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For Newspapers, Uneven Progress Toward Digital Profits

  |  March 5, 2012   |  Comments

For every dollar made in digital, newspapers are losing $7 in print ads, according to a Pew study

The search for a new revenue model that will sustain the newspaper business into the 21st Century remains a halting one, marked by losses that far outpace gains, according to a new study from the Pew Research Center's Project for Excellence in Journalism.

But amid the stalled transitions are a handful of newspapers showing impressive progress, possibly lighting a path forward for others.

"In general, the shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want," read the report, ""and at the current rate most newspapers continue to contract with alarming speed."

The study, which involved 38 newspapers from 6 different companies, found that papers are losing print advertising revenue at seven times the rate that they're growing digital ad revenue. In other words, for every dollar these newspapers make in digital revenue, they lost $7 in print advertising.

Not all the newspapers were increasing their digital revenues, either. Seven out of the 38 suffered a decline in digital revenue for the most recent year that data was available, while one had remained flat. Among the seven that saw declines, one suffered a drop of 37 percent, and another by 25 percent.

Among those making progress, however, were a number of newspapers doing well enough to suggest a path forward for others. One paper increased digital ad revenue 63 percent while simultaneously growing print revenue 8 percent. Another paper showed a gain of 50 percent in digital advertising.

Many of the papers doing well were finding revenue in new tactics and strategies. One paper had built a multi-million dollar consulting business that helped advertisers learn how to market themselves through digital media. Daily Deals accounted for 5 percent of overall digital revenue at the papers studied. One paper attributed its growth to selling targeted digital ads delivered to customers based on their online behavior.

(Unfortunately, less than half the papers surveyed said they had made targeted advertising a priority of their ad-sales efforts, despite the typically higher gains that can come from targeted ads. Instead, most of the newspapers were emphasizing conventional display ads and digital classifieds.)

Close to half of the papers studied said they were experimenting with nontraditional revenue streams, such as conference organizing or selling new-business products.

Still, the overall tone of the papers studied seemed to be cautious optimism at best, resigned fatalism at worst.

"We have all these [new] products we are working on that we believe are going to deliver results that are part of our sustainability," said one executive quoted in the report. "But we need to eat today."

Said another, less optimistic executive, "There's no doubt we're going out of business right now."

The data for the study was collected from the newspaper companies through site visits and interviews with multiple executives. Once the data was collected, Pew researchers conducted follow-up interviews and then shared that data with executives from seven more companies to see how widely they could be generalized. The newspapers participated with the understanding that their information would remain anonymous.

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ABOUT THE AUTHOR

Douglas Quenqua is a journalist based in Brooklyn, NY who writes about culture and technology. His work has appeared in The New York Times, Wired, The New York Observer, and Fortune.

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