• by Michael Shields , August 18, 2004

While the newspaper world struggles to recover the faith of advertisers after an unprecedented series of circulation scandals and battles with the Internet's threat to local ad sales, some good news for the industry emerged Tuesday. Total newspaper ad expenditures rose 4.1 percent for the second quarter of 2004 to $11.5 billion versus the same period last year, according to preliminary estimates from the Newspaper Association of America.

The modest increase was driven by a healthier classified advertising market, which saw spending increase 6.9 percent for the quarter.

Better hiring prospects and a continually strong housing market appear to be trickling down to the newspaper business. Within the classified category, recruitment advertising jumped with a 20.2 percent increase to $1.1 billion and real estate climbed 6.1 percent to 959 million.

"What we have seen is sequential improvement in newspapers as the overall economy has improved," said Jim Conaghan, NAA Vice President of Business Analysis and Research. In fact, ad spending for newspapers has grown consistently since the second half of 2003.

Automotive advertising, which is also driving down consumer magazine advertising, was down for the quarter, dipping 3 percent to $1.2 billion. Conaghan said that auto spending is expected to improve in the fourth quarter of this year as several new cars launch.

As for national ad spending, results improved in second quarter, though at a slower pace, increasing 2.8 percent to $2.1 billion. Similarly, retail spending grew by just 2.6 percent.

"There was a slowdown in telecom spending in second quarter driven by consolidation," said Conaghan, referring to recent moves by AT&T and SBC. "On the other hand, the largest category, transportation and travel, showed improvement."

For the first half of the year, total ad spending in newspapers increased 3.8 percent to $21.7 billion.

Meanwhile, in the second half of the year, might the recent circulation scandals effect total advertising growth? "The problems you have been reading about get washed out in the aggregate," said Conaghan. "It's going to be hard to pinpoint any effect."

There has been speculation that the various scandals may damage advertisers' confidence in the medium overall. Yet Conaghan believes these are isolated incidents. "I don't get that sense," he said. "These are specific to local markets and individual situations that will not have a domino effect."