Bad News: Plunging Newspaper, Online Revs

The fourth-quarter results for newspapers aren't surprising. Compared to the fourth quarter of 2007, print revenues plummeted 20.6% to $9.3 billion, while online revenues fell 8.1% to $778 million, according to the Newspaper Association of America on Thursday. Together, total print and online revenues fell 19.7% to just under $10.1 billion. The revenue figures make it virtually certain that this year will see the closing of more big regional daily newspapers and bankruptcy declarations from even more big publishers.

The quarterly figures from the NAA reflect the confluence of two trends in a perfect media storm -- a long-term shift in print ad dollars to the Internet was accompanied by one of the worst economic downturns in American history.

The first sustained declines in key newspaper ad categories began in 2004, well before the economy showed signs of recession. Single-digit drops in classified revenues foreshadowed increasingly steep declines across the board, including retail and national, in 2006-2008.



Newspaper graph

The first classified category to feel the effects of Internet competition was automotive, where ad revenues have fallen continuously since the second quarter of 2004. Online recruitment also went south before the recession, with continuous declines since the second quarter of 2006.

Then the recession piled on, beginning with the housing market meltdown in 2006, which turned the last successful classified category from a gold mine into a rubble heap. The collapse of the American car and financial industries, accompanied by rising unemployment and cutbacks in consumer spending, have hit every major ad category hard.

In classifieds, in the fourth quarter of 2008 automotive dropped 39.2%; real estate fell 41.3%; and job recruitment plunged an alarming 51.8%. National advertising slumped 15.8% and retail sank 12.5%.

While online advertising showed the smallest drop -- falling a mere 8.1% -- this figure is in some ways the most ominous, as newspaper publishers had for years pinned their hopes for revenue growth on the Internet. Earlier this decade, newspapers' online revenues did indeed post double-digit percentage increases, but ultimately their online strategies proved brittle and shortsighted.

The majority of this growth came from online "up-sells" offered to customers buying print classified listings. With the overall volume of print classifieds shrinking more rapidly, there were not enough up-sell opportunities to sustain online revenue growth.

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