Posted on: Saturday, April 16, 2005
Internet innovations cut in on newspaper circulation, revenue
By Michael Liedtke
Associated Press
SAN FRANCISCO — Craig Newmark already has tormented newspapers by creating a Web site where anyone can post ads at little or no cost, capturing an ever-growing share of the classified advertising market that had been one of the industry's most dependable sources of revenue.
Some of the largest publishers appear determined to become more prominent online players. In the past few months:
• The New York Times Co. paid $410 million for About.com, which runs a network of special-interest Web sites. • Dow Jones & Co. bought financial news site MarketWatch Inc. for about $500 million. • The Washington Post Co. bought the online magazine Slate from Microsoft Corp. for an undisclosed amount. • Gannett Co., Inc. which publishes The Honolulu Advertiser, along with the Tribune Co. and Knight Ridder Inc., each bought a 25 percent stake in Topix.net, a Web site that indexes thousands of online news stories. Newmark's brainstorming may lead nowhere, but smarter newspaper publishers have learned to take the ideas of Internet entrepreneurs like him seriously as online search engines, help-wanted sites, the self-published journals known as blogs and other innovations chip away at readership and revenue.
A sense of urgency and concern has been running through the industry.
"There are pockets of people within every (newspaper) who think we should be doing more on the Internet, but there are also other pockets of people who wish it would just all go away," said Ian Murdock, senior vice president of the San Francisco Chronicle. Ignoring the online threat doesn't seem to be a viable plan.
The Internet's U.S. audience has steadily climbed during the past decade, reaching 164 million people who spent an average of 84 minutes per day online during March, according to comScore Media Metrix. And while they're surfing the Net, they're often reading stories most newspaper publishers offer for free.
Meanwhile, the total paid circulation of U.S. newspapers has been declining for nearly 20 years, dwindling from a peak of about 63 million to about 55 million, the association said.
The newspaper industry is finding it particularly difficult to attract the younger readers prized by advertisers. Just 39 percent of adults 18 to 34 years old read a newspaper last year, according to the association. More than two-thirds of adults 55 or older still read a paper. "Newspaper readers are dying off faster than they can be replaced," said industry analyst John Morton.
Most papers remain profitable, cranking out profits of $20 for every $100 in sales, Morton said. But most also realize traditional profit sources are drying up as advertisers follow readers online.
Many publishers have reacted by cutting newsroom budgets in order to continue generating the earnings growth demanded by their shareholders, but some industry experts consider such moves suicidal. By cutting costs when they should be spending more money to become more competitive on the Internet, newspapers are heading toward a "profitable demise," said Jay Rosen, a New York University journalism professor who recently published a pessimistic essay about the industry's future. "They won't stop the gravy train even though the engine is broken," he said. "How does such a thing eventually stop? It crashes."
Newspapers can still save themselves, said Internet analyst Greg Sterling of the Kelsey Group. He still sees plenty of upside because most newspapers possess well-known local brands, backed by large staffs of experienced workers to report the news and sell ads. "The market is still theirs to lose, but they have to do something relatively soon to make the consumer experience better," Sterling said.
Now, the founder of Craigslist.org is pondering ways to improve upon newspapers. He smells an opportunity, convinced that publishers are more interested in preserving short-term profits than pursuing online audiences who still passionately care about journalism but don't read newspapers.
Newspapers get in on Internet
