Back in November, I suggested that the newspaper biz's revenue graph looked somewhat like a falling aircraft. That post included a graph originated by Henry Blodgett, using estimated total 2007 print revenues. Now the actual 2007 numbers are in at Editor and Publisher, and they are even worse than the forecast, by a half billion dollars at $42b. The 9.4% year-on-year (YOY) decline in print advertising is the biggest since tracking began in 1950, beating the drop in 2001 caused by the combination of the bubble bust and 9/11.
The industry's online revenues also give cause for concern. Growth continued, at $3.2b and 18.8% YOY growth, but that was significantly slower than the 31.4% growth in 2006 and 2005. What's going on there? Depending on the cause, it could be a temporary setback, or an indicator that the newspapers are nowhere near finished with their downward spin.
In the most forgiving interpretation, online ads on newspaper sites turn out to be a leading indicator of economic softness. It may be possible to draw a line between incipient chaos in the mortgage-backed securities market and a drop in real estate ad revenues. That seems a stretch to explain a 40% falloff in growth, and anyway the newspapers have already lost a good deal of presence in that market.
A second possibility is an impact from diminishing effectiveness of ads. Newspaper sites have less potential for the known effective and well developed search based advertising. They are largely display venues, and this type of ad has suffered in spite of attempts to make it more intrusive with video, sound, interstitials, and so on. There may be a limited appetite for this type of inventory, until some means of increasing effectiveness comes on the scene. Newspapers have had minimal impact in the still-experimental social networking space, that may offer a third type of user behavior and inventory.
The third and worst possibility - not entirely independent from the second - is that the market for newspapers online is becoming saturated. Rather than a temporary pause, this could represent movement past the mid-way inflection point in the S-curve of adoption of a particular product or service. If that were the case, it might suggest an eventual, somewhat stable revenue flow of $6b or so for newspapers online. Compared with the $42b in already reduced print ad revenues, it would suggest the industry's tail spin will not be halted by online alternatives any time soon.
Further: See Jeff Jarvis' post including interesting comments from industry insiders and disgruntled or former readers.