Newspapers: a minus-sum game

Henry Blodget analyzed the future of newspaper advertising this week, concluding that “the $42 billion that was spent on print newspapers in 2007 isn’t going to vaporize–it’s just going to go somewhere else.” By 2017, $10 billion of it will go to surviving newspapers, $2 billion to outdoor, and $30 billion to digital — of which, he predicts, $5 billion will go to newspaper web sites and $25 billion will go to “Google, Yahoo, Craigslist, eBay, Amazon, job sites, blogs, mobile ads, video ads, etc.”

But I disagree. Much of the advertising that is still in newspapers will vaporize. Much of it already has vaporized. Papers in top markets are down tens upon tens of millions of dollars each in classified revenue that has disappeared. Those former advertisers are using free or near-free substitudes to bring in and serve customers: craigslist, real estate agents’ own sites, car dealers’ own sites, and other new competitors. That’s not even to mention the cheaper sites — Monster, et al — that took real marketshare but at lower revenue. That newspaper revenue is gone forever. I’m not whining about that. It’s the new reality of the post-scarcity economy. This will only continue.

Now add Google and its power to get more and more targeted in a more efficient and transparent (well, translucent) marketplace. That is to say, the same marketing power will be bought for less.

Now add more changes in the marketplace itself. There has been a tremendous consolidation in retail with all department stores becoming one — Macy’s — and big-box and mall retailers that spend more on national than local budgets and Wal-Mart killing stores but not advertising locally itself. Yellow Pages will also migrate to mobile Google maps, I predict.

And there is the overall trend of advertisers replacing ad dollars when they create instead direct relationships with their consumers. Bob Garfield identified that in his Chaos Scenaro 2.0. And I wrote about that here.

So you see plenty of revenue vaporizing. It’s not a zero-sum game. It’s a minus-sum game.

Now at the same time, if papers are smart, they can use online and its laser targeting to serve a new population of hyperlocal advertisers that never could afford high-priced papers before. But as I can tell you from first-hand experience, papers are not built for high-volume, low-cost advertising like this. So those advertisers will go to Google and local blogs.

: Gallows humor: Friend Steve Gorelick sends me the Onion’s analysis:

A recent glut of feature stories on the death of the American newspaper has temporarily made the outmoded form of media appealing enough to stave off its inevitable demise for an additional 21 days, sources reported Monday. “People really seem to identify with these moving, ‘end-of-an-era’-type pieces,” Washington Post editor-in-chief Leonard Downie, Jr. said. “It’s nice to see that the printed word is still, at least for now, the most powerful medium for reporting on the death of the printed word.” Downie added that the poignant farewell Op-Ed he recently penned was so well received that he will be able to hold onto his job for up to six more days.

  • http://www.overthecounterculture.com Philippe Bradley

    Is there any truth to the meme floating around that newspaper profits are about double the S&P 500 average?

  • Mike

    The lead article in this weeks Economist is also about the decline of (some) US newspapers.

    http://www.economist.com/business/displaystory.cfm?story_id=11294258

    What do you think?

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  • http://www.shootingbynumbers.com peter

    come on Jarvis – it’s not all doom and gloom

    Both the Guardian and The Daily Mail have seen massive surges in revenue from the US market, and are confident of lots more to come.

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  • http://www.themodernjournalist.com BRad King

    Jeff:

    We talked briefly after the SXSW Interactive conference you attended that I moderated (the one with Gary V.), and I told you there were plenty of ways that news sites can make money these days.

    If you think in terms of banners, you’re right — the traditional media is in trouble. But that’s like using the template for caring for a horse on the maintenance of a car. It’s two different times and place.

    This is going to sound all pimp-like, and I’m not meaning it to be — but I’ve been outlining what a modern news company should do (http://www.themodernjournalist.com/category/newspaper-20/) for a book; but more importantly, we began to implement the back end for this type of work at Technology Review, where I was in charge of building the online news operation.

    The point is: it’s not about thinking outside the box, it’s looking at whole new polygons. What does the Web do — it allows us to form communities, interact, engage, contribute and build upon. The new business model needs to embrace those qualities in a web-centric way.

    (Mashups, MeetUps, social ARGs, neighborhood press are just a few examples…)

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  • http://www.cloud9webhosting.net Cloud 9

    I don’t miss newspapers at all! I even delivered them at one time in the past. They were a huge waste of paper. I agree that its the web that is putting newspapers out of business and rightly so.