Sunday, March 05, 2006
BUSINESS MODELS: Crosbie says 100 web readers equals 1 print reader
HEADLINE: One newspaper reader worth up to 100 online users in ad revenue
Monday February 27, 2006
By Stephen Brook
Press & publishing correspondent
Newspaper websites need up to 100 extra online users to accompany each reader that migrates from print editions or they will lose revenue, according to an analysis presented to the World Association of Newspapers.Between 20 and 100 additional online users are needed because the revenue per reader for a newspaper website is far less than the equivalent figure earned by a print edition, even though online advertising is booming.
"As more and more people shift their news reading from print to online, the newspaper industry must dramatically increase its online advertising revenues or die," said Vincent Crosbie, a senior associate at American media strategist Borrell Associates. "Some experts say the battle is already lost in America because newspapers did not move fast enough," Mr Crosbie told the World Newspaper Advertising Conference & Expo.
Print editions of American newspapers earn between $500 (£287) and $900 (£517) per consumer a year from a combination of direct circulation revenues and indirect revenues from advertising, according to Mr Crosbie's analysis. "If American newspapers continue to lose 2-16% of their print circulation each year, they will need to gain 40% to 1,600% more website users just to stay even," he said. "Almost all American newspaper websites are free. Only 35 of the more than 1,500 daily newspapers' websites charge for access. Most have tried, but discovered that readers will not pay. So, newspaper websites must get advertising revenue to profit."
Online advertising revenues have risen dramatically in recent years because of broadband. Internet advertising was worth more than $17bn (£9.8bn) in the US last year, with $4bn (£2.3bn) going to newspapers. The trend is borne out in Britain, with the Financial Times announcing today that the willingness of its biggest advertisers to book combined newspaper and online advertising had pushed FT.com advertising revenues up 27%. In the US internet advertising is expected to surpass ad spending on telephone directories this year and will overtake radio ad revenues during the next 12-18 months. It has already overtaken advertising spending on outdoor billboards and magazines.
American newspapers earned nearly $4bn in internet advertising in 2005, including more than $1.9bn (£1.1bn) from national online advertising, $1.7bn (£1bn) from local online advertising and $222m (£128m) in direct referral online advertising. Yet internet companies such as Google and Yahoo! took more than half of all online ad spend during 2005. Internet companies earned nearly $9bn (£5.2bn), 53% of all online ad spending in the US.
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