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Monday, February 7, 2011

Advertising Rebound Eludes Newspapers

Monetizing digital content won't come easy

Overall media advertising has rebounded after the economic downturn that started in early 2008, but newspaper publishers have yet to see positive growth. As illustrated below, advertising industry dollars began to decline in the second quarter of 2008, but the drop was more pronounced for newspaper publishers, continuing a secular shift from print media that started before the recession, according to a story at morningstar.com.

Even as the economy has improved, newspapers are still posting year-over-year revenue declines, while television and online advertising have rebounded sharply. In our view, the newspaper industry's decline will prevent  Gannett from sustaining positive top-line growth, given their dependence on publishing (roughly three fourths of total sales for each firm).

Predictably, advertisers are allocating fewer dollars to newspapers as consumers continue to spend more time watching television and surfing the Internet. As newspaper circulation drops, newspaper ad spending should also decline, creating a vicious cycle. U.S. newspaper circulation has fallen during each of the past 15 years, and newspapers' share of ad spending decreased to 23% in 2009 from 31% in 2002.

Aside from the increasing amount of time people spend on the Internet, this medium attracts advertisers as it allows for more targeted and measurable marketing. The advent of portable digital technology (such as smartphones) has only accelerated the decline of newspapers.
Read more here.

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