US Newspaper Industry Gets A Break, A Small One

According to the Newspaper Association of America, online advertising in websites operated by US papers rose 22% in the first quarter to $750 million. That brings it to about 7% of total ad revenues brought in by the industry during the period.

The bad news is that the print versions of the newspapers lost more ad revenue than the online versions gained. As the Financial Times points out, classified advertising is bleeding into properties like Craigslist. That trend shows no signs of abating.

Even the largest newspaper groups continue to struggle. According to The New York Times Company’s (NYT) 10Q for the first quarter of this year: "Print advertising revenues declined 6.1%, while online advertising revenues increased 20.3%." So, a company that runs the nation’s premier newspaper was unable to keep online revenue growth at or above the industry average.

The numbers for the Times are particularly bleak when investors consider that the company’s combined newspaper websites have the 10th largest audience of all website properties in the US, according to comScore. The NYT internet properties had over 43 million unique visitors in April. Gannett (GCI) was a distant second with just over 20 million uniques. That big newspaper chain’s online numbers were worse than the Times. In its 10Q Gannett reported that: "Total domestic newspaper online revenues were strong during the first quarter of 2007, increasing 12% over 2006.". "Strong" may be too strong a word.

It would appear that even a large scale online audience does not help companies like the NYT and GCI.

This may be due to the fact that search engine traffic, particularly from Google (GOOG) is considered more effective and targeted than news content is. If so, newspapers still have an uphill battle online. Consider that, while online newspaper revenue grew 22% in Q1, Google’s revenue rose 63% to $3.664 billion. That number is about five times total newspaper online revenue for the same period.

If internet advertising is going to save the newspaper industry, it may have to come up with a better model.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.