Monday, October 13, 2008

The hits keep coming: Newspaper's online revenue down

Just in case 11,000+ news jobs disappearing in the last year didn't perk you up, how about the news that online ad sales are down on news sites, after 17 quarters of growth.

That drop isn't symptomatic of Internet advertising overall, which grew last quarter by 7.6 percent. The problem is, of course, that newspapers aren't competing against only other newspapers (which is already a massively different equation than they're used to, when they could have a near-monopoly over ads in their local market) but against the entire Internet. And while people are certainly looking at news sites, they're looking other places as well. And advertising follows eyeballs (or so the theory goes, anyway).

But in the Times story today, another issue is raised: Newspapers' thirst to sell every possible space on their page, forcing them to rely on small money ad networks to fill a lot of the open space on their sites. These networks, which pay out about $1 per thousand views, may be stealing advertisers from news sites themselves, says Steve Stup from the Washington Post Interactive:

“It’s still a situation where if advertisers even perceive they can reach your audience, they might be inclined to go with a network, and that’s a concern I have with networks."

It's high school economics class: supply and demand. If you're filling your pages with endless numbers of cut-rate ads, how do you expect to sell the good stuff at a premium? Here's another ad-dude:

“That high level of unsold inventory often creates a real challenge in terms of sustaining pricing or growing pricing,” said John Frelinghuysen. “In most media, especially in television, the traditional model has been that you drive sellout, and that gives you the ability to drive pricing over time.”

Here's another case of newspaper moneymen putting the cart before the horse: They see the space, not the value. To them, the Internet is an infinite page with which to fill with advertising. But value doesn't scale like that: the more that's available, the less it's worth.

Why does that sound familiar? Because, perhaps, it's the exact same equation that got newspapers into the predicament they find themselves in in the first place. If you never learn from your mistakes, how can you not repeat them?

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