The Newspaper Association of America just reported the industry’s biggest-ever quarterly drop in total year-over-year revenue with the steepest decline in print classifieds seen in decades. And if that wasn’t enough, according to the NAA online ad revenues for newspapers have gone from double-digit growth rates to single-digit trickles: They reached $ 804 million in the first quarter of 2008, representing a 7.2 percent boost over Q1 2007´s $ 750 million – a considerable slow-down from the 22 percent growth rate over the same period in the previous year.

Actually, newspaper’s online ad revenue appears to be growing more slowly than the web ad industry in general. Nielsen reports a dip in online search and display advertising from about 32% growth in Q1 2007 to around 15% in the same period this year.

Newspaper industry to push more online ad dollars its way

Classifieds? They typically represent 60% to 70% of a paper’s online revenue. But they are particularly vulnerable because most newspaper publishers still get most of their online classified revenues from “up-sells” on the print side. But as a result of the downturn in the real estate market and declines in recruitment due to economic insecurity,  print classifieds are in free fall and there are simply fewer opportunities for “up-sells” to online. In addition the popular local classifieds US-website Craigslist – more than 9 billion page views per month – is capturing the business fast.

Newspapers think locally for online ads

As even the growth of national ads is slowing, papers are focussing on local ads: According to estimates from media-research firm Borrell Associates, the number of local salespeople peddling online ads for newspapers has swollen from 5,900 to 15,500 over the past two years. But newspapers have failed to crack this market.

Why newspapers haven’t captured the local online market so far 

Firstly, the potential clients for local online ads are small and medium-sized local businesses – a market segment that newspaper companies have typically ignored. Secondly, sales people often don’t really focus on selling online ads, which are less expensive than print ads and thus offer lower commissions. And thirdly, the needs of local merchants are better served by Internet companies like Google and Local.com, offering ads that target consumers searching the Web for a particular product or service and not typically banner ads.

There are some (promising) efforts by the industry

• Teaming up with internet players like Yahoo and a recent newspaper ad network venture (quadrantONE)

• Bakersfield Californian recently started offering free seminars to teach local small companies how to set up free business listings on Google and Yahoo and on an online directory hosted on the paper’s website.

• The Scripps chain is staring to give sales people more motivation to sell online ads: At one of its Texas newspapers, the online audience is about a third of the size of the print circulation. As a result, the paper is in the process of tying a third of the sales people’s commissions to their sales of online ads.

• The New York Times is currently beta testing a social network site (working title TimesPeople). According to the senior VP of advertising for The New York Times Media Group the intention is to sell sponsorship packages to advertisers, with one unnamed deal likely to close in the near future.

• More radical: since April the 90-year-old Wisconsin’s Capital Times has completely switched to online for its daily newspaper, becoming “a daily newspaper of the sort Americans will know in the 21st century”.

Pro

The newspaper industry is trying to make the process of purchasing   advertising across multiple platforms more simple and straightforward.

Con

The cannibalization of print ad revenues will remain a problem as local advertisers will only shift their budgets.