Taking into account the extra week in 4Q 2007, McClatchy's total ad revenues still fell 9.1% to $573.4 million, compared to the same quarter in 2006--due mostly to a 9.3% drop in advertising revenues, to $489.4 million. Circulation revenue fell 5% to $66.1 million.

For the full year 2007, excluding the 20 newspapers acquired from Knight Ridder, revenues fell 7.9% compared to 2006, to about $1.6 billion--due mostly to an 8.6% drop in advertising revenues and a 4.9% drop in circulation revenues.

As with other newspaper companies, McClatchy's losses were led by a 20% decline in print classifieds, with real estate, automobile and help-wanted revenues all suffering double-digit drops. In the fourth quarter, real estate tumbled 30.9%, automotive 13.3%, and help wanted 24%.

McClatchy management blamed the weakness in real estate markets in California and Florida, in particular, with chairman and CEO Gary Pruitt noting, "even though they represent only about a third of our total revenues, they account for a majority of our advertising revenue declines."

However, McClatchy, like other newspaper companies, is now also seeing an ominous new trend: declines in local and national advertising, including retail. In the fourth quarter, national advertising slipped 6.8%, while retail, which accounts for a large proportion of local ad revenue, was down 2.7%.

Even more discouraging was the anemic growth in online revenues, which rose just 2.2% to $164 million in the full year 2007 compared to 2006, when the Knight Ridder acquisitions are taken into account. Thus, online ad revenues, with growth now slowing into the low single digits, still make up just 8.5% of the company's total annual revenues.

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