Online Moguls To Feast on $42 Billion Newspaper Ad Pie

After another jarring 3.5% decline over the past six months, print-paper circulation will drop to about 50 million this year -- the lowest level since 1946.
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How bad are things in the (print) newspaper industry? Don't ask. After another jarring 3.5% decline over the past six months, print-paper circulation will drop to about 50 million this year -- the lowest level since 1946 (62 years ago).

That's during a period in which the US population has doubled, meaning that per-capita newspaper consumption has been cut in half. For more on this horror show, read the latest from the Dean of Newspaper Demise, Alan D. Mutter, at Newsosaur. Just don't do it if you've got friends or family (or money) in the industry.

If your career, portfolio, or fortune isn't tied to the newspaper business, however, rejoice. The newspaper industry's loss is your gain!

In ten years, print-paper circulation and ad revenue will likely be a quarter of what it is today, if that.

Why? Because:
  • As circulations and ad revenue continue to fall, print economies-of-scale will reverse, cutting further into already shrinking print margins.
  • As "green business" practices take hold, a new generation of consumers will come to view the newspaper industry as a horrifically wasteful polluter that eats forests, gobbles fuel and electricity, and farts untold amounts of hydrocarbons into the atmosphere -- all to deliver information that might have been interesting yesterday.
  • A generation of newspaper ad salespeople and ad sales buyers will gradually retire or quit, and advertisers will increasingly ask themselves why they are spending billions on ads they have no idea whether anyone looks at.
  • As financial and environmental pressures increase and a better grasp of reality sets in, more papers will opt to do what the Capital Times of Madison, Wisconsin, did last weekend: Shut down their print businesses, fire a third of their staff, and put what's left online.

And good riddance -- if not to the staff, at least to papers. And a hearty welcome to a slightly cleaner atmosphere and less need for recycling.

And here's some more good news: The $42 billion that was spent on print newspapers in 2007 isn't going to vaporize -- it's just going to go somewhere else. ($42 billion -- in the US alone!)

Where's it going?

Here's one guess:

Fate of $42 Billion of 2007 Newspaper Print Ad Spending in 2017
  • Surviving newspapers: $10 billion (25%)
  • Magazines: $0
  • TV: $0
  • Outdoor: $2 billion (5%)
  • Digital: $30 billion (70%)

And what about the newspaper companies -- won't they be fine because of their web sites? No, at least not without major restructuring and pain.

Newspaper web sites are only capturing a fraction of the print revenue the papers are losing, and the growth of newspaper sites has already started to slow. As the chart below shows, in 2007, the industry lost 8%, or $4 billion of advertising including newspaper web sites. Newspaper sites will capture a small portion of that new $30 billion Digital pie, but probably not much more than $5 billion. Some newspaper companies will survive, but only after major restructuring.

In fact, here's another guess:

Fate of $30 Billion Migrating Online From Newspapers By 2017

Newspaper Web Sites: $5 billion (17%)

Google, Yahoo, Craigslist, eBay, Amazon, job sites, blogs, mobile ads, video ads, etc: $25 billion (83%)

So if you're in the digital advertising business, that's good news. $3 billion a year of incremental ad revenue flowing toward you, without you even getting off your bum. Now all you have to do is fight like hell with all the other folks who have seen the future and want a piece of it.

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