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Research: Newspapers Struggle with Combined Print/Digital Ad Models

Published on March 05, 2012

A new study from the Pew Research Center’s Project for Excellence in Journalism (PEJ) finds some bright spots in the newspaper industry. A few—but just a few—are achieving success with their cross-media revenue models.

“In general, the shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want,” wrote Pew authors Tom Rosenstiel and Mark Jurkowitz. They described the rate of contraction among newspapers as “alarming,” but chalk it up in part to “cultural inertia.” Most newspapers have put no significant effort into monetizing digital revenue categories.

PEJ surveyed 38 newspapers from six publishers, charting digital revenue and sales efforts. PEJ ensured that it covered papers of various sizes; because the majority of papers in the U.S. are small, PEJ included 22 papers with circulations under 25,000; seven with circulations between 25,000 and 50,000; and nine of over 50,000.

Of those 38 papers, seven reported declines in digital revenue. Among the laggards, one paper saw digital ad revenue decline by 37%, and another by 25%.

But one saw digital ad revenue gains of 63%, and print revenues by 8% over one year, while a second paper gained 50% in digital advertising. One of the top gainers chalked its success up to “smart ads” that targeted customers by online behavior—a practice that was rare among the remaining 37 papers. A second paper build a multi-million dollar advertising and marketing consulting practice. It sold not just advertisements, but ad expertise.

Industry Obstacles
PEJ reported that the newspaper industry as “mature and monopolistic,” adjusting poorly to digital models. Digital is newspapers’ highest area of growth, but still provides nominal revenues. That is due in part to a lack of bandwidth in creating digital strategies. “We have all these [new] products we are working on that we believe are going to deliver results that are part of our sustainability," one executive told PEJ, "But we need to eat today."

So, companies that are struggling find themselves risk averse. "There might be a 90% chance you'll accelerate the decline if you gamble and a 10% chance you might find the new model," one respondent said. "No one is willing to take that chance."

Among other key findings:

  • The papers providing detailed data took in roughly $11 in print revenue for every $1 they attracted online in the last full year for which they had data. That nowhere near made up for the 9% decline in print ads revenue.
  • Only 40% of the papers say targeted advertising is a major part of their sales effort, despite the fact that targeted digital advertising is expected to dominate local digital revenue by 2014.
  • The majority of papers focus their digital sales efforts on conventional display and digital classified, which are the largest categories but low-growth categories.
  • Daily Deals accounted for 5% of digital ad revenue in 2011.
  • Advertising on mobile devices accounted for only 1% of the digital revenue in 2011. Executives have faith in this meteorically-growing medium, but have yet to take advantage. 
  • Almost half (44%) are trying to develop nontraditional revenue from, for example, events; consulting; and selling new business products, but revenues are typically under $10,000 per quarter.
  • Among the papers that provided data, the number of print-focused sales representatives outnumber digital-focused reps by about 3-1. This reflects the fact that print ad revenue, which is shrinking, still makes up the bulk of the overall revenue (on average 92% in our study's sample).

So as PEJ describes, newspaper execs are “still caught between the gravitational pull of the legacy tradition and the need to chart a faster digital course.”

One consideration: if digital advertising is so nominal a revenue source, advertisers may find they can negotiate for large contracts at medium-sized campaign prices. Newspapers are likely to respond positively to “walk-in business,” and willing to negotiate for the immediate cash influx.