• by Erik Sass  @eriksass1, September 22, 2006

The New York Times Co. posted disappointing revenue returns for the month of August on Thursday--with overall ad revenue sliding 3.8 percent across all properties in comparison with the same month last year. The core property, the New York Times Media Group, posted a 4.2 percent drop in ad revenue, which the Times blamed on declining national ad sales. Studio entertainment, telecommunications and technology advertising were all particularly soft in August. Classified ad revenue decreased, led by collapsing automotive and help-wanted categories. The August figures seem to indicate that July's 3.3 percent declined from the same month in 2005.

The worst news came from the Times' New England division, where troubles at the Boston Globe contributed to a 15.7 percent overall decline in ad revenue. Here, demand was soft across a range of national ad categories, including telecommunications, financial services, national automotive, travel and entertainment. Investors are pressuring the Times to sell the Globe, and the poor August performance, coming after an 11.7 percent year-over-year decline in July and a 10 percent drop in June, may foreshadow more big transactions on the newspaper market in 2007.

As in recent months, Internet revenue was a bright spot on the ' ledger next to mediocre print ad sales--but in August the numbers weren't quite as buoyant as before, with a relatively modest increase of 17.3 percent over August 2005. By comparison, July revenues were up 27.5 percent compared to last year, June was up 23 percent, and May was up 27 percent.

And taking a longer view, the rate of increase is clearly slowing from year to year as well: overall, 2005 saw a 30 percent growth in online revenue over 2004.

Given the slowdown at one of the nation's most Web-savvy newspapers, the August figures raise a troubling question for newspaper publishers: is the online boom, limited as it was, already ending? Although the Times hasn't provided information about classified versus display advertising, the slowing overall growth rate could be due to slackening demand for online classifieds, one of newspapers' key sources of online revenue.

On this point Ken Doctor, a newspaper industry analyst with Outsell, Inc., warned that reliance on recruitment and real estate leaves online papers especially vulnerable to an economic downturn. "The greatest concern going forward is that the economy appears to be slowing, and publishers should be thinking about what will happen cyclically to those two areas," Doctor said. "It looks like hiring is softening, and that could have a serious impact on recruitment revenues."

Doctor said that the real estate slowdown hasn't yet hurt newspapers because homeowners are continuing to sell their houses--especially because it takes slightly longer than in the past. But a downturn that spurs sellers to pull houses off the market altogether could put a big dent in classified revenue, he added.

Newspapers would do well to beef up their contextual pay-per-click ads, he said, adding: "They've been too reliant on Google and Yahoo." And newspapers should make more of an effort to target visitors based on the pages they view, according to Doctor. Currently, Tacoda and Revenue Science have deals with many newspapers to target online readers based on their on-site behavior. "Now that you have tracking mechanisms in place, advertisers, merchants and national brands will pay more money to sites that deliver more paying customers," he says.