Online Revenues for Newspaper Sites Grow

By: Jennifer Saba A new study released Wednesday by Borrell Associates shows online revenues from newspaper Web sites grew to $811 million in 2003, up from $655 million in 2002.

The research firm, which tracks local Internet advertising, predicts that newspaper sites will reap $1 billion by the end of this year. Furthermore, 83% of newspapers reported that their sites are profitable, with margins as high as 50%.

"I'm impressed with the growth and profitability of these sites," Gordon Borrell, president and CEO of Borrell Associates, told E&P. "I'm most impressed that newspaper sites have grown with the local market place while maintaining share."

The report surveyed 463 daily newspapers with a total circulation of 29.2 million or 53% of U.S. daily newspaper circ as well as 31 weekly papers.

The findings indicate 17% of newspaper Web sites are still trying to attain profitability. However, those in the black reported strong margins. At properties with more than $1 million in revenues, the average profit margin was 82.5%. One success cited: The New York Times Co.'s Internet operations, which include The Boston Globe, delivered a 30% margin in 2003, "generating $20 million in profits" and "contributing almost as much to the company's bottom line as its eight TV stations." Other companies like Belo tallied its first profit in Q4.

Though newspaper online sites continue to reap profits from classifieds, that percentage is dropping. This year, newspaper sites generated 60% of their revenues from classifieds, down from 73% reported in 2002. Borrell thinks there's a decline because newspapers have wrung "upsells" and "assumed sales" -- that is, forcing people to put ads online as well as in the paper -- dry. And the report finds that in most markets, newspaper sites are only going after a small slice of the potential ad pie -- meaning that newspapers are focusing 60% of their efforts on 15% of the available revenue.

Borrell cautioned that sites that are getting fat and profitable, especially off classifieds, are in a dangerous situation in a competitive environment. "They need to take those profits and invest in sales and marketing," Borrell recommended. "One company in the report generated $1.5 million in revenue with one salesperson. You can't rely on that."