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Online Ad Revenue Going from Phat to Flat?

Magazine article Editor & Publisher

Online Ad Revenue Going from Phat to Flat?

Article excerpt

Online revenue for newspapers is on the rise, isn't it? Well, yes, but perhaps not fast enough. With all the emphasis on online revenue, it's disquieting that newspapers are losing ad share there while experiencing slower growth.

A new report from Borrell Associates finds that while newspapers still claim the lion's share of online local advertising (at 35%), online pure-plays -- think Google, et al. -- are drawing near, with a 33.2% chunk of all local ad spend online. News-papers, over a two-year period, experienced a loss of 8.2 points (see page 56). "It's likely to slip more this year," the report warns.

Borrell analysts note that advertisers are stepping up spending online, at a projected increase of 31.6% to $7.5 billion. Yet as more competitors enter the fray, traditional media with online outlets are fighting for it. Many newspaper companies, most notably the New York Times Co., have signaled that online growth is decelerating.

"It's a bad thing," says Gordon Borrell, CEO of Borrell Associates, about the loss of share and slowdown in growth.

What's happening is this: Online advertising still is often tied to print advertising. As print advertising sinks, it pulls online ad growth down with it. Another factor that accounts for the slippage in share is that newspapers are selling banners and listings, revenue that is quickly drying up. The future is in paid search, and video.

But all is not lost: "It would be worse if they weren't preparing for it. They realized this a year ago," Borrell adds. …

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