• by March 16, 2007

Advertising on newspaper Web sites increased 31.5% to nearly $2.7 billion, the Newspaper Association of America reported in preliminary year-end estimates Thursday. On the print side, however, ad revenues of $13.2 billion reflected a 3.7% decrease for the year.

The estimated 35% fourth-quarter increase to $745.5 million for Web ads represents the 11th consecutive quarter of double-digit growth for online newspaper advertising since the NAA began reporting online ad spending in 2004.

But to put it in context, Web ad spending accounts for just 5.4% of all ad spending in 2006. And the overall newspaper advertising picture isn't very pretty. Overall ad dollars spent on online and print newspaper ads dropped 2.2% in the fourth quarter to $14 billion.

While Merrill Lynch analyst Lauren Rich Fine noted in a report this week that newspapers appeared to embrace innovation more aggressively of late, the serious question for investors remains "when will the gains online offset the declines in print," she wrote. "In fairness, we do not believe there is an answer to that question yet."

For 2006, ad spending in printed weekday and Sunday newspapers and online was flat--at $49.3 billion, from $49.4 billion the previous year. Print retail dipped 0.3%, totaling $22.1 billion versus $22.2 billion in 2005. National slid 5.1% to $7.5 billion, while classified ad spending in print fell 1.9% to $17 billion.

Within the classified category, real estate experienced a spike--up 11% to $5.2 billion--while automotive fell 12.8% to $4 billion. Recruitment declined 7.5% to $4.7 billion. All other classifieds rose 4.5% to $3.1 billion.