Technology | Media | Telecommunications

Saturday, January 24, 2009

Why Newspaper Advertising Model is Broken


According to the latest market assessment by eMarketer, the outlook for newspaper publishers in the U.S. is downright dismal. They estimate that American newspaper advertising revenues declined 16.4 percent in 2008 to $37.9 billion.

The forward-looking story is equally bad. By 2012, spending will slide to $28.4 billion.

"The current economic situation is making things tough across all media, but newspaper revenues are falling more than in any other major medium," says Carol Krol, eMarketer senior analyst. "Even the former bulwark of newspaper revenues, classified advertising, is plummeting due to Craigslist.com and other online alternatives."

The Newspaper Association of America tracked two consecutive quarters of declining revenues for newspapers online for Q2 and Q3 of 2008 -- the first time that has ever occurred since it began tracking online figures in 2003.

For 2008, eMarketer estimates online newspaper advertising revenues declined by 0.4 percent overall compared with 2007, to $3.2 billion, and forecasts they will drop further into negative territory in 2009, down 4.7 percent to $3 billion.

"The challenge for newspapers is continuing to make money while they transition to online," says Ms. Krol. "But they face the same transition problems that plague other traditional media, such as broadcast TV, and so far they have not been able to crack the code."

The "State of the News Media 2008" report, published by Pew Research Center, described the dilemma as a decoupling of news and advertising: More and more it appears the biggest problem facing traditional media has less to do with where people get information than how to pay for it -- the emerging reality is that advertising isn't migrating online with the consumer.

"It's like changing the oil in your car while you're driving down the freeway," Howard Weaver of McClatchy told Pew researchers. Clearly, that's a sobering analogy for investors who are hoping for any sign of an industry turn-around. Perhaps their advertising model is truly broken, and beyond repair.