Newspaper Industry in Trouble: Online Advertising Growth is Slowing

According to the Wall Street Journal, the newspaper industry’s online revenue growth seems to be slowing down and might not be the lifeline they were expecting. Here are the highlights of the article:

Last week, that lifeline began looking frayed. New York Times Co. warned Thursday that online advertising growth this year won’t be as strong as the 30% it had projected. On the same day, Tribune Co. reported that the growth rate for first-quarter interactive revenue was sharply lower than a year earlier. Gannett Co. likewise said online revenue growth slowed in the first quarter from a year earlier.”(…)

(…) last week’s news came as the number of online news outlets proliferates. Rival media such as TV stations and magazines have beefed up their presence, adding to threats posed by Web giants such as Google and Yahoo and popular sites such as CNN.com. Even the social-networking site MySpace has added a news feature and is boosting its ad-sales efforts. (…)

One major issue for many newspapers online: Roughly 70% to 80% of their online revenue is tied to a classified ad sold in the print edition — known as an “upsell,” says Paul Ginocchio, a newspaper analyst at Deutsche Bank. And as newspapers see a sharp erosion in classified advertising for real estate and jobs, their Web sites are being hit as well. Analysts say papers need to find new categories of advertisers. “Newspapers need to move beyond the traditional classified sources they’ve relied upon,” says Borrell’s Mr. Cassino. (…)

Underlining this pressure is a shift under way within Internet advertising. The ad formats that have so far proved strongest for newspapers — banner ads, pop-ups and listings — are losing ground to formats such as search marketing. Ad buyers say automotive, entertainment, financial-services and travel companies — all major newspaper advertisers in print and online — are aggressively shifting dollars into search marketing.(…)

What it means: here are my two cents as an outside observer (and newspaper junkie): obviously, media fragmentation online is hurting newspapers but I believe their general reluctance to embrace content syndication as a distribution/marketing strategy might be hurting them more. If you have an authoritative voice nationally or locally, you need to allow content syndication everywhere to try to drive traffic back to your site(s). Because of the lack of aggressive syndication, newspapers are being removed from the equation by news aggregators and undifferentiated content offer. I’m also a firm believer that becoming either a hypernational or hyperlocal-focussed news source will position you for the future. Everyone positioned in the middle will suffer exactly like what happened in retail with Wal-Mart. The launch of specific vertical sites (with or without a local angle) could also improve their situation. Finally, newspapers need to embrace blogging technology to improve their SEO strategy.

Update: Rich Gordon, Associate Professor at Northwestern University, suggests similar solutions: “Instead of trying to build the best destination, build the best network.”

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