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May 29 2013

21:39

The scariest chart in Mary Meeker’s slide deck for newspapers

I linked earlier to Mary Meeker’s new slide deck. For those who don’t know it, Meeker — formerly of Morgan Stanley, at VC firm Kleiner Perkins since late 2010 — each year produces a curated set of data reflecting what she sees as the major trends in Internet usage and growth. It may be the only slide deck that qualifies as an event unto itself.

Last year’s deck had one slide that I liked to cite when talking about the print advertising prospects for newspapers going forward. It’s this one:

mary-meeker-adshare-2011

The basic idea here is to compare the share of attention in various media to the share of ad spend. (This is U.S. data.) In other words: 43 percent of the time Americans spend consuming media is spent watching television. And 42 percent of the advertising dollars spent in America go towards television advertising. It’s a pretty good balance.

While there’s no ironclad law that ad dollars will always perfectly follow attention, it seems like a pretty good working assumption. And the main takeaways from that slide are (a) that print still gets a wildly disproportionate share of ad spend (25 percent) when compared with time spent (7 percent), and that (b) mobile is in the opposite situation — lots of attention (10 percent) but not many dollars (1 percent).

If you think that, all else equal, ad dollars will tend toward equilibrium with attention, that’s (a) a really scary thought for print — newspapers and magazines both — and (b) a sign that news organizations had better be putting a lot of effort into monetizing mobile.

That was last year’s slide. This is this year’s:

mary-meeker-adshare-2012

This picture isn’t any prettier. Print attention is down one percentage point; print advertising is down two. But the gap between them still yawns. Any time you hear someone be optimistic about the return of print advertising dollars, think about this slide and realize print ad dollars still have a long way to go down.

Meanwhile, mobile is continuing its move in the opposite direction: up 2 percentage points in time spent, and up the same in dollars. Mobile advertising went from a $1.6 billion business to a $4 billion business in a single year. Not much of that went to newspapers.

October 21 2010

14:00

The Newsonomics of the ad recovery

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Reading the news about the news business, you may have missed this: advertising is booming, again. Well, booming may be too strong a word, but overall, it’s growing. Unfortunately, the news about the news ad business is still negative. Not as negative as the negativity of last year — down 27 percent for 2009 — but still down in single digits over 2009. Being less negative than last year is good, it’s better, but my math doesn’t add that up to a positive.

So what we have here is a trend that’s held true from boom to bust through tepid recovery: newspaper companies’ continue to be the laggards, losing market share in ad revenue, by the week, month, and year.

This week’s reports from The New York Times Co., Media General, and McClatchy, and last week’s from Gannett, all point to the same numbers with a minus sign in front of them. Let’s look at the numbers, and the newsonomics of the ad recovery.

Overall ad spending is up 2.5 to 4 percent through the first nine months of the year, and forecasts call for it to come in at that rate for the full year.

Let’s pick that apart.

Local TV advertising is up 13 percent in 2010, according to BIA/Kelsey. National broadcasting is putting up double-digit numbers. Cable advertising is growing in single digits. Radio’s up about 6 percent.

Even magazine advertising, subject to similar doldrums as newspapers, was up 5.3 percentin the third quarter, its second consecutive quarter of positive growth.

Digital advertising picked up its pace rapidly at the beginning of 2010: up 11.3 percent over the first half of the year to $12.1 billion, according to the Interactive Advertising Bureau. This digital growth is a long-term trend — online advertising is now a close No. 3 among advertising media in the U.S. (behind TV and newspapers). It’s surpassed TV, to become No. 2 in the UK, and surpassed newspapers to become No. 2 in Japan. (See The Newsonomics of online ad trending.)

As an aside, consider how much faster Google is growing than the online ad market, from which it derives almost all its revenue. In the third quarter, Google reported revenues of $7.29 billion — a 23-percent year-over-year increase.)

Now back to newspaper advertising. Gannett’s publishing revenues dropped 4.8 percent in the third quarter, while the The New York Times Co. was down 2.7 percent. McClatchy saw a 5.7-percent decline. Media General had even more problems: down 7.6 percent in pub revenues. Gannett’s and Media General’s revenues, overall, were helped by owning broadcast properties, as Media General’s 18.4-percent increase in broadcast helped it report an overall increase in year-over-year revenues. Broadcast revenues at Gannett were up 22.3 percent.

Why the great disparity between newspaper — meaning print newspaper — and the rest of the recovering ad world? We won’t take the space to parse it here and now. Suffice it to say that the long-term declines in classified categories — auto, real estate, and recruitment — have hurt the industry greatly. Now, though, even retail advertising is “coming back” quite unevenly, the bumpy road to recovery New York Times CEO Janet Robinson highlighted in her third-quarter report remarks.

The possible silver lining of the newspaper reports: Some digital revenue reports were on a par or better than the growth of online advertising overall. That hasn’t been the case consistently over the past couple of years, so the the latest numbers offer a ray of hope for the future.

If online advertising grew 11.3 percent overall, then compare that to the 3Q growth rates (not quite apples to apples, but not far off) at the New York Times Company (15 percent), Gannett (10 percent), MediaGeneral (15-22 percent, depending on how you count it) and McClatchy (1 percent). Those numbers indicate that some of those newspaper companies are doing a better job of selling digital advertising.

My talks with publishers and online directors point to several reasons for that good performance, ones long in discussion, but now becoming more routinely operational. The No. 1 reason: Publishers have simply focused more resources on selling digital products. They are also increasingly un-bundling products, not forcing as many print/digital buys. And, of course, they’re putting themselves in position to get spending in the fastest growing ad category — online — and devoting fewer resources to mining print revenues, which are declining in general.

So here’s the rub, and the conundrum. Newspaper companies are now pedaling as fast as they can, trying to get as digital as they as fast as they can, because that’s what the growth in ad dollars is happening. The New York Times Company says that 27 percent of its ad revenue is now driven by digital, and that’s up three points year over year. So it has a quarter of its ad business in the new world, and three-quarters in the old world. Add it up, and you get those negative numbers overall. The trick of the next several years: pedal (and peddle) even faster on the digital bike, while stoking the steady, if slowing train of print — and pray that the train doesn’t run out of coal too quickly.

April 07 2010

14:00

Print ain’t dead: How an ad-man-turned publisher is building a local news empire profitably in Texas

John P. Garrett says he worries he sounds like someone from the early 1990s who predicted there would never be a computer in every home. Garrett’s the Texas publisher of seven neighborhood editions of a monthly newspaper called Community Impact Newspaper. And he’s not looking online to grow his business. The difference between him and the Luddite computer naysayer is that, so far at least, he’s been right. His business is profitable, and he’s expanding. His secret to success: attract local advertisers by giving readers relevant content through targeted distribution. And that content is often focused on the sort of local government coverage that newspaper doomsayers say is at the greatest risk.

Garrett left his job as advertising director at the Austin Business Journal in July 2005 after he was inspired by the toll road coverage, or lack of it, in his local newspaper. North Austin is a fast-growing, suburban part of the city, ripe for development. In 2005, the city of Austin had started massive construction on these roads (“they looked like Stonehenge”), but when Garrett turned to his local newspaper he couldn’t find stories on where they were going, or how North Austin residents might use them. “The local papers were very much [covering] ‘the local chess team has made it to state.’ Not that that stuff’s not relevant, but for most people it just isn’t,” Garrett said. His idea: Take the community feel of a local paper, cover neighborhood news the big papers won’t, and focus on business and development stories relevant to a typical resident.

“We write a lot about local government, local development, city business,” he told me. “In the greater Austin area, there’s probably ten different cities. We’re the only news organization that has a reporter at every city council meeting.”

Garrett started his business out of his house, with a $40,000 loan from a low-interest credit card. He hired an editor and writers to take care of the content side; he’d focus on the business end. He’s paid off the debt and now turns a profit. He employs 76 people, including reporters, editors, designers, managers, and ad sales reps. The staff is broken up into teams by location, including at least one reporter, editor, and sales person per area; larger regions get more resources. Three top editors oversee editorial quality across all seven publications.

Direct mail distribution

Garrett says a smart distribution strategy is at least as important as smart content to his success. When we talked, Garrett noted he was on Twitter at that very moment, engaged in a small tiff with Jeff Jarvis, whom he said argues relevant content is the key. “There is talk about hyperlocal content — buzzword, got it. But there’s not enough talk about the distribution of it. [Jarvis] is saying it’s not about the distribution anymore, it’s about relevant content. I’m saying it’s about both.”

When Garrett was preparing to launch Community Impact, he knew he wanted to use direct mail to distribute his product. He’d create targeted editions of his newspapers, print them on high-quality, stitched and trimmed paper, and mail them to everyone in the area. (You can see a copy of the print edition here.) Why not just toss them in driveways? “The Average Joe really hates that,” he told me, and his business is all about reaching the Average Joe (or Jane). He’s skeptical about online ever becoming his primary distribution outlet. “I hope I’m wrong,” he says, pointing out it is cheaper to publish online than mail content. Garrett points to the Huffington Post, which was still not profitable as of a few months ago, as an example of his problem. “If anyone’s made it, it’s the Huffington Post with 9 million in page views. How in the world is ImpactNews.com going to do it?”

This recipe — relevant content, wide distribution, and local targeting — has turned out to be attractive to local businesses looking to advertise. “We’re winning the local battle and we aren’t the least expensive,” Garrett said. Small ads run $350 to $400 per paper, which he says could buy more than a monthly run in a local paper.

Advertising success

I talked with one of Garrett’s long-time clients, the Austin Regional Clinic, which has locations throughout the Austin area and buys ads in all of the newspaper’s editions every month. Heidi Shalev, marketing communications manager, told me she likes being able to customize ads by community, including a map to the closest location. “We decided it would be better to pull out of the Austin American-Statesman. We can drill down into the niche area community [with Community Impact]. With the Statesman, we can’t speak on a more personal level.” (The Statesman does offer zoned advertising, but in fewer zones and lower distribution in those zones.)

Ken Moncebaiz, owner of K&M Steam Cleaning, a carpet cleaning service in Austin, says about a fourth of his business comes from the full-page ad he buys on the back inside cover of the Community Newspaper editions in his area. Since he started advertising in the paper in 2005, he said his business has doubled from five trucks to ten, and he said Garrett deserves some of that credit. He spends $10,000 a month on the print cover ad and an online ad. In all, he spends $36,000 a month on six or seven forms of advertising, like radio ads, online search ads, and other forms of direct mailing like ValPak. He does about $2.5 million a year in business.

“In Austin, there’s like ten different sub-cities inside of it. That newspaper is so neat because it actually gets to the different subdivision in that area,” Moncebaiz explained. “What our customers love, what they all say is they read the newspaper from cover to cover. ‘It’s free, it tells me all about my area.’ That’s why they love it. The reason I love it is everyone reads it cover to cover. I anchor the inside back cover, no one else is allowed to have it. It’s all mine.”

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