Analyst’s Prognosis Bleak for Print Ad Revenue in 2007

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By: Jennifer Saba

Bear Stearns analyst Alexia Quadrani is forecasting a bleak 2007 at least with print advertising revenue. ?The print malaise will likely continue, leading to declines in revenue growth again in ?07,? she wrote in a note released on Friday.

She figures several categories will weigh down results next year, including help wanted and real estate, two relatively healthy categories now in decline.

June was the turning point for help wanted classified results, after two years of growth. The ?precipitous? fall shows ?little sign of abating,? Quadrani wrote.

Even online help wanted ad revenue is starting to show strains. CareerBuilder, the online recruitment site owned by Gannett, Tribune and McClatchy, reported that revenue increased 39% year-to-date Q3. For the same period a year ago, revenue advanced 79%.

?Our outlook is for little relieve in ?07 to this downward trend,? she wrote about help wanted classified.

While real estate has yet to turn negative, it has slowed considerably. In Q1 this year, real estate grew 23%; year-to-date Q3, it gained 9%.

National advertising revenue is the laggard of all categories. Though it represents the smallest amount of revenue for the industry, it has fallen the fastest. Year-to-date the category declined 6%, Bear Stearns reported.

More troublesome: The categories that make up the bulk of national don?t look like they are going to be jumping back to newspapers anytime soon. Telecommunications, auto, and movie advertisers are ?showing a willingness to experiment with digital and non-traditional marketing services, we do not anticipate a material increase flow in ad spend back to newspapers,? according to the note.

Quadrani comments on Google?s ad print program and notes that while newspapers may pick up additional advertisers, they are giving up potential direct relationships. ?If successful, Google print ads could impact the sales force role as Google begins to develop traditional media relationships directly with advertisers in addition to its Interactive ones,? she wrote.

As for the recent news that David Geffen reportedly offered Tribune $2 billion for the Los Angeles Times, Quadrani believes that a ?do nothing scenario? will be the most likely outcome given the paltry offers for the overall company. Tribune may be in a position to divest non-core assets like the Cubs or the Food Network and use the money to grow the business or return capital to shareholders, she speculates.

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