Conventional wisdom holds that the drop newspaper advertising revenue will be offset by increases in Internet advertising revenue. Unfortunately, a close look at the numbers reveals that the conventional wisdom is wrong.
I've often pointed out that a subscriber to a major daily generates nearly $1,000 a year in ad revenue, while a loyal web reader generates...about $12 in annual revenue.
If you want a more graphic example, here's a tidbit from yesterday's Wall Street Journal.
Print-only advertising at newspapers slumped 10.2% to $10.5 billion in the second quarter, marking the fifth consecutive quarter of decline, according to figures compiled by the Newspaper Association of America.
Online advertising at newspapers continued to grow, rising 19.3% to $795.7 million, although that was a slower rate than the 22.3% gain recorded in the first quarter, and the 35% gain in the fourth quarter of last year.
That looks great. Print ads slumped about 10% while Internet ads rose nearly 20%. That looks healthy. But look a little more closely. The 10% drop in print ads equates to a $1 billion decrease in revenue. The ENTIRE AMOUNT of the Internet revenue for the same period is $795 million. In other words, the decrease is print revenue is larger than total Internet revenue.
To be sure, Internet revenue is growing at a rapid clip, but it will never be able to replace the revenue that used to be generated by print advertising. That revenue is gone.
Internet will not be able to support the overhead of the current newspaper model. The conventional wisdom is wrong; the business model is fatally flawed. But like the managers of Kodak, AOL, Word Perfect and Blockbuster, the captains of the newspaper industry don't have a replacement model.