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US Newspaper Internet Sites Grew 2004 Advertising By 26.7%; Print Newspaper Advertising Rose by 3.9%. Which Do You Think Is the Growth Market?

For those newspaper publishers searching for double-digit advertising growth opportunities in 2005 they need look no further than their own web sites. Statistics released by the Newspaper Association of America showed record advertising revenues for US newspaper Internet sites in 2004 of $1.5 billion.

That’s still a tiny fraction of the $46.7 billion earned by print advertising, but whereas print advertising is forecast to grow by around   4 – 5% in 2005, Internet advertising is forecast to be from 25% to 30%.

And Merrill Lynch has revised up its forecast for the total 2005 advertising spend to 4.8% from 4.6% specifically because it believes online advertising is gaining even more strength, but with traditional media seeing its share of the total advertising pie decline.

What must be a major concern to US publishers is that in 1970 newspapers had a 30% share of the total advertising share, but that figure has declined every year since and for 2005 newspapers are expected to take just 18% of the total advertising spend. .

Overall, the Internet showed the largest percentage gain of any advertising medium in the US in 2004, growing 21.4% to $76.4 million, according to TNS Media Intelligence.

One reason for the growth in the advertising on newspaper web sites is that those sites have become very popular. Publishers are now facing the realities they have more readers for their web site than they do for their hard copy newspaper, and many publishers are convinced that is one reason for the circulation declines their newspapers are experiencing. 

There is also the philosophical question of whether newspapers should be in the business of providing news for free? Internet users seem loath to pay for news and the only national US newspaper to charge for online subscriptions is the Wall Street Journal.

At the New York Times there have been ongoing discussions for months in trying to find the right balance between free news and charging for news. The Times now has an online daily “circulation” of 1.4 million daily unique visitors while circulation of the hard copy averaged 1.124 million in 2004, a drop of some 52,000 over 2003.

Many publishers are concerned that the success of their web site is at the expense of their print product. At the Times, for instance did circulation go down because those readers decided the web version was good enough and the print version was no longer necessary? It’s an important question because while Web advertising revenues are growing strongly, they are still a fraction of what the hard-copy print newspaper earns from advertising, and most publishers still want to protect their print newspaper revenues no matter what.   

The Times actually increased its advertising rates this year, even with a lower circulation, but most newspapers can’t do that. A decline in circulation usually leads to a decline in advertising revenue

That’s one reason why newspapers are looking to charge for access to their web site – not so much that they will earn the subscription revenue but rather they can protect the subscriber base of the print edition.

What also worries publishers is that the Internet is becoming the preferred medium for news, although the research still shows some contradictions. During the past US Presidential election those homes with broadband connections used the Internet as their primary news source, according to the Pew Internet & American Life Project, The report suggested that the Internet surpassed radio as a news source for the election campaign and was about equal with newspapers.

But new research from Carat Insight, based on information from Mediamark Research, Inc, and Multimedia Scan suggests that those adults who daily search the Internet for their news are still avid newspaper readers and television watchers. The research showed that daily web users were thought to read two or more daily and Sunday newspapers while those people who went online less often read fewer newspapers.

This year may be the turning year for how newspapers formulate their web policies. News International has brought in the consultants to tell it how it can maintain its print circulation and yet still make a lot of money online. The industry as a whole is waiting to hear exactly that.

© Philip M. Stone of  Stone & Associates, a partner in followthemedia.com


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