Gannett Suffers Big Drop in Online Job Ad Revenues

Gannett, like its newspaper publisher brethren, continued to fall prey to toppling classifieds sales in Q1 2009. Yet, in addition to big decreases in print classifieds spending in Q1, the company also experienced a drop in online recruitment classifieds sold through its CareerBuilder service.

“The soft economy limited opportunities for revenue growth in the quarter,” said Gannett President and CEO Craig Dubow, calling this “the toughest advertising market in memory.”

According to Dubow, online revenues rose about 9 percent. Total interactive revenues, including digital revenues for its publishing and broadcast units, came to $225 million. The firm reported digital operating revenues totaling $143 million for the first quarter. Gannett said positive cash flow for CareerBuilder, PointRoll, and ShopLocal was offset by investments in its other digital businesses.

However, the firm’s Q1 digital revenues cannot be compared directly to those of the same quarter last year. That’s because properties now under the digital umbrella were previously included in other units. The digital division now includes social media services firm Ripple6 — purchased in November 2008 — ad tech firm PointRoll, search and online ad outfit Planet Discover, and Schedule Star, which publishes HighSchoolSports.net and offers athletic scheduling software. In addition, Gannett consolidated CareerBuilder and ShopLocal within the digital segment in Q3 of last year, following its full acquisition of ShopLocal.

Regardless of gains in digital revenue, Gannett and others in the newspaper industry appear to be falling deeper into a revenue pit, driven by steady weakness in auto, retail, and real estate classifieds sales and spending declines in hard-hit sectors like retail and financial. Auto ads dropped 39 percent, real estate was down 50 percent, and employment fell 62 percent.

Slow job ad sales took a bite out of CareerBuilder revenues. North American revenues for the online jobs classifieds service were $141 million, down 27 percent since Q1 2008, according to Dubow. “The decline reflects significantly lower revenues from the affiliate newspapers,” he added, noting the firm includes both affiliate network sales and direct CareerBuilder sales in that total.

“Q1 is traditionally the smallest quarter of the year because we tend to have a big ramp up in marketing and promotion expenses in the first quarter, particularly at CareerBuilder and some of our other…businesses,” said Gannett CFO and EVP Gracia Martore.

Some believe online ad revenues, once considered a potential antidote to plummeting print ad dollars, cannot be relied upon to save the industry. “The advertising model is in jeopardy,” said media strategist Nancy Wang of Mignon Media, during a Newspaper Association of America webinar focused on online revenue generation models, which was attended by members of the paper industry yesterday. “The advertising model is in danger unless we figure out on the first try exactly how we can prevent the advertising from going down quickly,” she added.

Gannett, however, has been a leader in adjusting its business to deal with the changing media habits of consumers, and in creating digital revenue streams outside news publishing. In addition to acquisitions of PointRoll, PlanetDiscover, and Ripple6, the company continues to push its MomsLikeMe mom-centric local social sites, and has begun implementing its ContentOne initiative, launched last year to boost efficiency within the company’s newsrooms. Dubow noted the new operating structure was applied for coverage of the NCAA games and shootings at a Binghamton, New York immigration services center earlier this month. “It is all about smarter quality content gathering,” he said.

“We are very pleased with the results we are getting with the digital segment,” said Martore.

The firm also has plans to broaden its mobile properties. According to Dubow, Gannett is “gearing up for [Google] Android.” He said Gannett’s USA Today iPhone application has been successful, and added applications in the travel and other categories could be available in the future.

“We are committed as a company to further progressing in a tethered or un-tethered arena,” said Dubow, who suggested Gannett will continue expanding its digital offerings either through acquisition or organic growth.

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