Newspapers’ Online Growth Slowed in ’07 Along with Web Ad Industry

Source: http://clickz.com

By Kate Kaye, The ClickZ Network, Mar 28, 2008
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Online newspaper ad spending rose almost 19 percent to $3.2 billion last year, according to estimated numbers just published by the Newspaper Association of America. However, growth of paper Web site spending dropped more than 10 percent from 2006, when online ad revenues grew 31.5 percent.

In Q4 2007, online newspaper spending hit $847 million, up more than 13 percent over Q4 2006. Overall, print and online ad revenues reached $12.6 billion in the last quarter of 2007, a decline from total ad spending of $14 billion in Q4 ’06.

The portion of ad revenue from Web media continued its incline last year, accounting for 7.5 percent of all newspaper ad dollars, up from 5.7 percent in ’06, according to the NAA. Though online ad dollars are going up, the rate at which they’re rising has slowed for paper publishers. In 2005 and 2006, online ad revenue grew at a 31 percent clip each year over the previous year. Yet in 2007, the growth rate decreased to below 19 percent from 2006, down over 12 percent.

The NAA attributes the growth decline to overall online ad spending decreases in 2007. Indeed, the entire industry experienced a rate of growth in 2007 of about 10 percent less than in 2006. Estimates from the Interactive Advertising Bureau and PricewaterhouseCoopers pegged 2006 online ad spending at $16.8 billion, an increase of 34 percent over $12.5 billion in 2005. Yet, by 2007 online ad growth tapered. The IAB estimated last month that full year ’07 revenues would reach about $21 billion, a 24 percent increase over ’06.

NAA VP Audience and New Business Development Randy Bennett indicated the newspaper industry’s partnership with Yahoo, as well as the recently-launched quadrantOne newspaper network, will boost online ad revenue generation for the industry. “Newspapers have been aggressively diversifying the online advertising revenue, particularly through the Yahoo partnership and the quadrantOne newspaper partnership, to capture a larger share of national advertising dollars,” he told ClickZ News. “We expect to see an impact from those partnerships this year.”

Although the Yahoo deals have involved HotJobs recruitment listings revenue thus far, a handful of sites from the 26 publishers in the newspaper consortium have begun testing a display advertising relationship with Yahoo. The project promises to rake in national ad dollars for the paper sites, something they’ve been sorely missing.

The drop in combined print and online ad revenues also has continued to accelerate. According to NAA numbers, total ad spending fell at a rate of less than 1 percent between ’05 and ’06, but declined nearly 8 percent in 2007 compared to 2006.

In their long transition to the Web, newspapers have bundled sales of print and online classifieds ads. Now that’s coming back to bite them, said Ken Doctor, newspaper industry pundit and lead news analyst at media market research firm Outsell. “They have a lot fewer ads going into print, and if they’re not going into print, they’re not getting the [online] upsell,” said Doctor. Still, he points to the industry’s increased investments in staff and training dedicated to selling Web advertising. “Online-only sales have ramped up,” he continued.

Doctor also suggested online newspapers, still mainly reliant on CPM-based advertising, would benefit from introducing more performance-based ad opportunities. As the recession tightens ad budgets, advertisers are seeking advertising that can be tracked, with results tied directly to expenditures. Those recession winds are shifting more towards performance-based online advertising sold on a cost-per-click or cost-per-action basis, and away from impression-based advertising.

“Newspapers need a [cost-per-action] strategy as advertisers discover the world of pay-for-performance just like the auto advertisers have with lead generation,” said Doctor.

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