July 17th, 2007

Newspaper Online vs. Print Ad Revenue: The 10% Problem

by

How will newspapers shift their business center of gravity online the same way most have shifted their audience center of gravity? That is the question keeping every newspaper executive awake at night.

Bill Keller, the New York Times Executive Editor and excellent editorial emissary, made the following comment in an interview:

But 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.

Most newspaper executive use words like “eventually” to push off into a fuzzy future a transition that they know needs to happen sooner rather than later, but still find impossible to conceptualize because of the 10% problem.

What is the 10% problem? Let’s look at the New York Time’s numbers. According to the NYT online media kit, here are the print and online audience numbers:

  • Online unique users (12 month average): 13,372,000
  • Print circulation – weekday: 1,120,420
  • Print circulation – Sunday: 1,627,062

NYT doesn’t report ad revenue for NYTimes.com broken out from its News Media Group (which includes mostly other local newspapers, but is likely dominated by NYT revenue)

  • Total advertising revenue: $483,594,000
  • Online advertising revenue: $51,000,000

Let’s assume that the NYTimes.com has roughly the same portion of ad revenue coming from online. 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.

But why is this so? Let’s take a look at NYT print and online ad rates, using employment as an example. Here are the print display ad rates for employment:

nyt-emploment-ad-rates.jpg

And here is the rate for an online employment display ad in the job market section of NYTimes.com:

nyt-employment-ad-rates-online.jpg

It’s hard to compare apples and oranges — a big pat of the problem — but the online ad looks like about a quarter of the screen:

nyt-employment-display-ad.jpg

So let’s say I wanted to buy a quarter page ad in the Sunday edition for each of four weekends across a month. A half page is 63 column inches, so four quarter pages would be 126 column inches for the four ads. At a half page rate of $1,247 per column inch, that’s $157,122 for the four quarter page display ads in print.

Those ads would run in the Money, Business, or Week in Review sections, so would reach people who didn’t necessarily look in the employment section. It’s difficult to compare it then to the $7,500, which gets you a 20% share of voice display ad in the online job market section. But given that the NYTimes.com has nearly 10 times the reach of the Sunday print edition, $157,122 vs. $7,500 is a pretty eye-popping disparity.

Let’s try another print/online comparison. NYTimes.com also has a package called Employer of the Day, which gets you an ad on the homepage of NYTimes.com:

The homepage of nytimes.com is viewed by more than 1 million unique visitors every day. For Job Market advertisers seeking quick access to an extremely large audience, the Employer of the Day position can deliver a branded message twice per week.

Attract passive jobseekers
This position exists on the homepage of nytimes.com in order to attract jobseekers who may not be visiting nytimes.com specifically to visit Job Market. This provides you with an outstanding opportunity to woo potential jobseekers, who may be on the site to read articles, view award-winning multimedia content or use any one of our other services. By becoming the Employer of the Day, all visitors to nytimes.com become potential jobseekers for you to target.

Here’s the pricing:

nyt-employer-of-the-day-rates.jpg

So for $10,000, you get a 20% share of voice on the homepage for a full month. For the same $10,000, you can also reach about 1 million people in the daily print edition, for ONE day, with a 10 column inch ad (based on open rate of $1,056 per column inch), which is about 1/12 of a page.

With such a disparity in how the New York Times values its print advertising and how it values its online advertising, is it any wonder that it suffers from the 10% problem?

Of course, the New York Times can’t just go charging the same rates for online employment ads as it does in print. In print, no other channels reach the same high-end national audience — but online, the competition is fierce.

Still, it seems impossible for the New York Times or other newspapers to overcome the 10% problem without beginning to value online ads at a premium, the same as they do in print, rather than making online look like a giveaway by comparison.

Here’s a telling line from the NYT’s Display Advertising: Print+Online Packages:

Print and online are powerful, and complementary, recruitment channels; Job Market integrates both to provide an unsurpassed employment marketplace. All of our display listings now go online for 30 days at nytimes.com so that you can recruit from two top-quality audience pools.

I’m sure it’s true that both audience pools are “top-quality” — it’s just that one happens to be 10 times as large — the challenge is to bring ad rates in line with that disparity in the face of fierce competition online.

Comments (32 Responses so far)

  1. Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0

  2. online. 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.” Read the whole analysis

  3. Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0

  4. I’m sure it’s true that both audience pools are “top-quality” — it’s just that one happens to be 10 times as large — the challenge is to bring ad rates in line with that disparity in the face of fierce competition online. [IMG ] [IMG] (via tmonkey’s starred items in Google Reader)

  5. Newspaper Online vs. Print Ad Revenue: The 10% Problem

  6. Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0

  7. testing iPhone CSS (tags: iphone css3 browser) Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0 (tags: advertising business) Los blogs: la ruina de la prensa tradicional (tags: blogs publicidad toblog) [IMG] [IMG] [IMG] [IMG] [IMG] (via Online)

  8. [IMG Links%20chain.jpg] Search Engine Land offers detailed instruction on how to build landing pages. Kenneth W. Davis discusses the decreasing effectiveness of e-mail. Scott Karp identifies the paradox of print versus online advertising revenue– For newspapers, print ads reach 10% of the audience, but online ads produce only 10% of ad revenue. Sujan Patel suggests 5 ways to optimize for local search. Search Engine Land reviews a strong alternative to Google,

  9. Excellent analysis. The only thing I’d question is the comparability of the online and print audiences. You say you’re “sure” that both audience pools are top quality. But how do you know that, really?

    Print audiences are quite well known; if you know their zip codes, you know how much they spend on cars, etc. And every single print readers made the conscious decision to buy the paper and read it. Most read more than one story.

    Online audiences, on the other hand, are the great unknown (no one knows you’re a dog, etc.). And how many of the NYTimes.com’s 13 million uniques arrive from search engines, looking for just one story, read it (or not), then leave? In every study I’ve seen, print readers spend far more time with the paper (or magazine) than the online readers do on a Web site.

    So should advertisers really value those two audiences equally (or even comparably)?

    To me, it only makes sense to value and sell those audiences separately. You’ve got different audiences, you’ve got different types of ads (branding vs. transactional). I wish more of these discussions would examine how online and print are complementary and additive, rather than competitive.

  10. Dan,

    Excellent point — I’m sure a healthy percentage of that 13 million average is constant churn from search engines and other referrers. But some percentage is people like me, who read NYTimes.com regularly, but NEVER read it in print.

    If you and I are sitting here scratching our heads, you can bet advertisers are, too.

    The problem is that online has been turned into raw volume game, so sites like NYTimes.com are reluctant to separate the wheat from the chaff of their online audiences.

    I’d be very surprised if only 10% of those 13 million unique users are regular readers.

    That said, I agree that the two can be complementary — but that still doesn’t explain why one is worth SO much more.

  11. Scott,

    Why don’t you link this post with the one you wrote two days ago, The Poor State Of Online Display Advertising Relevancy?

    It’s hard to argue that online advertising has reached its full potential yet.

  12. Scott/Dave

    I agree with both of you. I think there are 2 points here.

    1. There is definitely a lack of commitment in the online users because the content is there at a click which is not the case with paper users. They have limited content. So may be you can use online users for creating the first impression – brand recall.

    2. For educating the users – may be print is good. If they had the brand recall from internet – they will pay more attention while it is on print.

    So a combination can do the trick.

  13. Online typically measures an audience by the total number of people who have EVER visited or registered. Traditional media uses tried-and-true practices of audits that specifically detail a current user-base/subscriber-base.

    So you never read the NYT in print. They don’t care if you do or not. They want you as a customer.

    Regardless, there are content issues in “snoozepapers” that need to be addressed: http://www.pubexec.com/pubtalk/pubtalk.bsp?var=story&sid=57181

    Then of course, there’s always that six-letter word, Google: http://www.google.com/adwords/printads/

  14. And now this:

    http://www.latimes.com/business/la-fi-readers18jul18,1,4508211.story?coll=la-headlines-business&ctrack=1&cset=true

  15. [...] RSS Feed ← Newspaper Online vs. Print Ad Revenue: The 10% Problem [...]

  16. [...] Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0 (tags: advertising business) [...]

  17. A new(ish) metric I’m hearing more and more about is “revenue per reader”. Many interpretations exist, but the most salient remains: Advertising Revenue + Circulation Revenue – Circulation (or acquisition) costs/total readership (however you want to define that). This is a great metric for businesses to gauge whether or not they are getting a reasonable return on audience (investment to build audience). This metric could be applied to online audience/business as well (minus the circ rev of course). I think you’d find much room for growth in revenue per user/reader at nytimes.com and others of the lot.

  18. There’s a simple answer to this.

    When I worked in Advertising the ineffectiveness of advertising was hardly a secret. But customers couldn’t measure the effectiveness of ads. So they paid and continue to pay ridiculous prices for them.

    Online ads, on the other hand, are measurable. They work just as well, if not better, than print, television, etc., the difference is that for the first time ad customers know exactly how ineffective they are.

    It’s a great credit to the snakeoil salesmen in the Ad world that they’ve convinced their customers that what is really going on is that online ads are ineffective, preventing a massive collapse of the entire ad industry. Once ad customers wake up and admit to themselves that ads of any kind have never been very effective, the prices between online and everything else will equalize.

  19. If front page readership is any indication, the total uniques should be taken with buckets of salt. In my analysis, only about 14% of the people who visited washingtonpost.com in a month visited the home page even once.

    http://blog.agrawals.org/2007/04/09/who-reads-the-front-page/

  20. [...] Publishing 2.0: Newspaper Online vs. Print Ad Revenue: The 10% Problem Scott Karp: The NY Times’ “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.” (tags: nytimes newspapers online) [...]

  21. [...] Newspaper Online vs. Print Ad Revenue: The 10% Problem » Publishing 2.0 “Still, it seems impossible for the New York Times or other newspapers to overcome the 10% problem without beginning to value online ads at a premium, the same as they do in print” (tags: internet newspapers business advertising revenue migration economics nyt) [...]

  22. [...] you’re supporting your local paper by clicking on their ads? Think again; papers only make ten percent of their money from online advertising. And let’s have a moment of honesty here, shall we? [...]

  23. [...] Googlu. Na online reklam? vydavatelé oproti její srovnatelné tišt?né variant? tratí i více než 90%. To možná není patrné vzhledem k tomu, jak se tradi?ní mediální firmy nadšen? vrhají do [...]

  24. [...] meanwhile, still suffer from what Scott Karp has called the “10% problem,” which is that just 10% of their readers but 90% of their revenue is in print. None of this [...]

  25. Re: J. Jeffryes commnent on July 21st 2007…

    It will not be difficult for print advertisers to adapt and start tracking ad effectiveness using the ideas and tracking mechanisms we’ve learned from the Internet. For example, on your print ad, identify a unique URL specific to the ad. For example, an ad about buying a Lexus in Cosmo might list a URL, http://www.lexus.com/cosmo. Or, use a tracking phone number so that you can monitor leads coming from the print ad. I can only see print ads becoming more effective as advertisers are forced to develop ads with a call to action and tracking mechanisms, versus relying on branding and hoping for the best.

  26. [...] Most newspaper companies’ strategy right now is based on the assumption that you can’t shut down the print newspaper because it brings in 90% of the revenue, and you couldn’t possibly support the same news gathering operation with the 10% revenue slice that goes to the website. (The 10% problem) [...]

  27. [...] Most newspaper companies’ strategy right now is based on the assumption that you can’t shut down the print newspaper because it brings in 90% of the revenue, and you couldn’t possibly support the same news gathering operation with the 10% revenue slice that goes to the website. (The 10% problem) [...]

  28. My question is: Will advertising reach it’s “full potential” as seen by this analysis? Isn’t simple supply and demand in effect here (i.e., if the NYT could charge $152k for an online ad, why wouldn’t they)? Is it poor salesmanship on the web side? Or does print still have more value because it’s a tangible asset (in advertiser’s eyes) to the cacophony of the web?

    I guess my real question is: Are you saying that websites need to raise their rates to increase revenue creating parity, or that advertisers need to wise up to the seemingly bargain basement prices on the web?

  29. [...] Zuckerman quoted this comment left by Joshua Jeffryes on a 2007 Publishing 2.0 post. Jeffryes [...]

  30. [...] Karp wrote a lovely piece for Publishing 2.0 about 18 months ago called “Newspaper Online vs. Print Ad Revenue: The 10% Problem“. The title refers to Karp’s astute observation that “print circulation is about 10% of total [...]

  31. NY Times main business will be online because paper printing is expensive than online. The future is online not paper print. Feed reader like http://NewsCombined.com will benefit this shift.

  32. NY Times main business will be online because paper printing is expensive than online. The future is online not paper print. Feed reader like http://NewsCombined.com will benefit this shift.

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