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Jun 11, 2008

NEWS: US: The troubled economics of online advertising

NEWS: Intractable Business Model Conflicts
SEO or 'Flypaper Effect' for Attracting Readers 

Display Ads Grew 8.5 Percent In Q1, Down From Last Year's 16.7 Percent Gain: TNS

Display ad dollars in Q1 were way down from last year's double-digit growth rates, but the segment still managed to reach a healthy 8.5 percent gain, TNS Media Intelligence reported. In Q107, TNS said that display ads grew 16.7 percent, coming in $2.7 billion. TNS, which does not look at search ad spending, did not release dollar figures this time out.

Still, considering that ad spend overall was essentially flat at 0.6 percent and the tepid growth of segments like cable TV (+4.1 percent) and outdoor (+2.5 percent) compared to their stellar periods last year, display isn't doing too badly. To put display's Q1 in further context, consider that network TV expenditures were up 0.8 percent—its best quarterly performance in two full years. Looking at the year ahead, there was no update one way or the other on TNS' January forecast, which predicted display ad revenue growth of 14.4 percent, down slightly from its 2007 tally of 15.9 percent gains. Release

US: The troubled economics of online advertising

It isn't a secret that the American newspaper industry is experiencing difficult times, as core print revenues and circulation are falling. Many think that online news, which has been accompanied by double-digit online advertising growth in recent yearscan make up for the decline in print. But several studies and articles think otherwise.

"The Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there's little doubt that -- "eventually" -- online becomes the main business," said Bill Keller, the New York Times Executive Editor, in a 2007 interview with IwantMedia

But as sanguinity faces off with the numbers, perhaps we shouldn't hold our breath for "eventually." 

Internet revenue is growing -- in 2003, newspapers collected a mere $1.2 billion from online advertising; last year the figure was nearly $2.7 billion. "We're growing at a double-digit rate," saidRandy Bennett, of the Newspaper Association of America.

But there's a problem. Scott Karp, of Publishing 2.0, has dubbed it the "10% problem." Karp explains that looking at New York Times print and web circulation numbers, "What you find, with some modest rounding, is that print circulation is about 10% of total audience reach, while online advertising revenue is 10% of total ad revenue -- the economics are nearly the perfect inverse of what they should be."

Why, as audiences shift to the web, are advertisers not following?

Although newspaper websites are attracting a lot of visitors, they aren't keeping them there. 

According to the American Journalism Review (AJR), the typical visitor to nytimes.com, which attracts over 10 percent of the entire newspaper industry's online traffic, spent an average of just 34 minutes and 53 seconds browsing its extensive editorial and interactive offerings in October. That's 34 minutes and 53 seconds per month - just 68 seconds per day online. By contrast, according toScarborough Research, print readers report spending 16 minutes a day with their newspapers. 

And as small as 68 seconds a day is -- it's actually about three times longer than the average of the next nine largest newspaper sites. 

Although a minority of news hounds linger on the sites, Greg Harmon, director of Belden Interactive, estimates that as many as 60 percent of online newspaper visitors are "fly-bys," people who use the site briefly and irregularly. "Everyone has the same problem," explains Jim Brady, editor of washingtonpost.com. The news industry's continuing challenge, Brady says, is to turn "visitors into residents."

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