• by Ken Liebeskind , June 8, 2001

The economic downturn has affected all media, with newspapers perhaps among the hardest hit. The Newspaper Association of America reported that $10.4 billion was spent on newspaper advertising during the first quarter, a 4.3% decline from Q1 2000 and the first such decline since Q1 1992.

The drop in revenue accompanied by rises in newsprint prices last year and this year have prompted newspapers across the country to cut their staffs.

"The slow down in advertising is unlike any we've seen," according to Jim Conaghan, VP of market and business analysis for the NAA. "We had a long expansion period."

For years, newspaper advertising growth was heralded, even last year when there were huge gains in national advertising. But in the first quarter this year, national was down 3.7% to $1.75 billion, which Conaghan attributes to the slowing economy. He notes that GDC growth was about 1% in Q1, down from over 3% in Q1 2000. He says that drops in national advertising were higher in other media, especially radio and notes that newspapers are less dependent on it than other media. Still, the drop is significant because many papers were benefiting from the category growth, with heavy dollars coming in from automotive, travel, dot-coms and other products.

An even bigger drop was recorded in classifieds, with recruitment advertising falling 16.9% to $1.7 billion. "Fewer jobs mean fewer ads," Conaghan says, indicating there was actually negative job growth in March and April according to government statistics. He predicts further drops for recruitment ads for April, though he is unsure of the category for May and beyond. Automotive advertising also declined 6% to $1,1 billion, which can be attributed to the general economic slowdown. Real estate actually showed a gain of 11.6% to $745 million because the housing market has stayed strong.

Finally, retail advertising has dropped the least, down 0.4% to $4.6 billion. This large category remains strong since it is less sensitive to the economic slowdown with consumers still making basic retail purchases, like food and clothing.

The revenue numbers are compiled by NAA through surveys sent to newspaper companies each quarter.

Conaghan predicts a rebound later this year, with GDP growth expected to return to the 3% level by Q4. But he is unsure what will happen during Q3 and isn't sure how the GDP rebound will impact newspaper advertising.