2Q Advertising Revenue Plunges, According to NAA Analysis

By: Jennifer Saba and Mark Fitzgerald Newspaper print and online advertising revenue in 2Q sank 8.6% to $11.3 billion according to the Newspaper Association of America, which released the bad numbers just before the Labor Day holiday.

Print advertising revenue for the quarter fell 10.2% to $10.5 billion, one of the largest quarterly drops since 2001.

Online advertising, which grew 19.3% to $796 million, is starting to slow. In 1Q of this year, online advertising increased 22.3%. And in 2Q 2006, online advertising rose 33.2%.

The NAA attributed the loss in advertising revenue to economic cycles and changes occurring with newspaper advertisers. "Cyclical swings in the U.S. economy, as well as structural changes in the business of major advertisers continue to affect print advertising revenue," John Sturm, CEO of the NAA, said in a statement. "Yet, newspaper compares are continuing to take aggressive measures to prepare for the future as they contend with a challenging economic environment that is having an impact not only on newspaper advertising, but revenue for other media as well."

Taking only print into account, retail advertising revenue was down 6.4% to $5.2 billion. National advertising revenue declined 7.9% to $1.8 billion.

Classified revenue plunged 16.4% to $3.4 billion. All three components of the classified category plummeted: Real estate fell 20.7% to $966.8 million, help wanted dropped 18.5% to $995.4 million, and automotive decreased 19.3% to $756.3 million.

Newspaper consultant Alan Mutter, in his blog "Reflections of a Newsosaur, http://newsosaur.blogspot.com/
said NAA's study shows newspaper print advertising has fallen to levels not seen since 1999.

With print representing fully 93% of total revenue, Mutter argued, its collapse "at an ever-quickening rate" signals that online will not the be industry's revenue savior.

"But let's get one thing straight: Improving online sales, while a good thing, won't help an industry whose primary revenue base has been eroding at an ever-quickening rate for six straight quarters," Mutter wrote.

Sturm said Web sites are having a "positive impact on the industry's revenue stream during a time of transition."

"As newspapers transform themselves into multimedia platforms offering a diverse portfolio of print and digital products, publishers continue to deliver the award-winning, innovative content that makes newspapers the most trusted source of news and information," Sturm said. "Advertisers know that newspaper Web sites are ideal for reaching online users with the most attractive demographics."

The complete statistical report is available on NAA?s Web site at http://www.naa.org/Trends-and-Numbers/Market-Databank/Industry-Statistics.aspx.