mikolas

The burden of the newspaper industry

The Street is reporting on the decline of newspapers. Similar has been reported earlier. One could jump to some quick conclusions and blame the overall economy for the decline. However, at the very same time online classifieds, search advertising and online display ad sales has been steadily growing, even though the economy is globally having some challenges.

The biggest problem is that although newspapers do have growing online operations, the growth is not enough to compensate for the decline in print advertising. Print advertising is still multitudes more expensive, while the reach online has been getting better and better. This makes at least me wonder if online advertising is priced correctly? Given that you can drive campaigns online where you 1) only pay for performance 2) can segment the target group very finely 3) can have real time visibility to the campaign performance, it might be that online advertising products are underpriced, given the level of service available to the advertiser.

Then, there is the competition. When moving online, the amount of competition explodes. This ranges from small local classified services to ad networks like Google, Advertising.com, TradeDoubler, Yahoo and Microsoft with billions and billions of ad displays per day. From that perspective, keeping up premium pricing will be harder and harder as the big networks are pushing down CPM prices due to the sheer volume of both affiliates and advertisers. So it really seems that newspapers’ current business model has to be revamped in order to successfully compete online.

It will be interesting to see what happens in the coming months. It still might be that this decline is only about the current economic downturn, but the more you think about the more uncertain that seems.