Newspaper Spending Hits $11.1 Billion

With yesterday's release of the latest Newspaper Association of America (NAA) ad-spending estimates, the struggling newspaper medium received another welcome bit of good news. And while few publishers are ready to break out the cigars and champagne just yet, the industry continues to distance itself from the lows of 2001 and 2002.

The NAA estimates that newspaper ad spending in the second quarter of 2003 hit $11.1 billion, up 1.6% from the year-ago period. Not surprisingly, national advertising led the charge, with big gains in telecom and automotive powering the segment to a 12.8% gain (up to $2.1 billion) over 2002 levels. Retail ad spending also nudged upward - 1.7%, to $5.3 billion - despite shaky financial performances by several of the country's biggest sellers.

The results weren't entirely encouraging, however. Newspapers' highest-margin category, classified ads, continued to suffer as a result of the sludgy job market. The segment slipped 3.9%, to $3.6 billion, in the second quarter; for the first six months of 2003, it is off 2.2%, to $7.1 billion, from 2002.

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NAA vice president of business analysis and research Jim Conaghan expressed mild satisfaction with the numbers. "They're pretty much what we expected," he says. "Given where the overall economy has been, we thought they'd be in line with what we saw in the first quarter [a 1.7% gain over the first three months of 2002]."

Bright spots could be found within each of newspaper advertising's three categories. While transportation and travel companies shied away in recent months - see under "war, fallout from" - national advertisers were otherwise bullish on the medium. "What's happening in telecom is pretty amazing," Conaghan notes. "It just keeps going and going." In the first six months of 2003, $3.8 billion was spent on national advertising in newspapers, up 8.4% over 2002.

Although its overall growth was middling, retail advertising saw several pockets of strength. Ad dollars from sellers of building materials increased sharply, perhaps owing to favorable financing rates for home-improvement efforts. Food store advertising was similarly strong.

For the year to date, retail is up 2.1%, to $10.0 billion, over 2002. Conaghan, however, believes that significant growth may finally be realized in the months ahead. "You've got back to school and you've got the holidays," he explains. "General merchandisers in particular will probably do more than they've been doing so far."

While little such optimism exists for the hard-hit classified ad segment, it's worth noting that the other classified-ad mainstays - real-estate and automotive advertising - remain healthy. Fueled by low interest rates, real estate jumped 9.0% in the second quarter to $904 million, while automotive crept up 1.7% to $1.2 billion. While these gains didn't offset continued huge losses in recruitment (down 15.0% to $956 million in the second quarter), they were nonetheless higher than most pundits had predicted.

As for recruitment ads, Conaghan has little to say about the current economic climate: "The economy is down 400,000 jobs between June 2002 and June 2003, and 2.5 million jobs from the employment peak in 2000. Obviously it's not a situation where you're going to see a lot of employers advertising."

Conaghan is hesitant to make big-picture predictions for the months ahead, but remains optimistic that newspaper ad spending will have grown 3% by the time 2003 is in the books. "I think that's realistic," he says, citing the oft-quoted prediction of 4% GNP growth in 2003. For next year, he hopes to see an increase of 5% or more in newspaper ad spending.

"I think it will be more of what you'd call a 'normal year' for us," he says. "Of course, it's been quite a while since we've seen a normal year. Everybody in the ad business would be very happy with 'normal' at this point."

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