Advertising: online growth slows, news sites worse

The economy has continued to generate GDP growth despite rising oil prices and the mortagage meltdown but the latest advertising estimates suggests a slight slowdown in the stunning growth of online advertising. MediaPost editor Joe Mandese writes that Internet ad growth: 

“continues to outpace that of every other major medium, expanding at 25.3% – or by $1.1 billion – during the third quarter of 2006 . . .  a slowdown from the third-quarter 2006’s 33% rate of growth . . . “

Here is a link to the report from PricewaterhouseCoopers and the Interactive Advertising Bureau:

Meanwhile newspaper online revenues seem to have stalled, as Poynter Institute business analyst Rick Edmonds writes in a recent blog entry that reports the online metrics revealed by publicly-traded newspapers:

  • Gannett (excluding USA Today): 7.5% (compared with 21 percent in the third quarter of 2006)

  • Tribune: 9 percent (compared with 28 percent a year earlier)

  • McClatchy: 1.4 percent (compared with 16.3 percent)

  • Dow Jones: 8 percent (compared with 13 percent)

  • E.W. Scripps: 19 percent (compared with 40 percent)

But it gets worse. Edmonds talks to media analyst Gordon Borrell of Borrell Associates who says that the current falloff in news ad revenues is indicative of a shift in what advertisers want to buy. Edmonds says Borrell sees:

“ad growth over the next five years in two formats: search and video.  Video is tiny as yet but expected to more than double in volume this year, according to a Borrell report published in February 2006.  Local search is bigger but newspapers are getting little of that action compared to Google and other non-news sites . . . The current newspaper bread and butter of banners and classified listings will not just stall but fall to less than half its current dollar volume in 2012 . . .  That amounts to a prediction that pay for listings will give way to fees for placement at the top of search listings on the Google model . . . Long story short, Borrell said in a phone interview, unless the industry learns some new tricks fast, ‘newspapers are basically screwed’.”

I added the emphasis (above) because I do not agree that newspapers must surrender their selling ability and rely on search listings. To rely on Google would be the death of news. But Edmonds writes a good piece and you may wish to read his analysis if the subject matter to you.