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Newspapers missing out on digital-ad boom

As digital-subscriber revenue-growth slows, newspapers’ market share in this fastest-growing ad category is still plunging.

The Star Tribune is a bright light in the murk that is the newspaper business.
MinnPost photo by Corey Anderson

I recently wrote in this space about the staggering growth of digital advertising. Internet and mobile advertising has grown, on average, 18 percent every year since 2005. In that time, ad spending on the Web has more than quadrupled.

In 2013, for the first time, marketers spent more on digital advertising ($42.8 billion) than on broadcast TV ($40.1 billion). Print advertising at newspapers tumbled to $17.3 billion, a drop of 8.6 percent from the previous year.

Although print ads still provide the majority of newspaper revenue, owners seem powerless to stem the decline, which has continued unabated since newspaper ads hit their all-time peak in 2005.

Newspaper publishers are counting on the growth of their own digital offerings to remain relevant as an advertising medium — but so far, the results don’t offer a lot of hope. Alan Mutter, an industry analyst, points out that digital advertising at newspapers grew only 1.5 percent in 2013 – while digital ads in general grew 17 percent.

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But wait — there’s more. Newspapers are losing market share in digital ads, an even more frightening prospect. In 2003, when the Internet was still a relatively new advertising medium, newspapers claimed 14 percent of all digital ad revenue. Today, with the Internet and mobile as the primary places for marketers to reach customers, newspapers are claiming 8 percent of the market — roughly half of the share they held a decade ago.

In other words, even with a much larger pie to carve up, marketers are assigning newspapers a proportionately smaller piece of their ad budgets.

Newspapers have had some success with charging for articles on their websites. Most offer a limited number of free articles — typically 10 to 20 a month. After that, readers must pay. Or readers may pay for a digital subscription that allows them unlimited access.

The New York Times has had success with this model, but it may be reaching the point of saturation. The Times has sold 800,000 digital subscriptions since it introduced the service in 2011, but it added only 39,000 new digital payers in the most recent quarter. The universe of people who will pay a monthly fee to read the Times online is finite, and it may be reaching its limit.

The Star Tribune is a bright light in the murk that is the newspaper business. Published reports related to the paper’s pending sale to Glen Taylor estimate that the Strib turned a profit of about $30 million on revenues of $175 million last year. That’s an impressive showing in today’s news business. But in 2005, the paper brought in $380 million and showed a profit in the $90-100 million range. Today’s profitable Star Tribune is a much smaller — and less profitable — enterprise than it was a decade ago.

Print ads are never again going to bring in the river of dollars that flowed into newspaper accounts in the post-World War II era. If the news organizations that we now call “newspapers” are to survive, they must become places where advertisers credibly believe they can reach consumers with digital marketing content.