Online Ad Revenue Going From Phat To Flat?

By: Jennifer Saba

Online revenue for newspapers is on the rise, isn’t it? Well, yes, but perhaps not fast enough. With all the emphasis on online revenue, it’s disquieting that newspapers are losing ad share there while experiencing slower growth.

A new report from Borrell Associates finds that while newspapers still claim the lion’s share of online local advertising (at 35%), online pure-plays ? think Google, et al. ? are drawing near, with a 33.2% chunk of all local ad spend online. News-papers, over a two-year period, experienced a loss of 8.2 points (see page 56). “It’s likely to slip more this year,” the report warns.

Borrell analysts note that advertisers are stepping up spending online, at a projected increase of 31.6% to $7.5 billion. Yet as more competitors enter the fray, traditional media with online outlets are fighting for it. Many newspaper companies, most notably the New York Times Co., have signaled that online growth is decelerating.

“It’s a bad thing,” says Gordon Borrell, CEO of Borrell Associates, about the loss of share and slowdown in growth.

What’s happening is this: Online advertising still is often tied to print advertising. As print advertising sinks, it pulls online ad growth down with it. Another factor that accounts for the slippage in share is that newspapers are selling banners and listings, revenue that is quickly drying up. The future is in paid search, and video.

But all is not lost: “It would be worse if they weren’t preparing for it. They realized this a year ago,” Borrell adds.

There is movement with companies like Gannett, which purchased the local search engine Planet Discover. The Washington Post and The Wall Street Journal are just two of the many papers experimenting with online video advertising.

“I’m certain they will at least hold off significant erosion,” Borrell says about the industry at large. “They have made plans to plug the dike.”

There are a few key factors, he suggests, that executives should take into consideration if they want to keep increasing online ad revenue at a fast clip. Borrell is a proponent of newspapers cleaving online divisions ? especially when it comes to the sales team. “It’s a no-brainer,” he says. “If you want to affect online sales, hire people who unless they sell [online], won’t eat next week. Unfortunately, everyone wants to use their print staff to sell online advertising.”

Frankly, in this view, print-ad salespeople need to concentrate solely on getting more ad dollars in the paper, while the getting is still good. They don’t need the extra diversion of trying to sell online, especially when they net bigger commissions with print.

Newspapers need hungry online salespeople ? and they aren’t usually coming from the ranks of the print newspapers, Borrell notes. He suggests raiding cable and radio outfits. “Newspaper people are generally order-takers,” he says. “Radio and cable salespeople are much more accustomed to cold-calling and selling in small increments.”

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