Advertising Revenue on US Newspaper Web Sites Increases 33%, But Print Continues Its Decline With More Dark Clouds On The Horizon

It’s already well documented that great newspaper web performances do not yet make up for the losses suffered on the print side, and the second quarter report by the Newspaper Association of America (NAA) shows that again. The newspaper web sites grew their advertising by 33.2% to $667 million in Q2 over the same period a year ago. Print, on the same basis fell by 0.2% to $11.7 billion.

According to these figures for all that web growth, newspaper web sites on average still provide only 5.4% of a newspaper’s revenue. Many newspapers have targeted that within three years the average is closer to 12%.

And that explains why John Kimball, NAA chief marketing officer, says, “The mother lode is still print, and the business is very focused on making sure that we find ways to make sure that grows.” He says he doesn’t know of any newspaper that says the future is just online and that is where they concentrate all their effort.

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Combine the print and online revenues in that second quarter and the spend actually increased by 1.1% over a year ago which gives an indication of just how much advertisers are turning their spend away from print. The biggest print problem was in national ad spending that was down 3.8%.

Print has a couple of major advertising problems on its hands according to new studies. First, the automobile industry is not only cutting back its total spend but it is also reallocating away from print. And secondly, whereas classified advertising in the latest figures held steady a new report says that while real estate (property) spending is going to increase this year the sector’s newspaper advertising spend is going to drop very dramatically.

General Motors, the US number one advertiser, has reduced its overall spend in the first half by 3% to $1.7 billion, according to Nielsen Monitor-Plus, and DaimlerChrysler has reduced its spend 13% to $723 million. But both are actively putting more of what they do spend into television and interactive activities and print is seeing less and less. It’s true that Ford has increased its spend by some 7% because of its “Way Forward” but with its sales numbers ever decreasing the company says it is revisiting its ad spending plans for the rest of the year.

And the other auto drop that really hurts print is that local auto dealers reduced their overall spend by 4%.

According to the NAA one area where newspapers showed good strength was from real estate ads that jumped 18.5% from a year ago to $1.2 billion. But a new report from Classified Intelligence, a company that works with newspapers to improve their classified advertising revenues, says that real estate advertising has already begun a dramatic print decline.

Former colleague Peter M. Zollman, the founder of Classified Intelligence based in Altamonte Springs, a northern Orlando, Florida, suburb, says, “While this has been a banner year for real estate advertising in US newspapers, there’s a cliff ahead – and newspapers are already beginning to see a significant fall-off in real estate revenue.”

Some 51% of the realtors in the survey said that while they were spending more money than ever before on advertising, they are planning to steadily reduce their newspaper spend. As one realtor said, “Print publications are no help. The Web provides more information to the customer and less wasted phone calls. I think in five years, 95% of my advertising will be done on the Internet.”

According to the report realtors spend more money on their own Web sites than any other advertising medium. Nearly two-thirds said they do not advertise on newspaper web sites, while the other third said they spending up to 20% of their budget on newspaper web sites.

Print has experienced this type of advertising roller coaster ride for a few years now which explains all the cost cutting, but it cannot rely upon that alone to keep the numbers up. It needs to find new ways of adding revenues, such as the Wall Street Journal’s move to open up its front page to advertising. When it made that announcement in July t the traditionalists howled. Other newspapers took note and said they might put advertising on section front pages but certainly not on the A1 front page.

But the WSJ, which admittedly has a unique opportunity to raise major revenues from such a move because of the demographics of its national readership, is showing it is on the right track. It has made deals with two automakers – that very industry sector that is cutting back on regular print – for 15 month contracts to advertise once a week on the Journal’s front page.

Those on Madison Avenue say each automaker has signed 15 month agreements at a minimum of $75,000 a week – that’s some $5 million each – for the privilege of Toyota appearing on Wednesday and GM on Fridays. If the Journal can sell the other three days than that’s a cool $25 million it wasn’t seeing before, assuming those advertisers don’t just reallocate that spend from what they were already budgeting to spend at the WSJ. The first such ads appear this week.

Unlike the US, front-page advertising in Europe is frequent and there are no statistics to show that it drives readers away. Just looking, for instance, at Saturday’s Tribune de Geneve, there are ads in the lower left and lower right corners of the front page.

Newspaper publishers these days are saying they are taking a look at all their activities. It’s time for the traditionalists to step aside, and the WSJ has made a good start.