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We are familiar with the contention that digital pennies cannot compensate for the loss of print pounds. In other words, online advertising revenue will never provide enough to fund traditional newspaper journalism.
A new survey by the Newspaper Association of America (NAA) has produced new evidence to illustrate that fact. It shows that the US industry suffered $798m (£500m) in print ad losses for the first half of 2012 compared to the same period a year ago.
That was offset by a $32m (£20m) gain in digital. So the ratio of losses to gains was 25 to 1.
Rick Edmonds, a writer for the Poynter Institute, sees this as “ominous” and believes it casts a cloud over hopes for journalism funded by digital advertising. Well, he doesn’t quite say that merely observing that it “raise(s) the question again of whether the base is so small and progress so slow in dollars that digital first may fail to support much of a news operation.”
He has in mind US companies like Journal Register and Advance. The former is pursuing a digital first strategy but has just filed for bankruptcy (see Michael Wolff here and Jeff Jarvis here for very different views on that).
Advance is restricting most of its daily papers to three days in newsprint as it seeks to rely eventually on digital advertising.
But Edmonds quotes Jim Moroney, NAA chairman and publisher of the Dallas Morning News, as confirming the truth of the discouraging digital ad results.
Faced with that reality, Moroney said most newspapers‘ strategies have shifted to a broader view of building replacement revenues, meaning the erection of paywalls.
According to Edmonds, publishers are also “having some success with non-advertising initiatives like offering web design and social media services to businesses.” Meanwhile, the biggest companies, such as Gannett and McClatchy, have taken profitable stakes in major classified platforms.
He goes on to consider the specific problems of attracting digital ad revenue, including low rates – due to the array of choices for advertisers on the net – and the perceived ineffectiveness of banner ads.
He cites recent studies by the Interactive Advertising Bureau which indicate that one third to a half of web display ads are not even seen because of their placement on a page or because users move off before they load.
Then there is the competition from the big beasts – Google, Yahoo and Facebook – that continue to grow their advertising.
So Edmonds believes that cash-strapped newspaper companies will continue to do what they’ve been doing for the last five years – cutting costs by reducing staffs.
And he also shows that with fewer people buying papers, the roughly stable circulation revenues have been achieved by raising cover prices – a tactic that stimulates further desertion by readers.
Cost-cutting and cover price hikes are being pursued here in Britain because the problems we face are similar to those in the United States. But this situation doesn’t negate digital missionaries who are trying to build a future without print advertising revenue.
Surely none of us thought that the disruption caused by the digital revolution was going to be easy. We have to think, to innovate and to experiment in order to discover the journalistic light at the end of the tunnel. To do otherwise is to give up hope altogether.