Mind the Gap

The latest numbers from the Newspaper Association of America show print newspaper advertising revenue continuing to drop: down 1.7 percent in 2006 to $46.6 billion. No news there--the usual doom and gloom.

But there's another interesting number in the NAA report: Advertising revenue for online newspaper sites jumped 31.5 percent in 2006, to $2.7 billion. It would appear that increase accelerated in the fourth quarter, when online revenue was up 35 percent year over year (the third-quarter increase was just 23 percent). The decline in print advertising accelerated in the fourth quarter, too, with classifieds particularly hard hit. Also no news there.

It's a little hard to see what's really going on here from the percentage changes, but if you look at the hard numbers, something very interesting emerges: The decline in print advertising is beginning to be made up by the increase in online revenue. Print advertising fell roughly $800 million in 2006; online advertising grew roughly $650 million. That's still a $150 million gap, which isn't chickenfeed—but it's not hard to imagine that gap closing in 2007.

Or, to look at it another way, the combined newspaper print-online revenue for 2006, $49.3 billion, was only slightly below the $49.5 billion in combined ad revenue in 2005. Back to percentages: combined ad revenue fell by less than half of 1 percent in 2006. That's practically a rounding error. Online accounts for 5.4 percent of all newspaper ad revenue, incidentally, a share that continues to increase.

The NAA release describes the decrease in print advertising as "outweighing" the increase in online ad revenue in 2006. Well, yes--slightly. But I think this is a glass-half-empty/glass-half-full situation. The replacement of print advertising revenue with online revenue is starting to happen in a significant way, as some of us have predicted for some time. And online revenue continues to accelerate. Next year, the Newspaper Association may have to find another description of the difference between the two numbers.

Comments

[Kyle Redinger]

I think newspapers are sitting on a tremendously valuable market that they can not only target with local advertising (their specialty), but also with unique user interests (based on indexing/meta data). I write about this here: http://themediaage.com/?p=21 .

[Mary Specht]

Robert Kuttner said in CJR that print and online revenue will meet in the middle in 2020. That's much slower than you're predicting, and it seems a little slow to me, too. He doesn't attribute the prediction, which is disappointing. From Kuttner's piece:

"With Web income soaring and print revenue basically flat, analysts expect the lines to cross within fifteen years. By about 2020, if current trends persist, half of a newspaper’s income and most of its readership will be via the Internet."

Here's the link: http://cjr.org/issues/2007/2/Kuttner.asp