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Newspapers Commoditizing Web Ad Inventory; Reducing Revenue in the Process

It seems every time I pick up my local newspaper it’s cut back on editorial pages and instead added lots more advertising. Many publishers around the country have applied a similar tactic to their online publications–increase the number of advertising spots–but new research suggests that approach my now be backfiring.

…after 17 quarters of ballooning growth, online revenue at newspaper sites is falling. In the second quarter, it was down 2.4 percent compared with last year, to $777 million, according to the Newspaper Association of America. It was the only year-over-year drop since the group began measuring online revenue in 2003.

While newspapers have increased their online audiences, they’ve also increased the amount of online content, which in turn has led to a glut of display advertising spots. In effect, there are now more ad units than advertisers, forcing many publishers to turn to ad networks to sell off their remnant advertising–often at a deep discount.

It’s a vicious downward spiral. Create more content, create more ads, but fail to find enough advertisers to fill those spots. This, in turn, brings down the average CPM rate.

With networks, “unwittingly, I think, the publishers commoditize their own inventory,” said Paul Iaffaldano, the general manager of the TWC Media Solutions Group, which sells ads for the Weather Channel and Weather.com.

It’s not all doom and gloom. Some publishers have realized that less can really mean more. They’re reducing the number of advertising spots and creating demand for their content.

“We’re going to reduce the number of ad sizes we use and the number of units,” said Christian Hendricks, the vice president for interactive media at McClatchy. “It is a case where yeah, you could probably sell another advertiser by creating another ad space,” but that could hurt the revenue over all, he said. Online revenue at McClatchy rose 12.5 percent in the second quarter; a year earlier, revenue dropped 2.2 percent.

McClatchy also tries to avoid ad networks. “We don’t want to get in the habit of filling every little space we have with remnant,” Mr. Hendricks said.

The question is, will enough publishers realize they need to pull back on the number of ad units they sell, before the online newspaper space collapses under the weight of its own saturation?

  • http://www.jordankasteler.com/utah-seo-pro-blog/ Utah SEO Pro

    As the economic crisis increases the more and more advertisers will pull back on the ad units. Hopefully newspapers will adapt to change.

    Utah SEO Pro’s last blog post..Link Metrics for SEO

  • http://www.tribuneinteractive.com/network Brent D. Payne

    Great article which I can’t comment on. ;-)

  • http://thisismyurl.com Christopher Ross

    I spent years working in the newspaper business and I can honestly answer your question by saying no. The industry won’t do anything to stabilize the market because the people in charge of selling the ads are commission based.

    Christopher Ross’s last blog post..How to Run a Successful Website for Your Church

  • http://www.marketingpilgrim.com Andy Beal

    @Brent – lol

  • http://www.dogballsblog.com marc

    The real question is how are ad networks helping/hurting web-publishers (and their shareholders) and what will Yahoo’s new network mean to all this once it has ramped up to full speed and continues to scale?

  • http://cssdigitaldesign.co.uk sheppy

    An alternative key to success really is targeting. If you don’t have a great level of granularity in your ad targeting, it’s quite hard to sell your inventory.

    If you can put together intelligent advertising packages perhaps using behavioral targeting or even with the content on each page/article then you shouldn’t have too much of a problem selling out.

  • http://www.netage.co.za Goran Web Design

    If the newspapers were to have more relevant content on their pages, then they wouldn’t be having this problem. They should take a shift from tabloids and politics, and all the other usual stuff that they write about, and start looking at other stories that will capture people’s interests.

    But again the digital world is taking over, esp the net has become a giant multi-media outlet and a very reliable one too, so I’m not surprised that the print media is taking a decline in returns. ;-)

  • http://www.terryhoward.net/ Terry Howard

    Here the newspapers have finally turned the wheel on their massive lumbering FAIL boat of a business model towards the web and are following in the genius wake of… Radio station websites. You know the ones, that have so many flashing blinking ads intermixed with flash navigation and “enter a keyword” deep navigation schemes that scrolling becomes a wait and load exercise. Seems like they thought that idea was so awesome they would regurgitate it back up onto the deck of their print titanic.

    Can we just send these print jerkwads back to remedial business school already?

    Terry Howard’s last blog post..Candidates’ Percentage of Maverickism

  • http://www.downloadic.com Downloadic

    How are ad networks helping/hurting web-publishers ?