More Bad News from Q1: Online Growth Slowing

By: Jennifer Saba Bear Stearns analyst Alexia Quadrani noted slowing online growth in a brief to investors regarding Q1 results.

She pointed to Yahoo?s difficulties over the past twelve months, The New York Times Co.?s -- where revenue advanced 26% in Q1 compared with 98% in Q1 2006 -- and the revenue shortfall at E.W. Scripps' Shopzilla as evidence of the slackening pace.

In Q1 2006, online advertising for the companies that Bear Stearns covers, rose 35% versus 22% for Q1 of this year. ?A double digit revenue growth profile is still impressive,? she wrote, ?However, at 7% of revenues on average, the rate of deceleration is a bit of a concern as this online segment may not ever become a sizable enough contributor to offset losses in the print world.?

Newspaper online properties fetch a quarter of the price paid for print run of press advertisements.

Quadrani believes that online revenue will bring in enough to cover print losses only if there is meaningful investment on the part of publishers.

Bear Stearns doesn?t think the slowdown will reverse in Q2. ?Comparisons remain very challenging in the classified segment and growth continues to be muted in retail and national,? the brief concluded. ?Particularly in light of the deceleration in the online ad segment, we don?t see any signs of stabilization in revenues in the near-term.?


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