US online population is now growing very slowly, the interest in online news is rising rapidly. “This is partly due to broadband adoption, but just as important is a behavioral shift among consumers who now see online news as a commonplace, and commonly used, information source.”

EMarketer sees double digit online revenue for US newspapers through 2008, where as most newspapers are seeing print revenue increases of less than 5% annually. Following on the 38% increase in 2004, the research firm estimates online newspaper site revenue will grow by 36% in 2005, drop to 23% growth in 2006 and then down to 16% in 2007 and 18% in 2008.

But again those figures need to be put in perspective. Online advertising as a whole is still a very small percentage of the overall media advertising spend. In 2004, the online advertising was about 3.6% of the total spend, according to eMarketer, in 2005 it will grow to 4.6% and by 2009 will reach just 7.5%.

A report from Research and Markets to be published in September confirms the basic eMarketer figures and looked for answers to why online newspaper sites are doing so well. “”US consumers are flocking to online news sources, and in particular the online arms of offline publications. This growth is occurring despite the fact that growth in overall Internet usage is slowing down, or flat.”

 

 

 

 

 

 

 

Which do you prefer?

The report also credits broadband connectivity but, most importantly, that advertisers seem to be shifting some of their spend to online. “The percentage of time that people spend online dwarfs the percentage of advertising dollars devoted to the online channel. The biggest advertisers are cautiously shifting their budgets online. Online publishers, and again, newspapers in particular, provide a ‘safer’ environment for many advertisers, with trusted, known parent companies and predictable content,” the report concludes.

Another positive for newspapers, according to Research and Markets, is that they seem to be getting a handle on classified advertising revenue online. Craigslist may still be one of the most fearful words in a newspaper publisher’s vocabulary, but newspaper online sites are fighting back.

“The healthier economy has fueled strong gains in employment and real estate advertising. Many publishers seemed blindsided by the rapid rise of online classified sites, but now they appear to be putting up a stronger fight – classified ads make up the majority of online ad revenues at most companies,” the report says.

A report by the venture capitalist firm Veronis Suhler Stevenson (VSS) that primarily invests in media and information companies, focuses on the growth potentialities of new media versus traditional media.  It expects a 20.7% growth for new media advertising in 2005 as opposed to just 3.2% for traditional media.

And the report clearly gives the reasoning behind the very large media Internet purchases this year by mainly traditional media companies that have surpassed $2.5 billion. “New media advertising is forecast to grow at a compound annual rate of 16.9%, reaching $68.62 billion by 2009, while traditional advertising is expected to rise only 4.2% on a compound annual basis during the forecast period to $192.28 billion,” the report concludes.

It further projects that an average person by the year 2009 will spend 10 hours a day with media products such as home video, consumer Internet, wireless and interactive television and estimates the average consumer by then will spend more than $1000 annually each on digital-based media, the first time that threshold will be met.  It estimates the media and communications industry will “top $1 trillion dollars in 2009, making it the fourth largest and growing sector of the US economy.”

And supporting all of those figures come numbers from Nielsen/Net Ratings that online ad impressions really surged in July for the fourth straight month. In July there were 102.9 billion online display impressions, compared to 97.1 billion in June, 93.1 billion in May and 91.4 billion in April.

The five largest advertising blocks were financial services, web media, retail goods and services, telecommunications and public services.

And in an indication how all of this may be coming full circle, there were reports at the weekend that both Google and Yahoo had been approached to take over Trader Classified Media. Besides its 56 Web Sites that must be the main attraction, the Amsterdam-based company also publishes 578 print guides.

Be that as it may, it’s not often you see Internet companies showing any interest in print!

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