McClatchy online revenue looking good

Advertising lineage in newspapers will continue to decline, Media Daily News reports, but McClatchy Newspapers reports online advertising grew 58.5 percent in the second quarter of this year.

Although most companies still don't release separate figures for "Internet-only" revenues, McClatchy CEO Gary Pruitt, discussing second-quarter results, remarked: "Excluding employment advertising, which is the category most tied to print upsell advertising and which has declined nationally both in print and online, our online advertising grew 58.5% in the second quarter of this year. We were pleased to note that nearly 50% of our online advertising came from ads placed only online; they were not tied to a print upsell."

Online display ad revenue is up 26% at E.W. Scripps, and local ads (mostly display) rose 45.7% at Media General. Finally, although she did not cite specific figures, NYTCO CEO Janet L. Robinson attributed the 13% increase in the company's online revenues to "strong display advertising."

Nonetheless, the proportion of total revenues derived from online display advertising remains quite small, and potential sources of new online revenues are a long way off.

Most of the big newspaper publishers have seen their print ad revenues fall sharply over the last year, if not longer. The downward trend is clearly established, with executives warning investors that there are more declines on the way. It seems that things can't get any worse--but incredibly, they can, and probably will. As newspapers are buffeted by a perfect storm of industry-specific and general trends, the rate of revenue decline is likely to accelerate in the second half of 2008 and 2009.

It's impossible to see into the future, of course--and Ken Doctor, an analyst with Outsell, Inc., steered clear of hard-and-fast predictions, but he did say "the points for revenue are all pointing down"--adding that the situation appears especially ominous because of a couple of new, emerging trends.

First and most importantly, online revenue growth has sputtered, stalled, and in some cases even swung into reverse in 2008. Comparing the second quarter of 2008 to the same period last year, online revenues declined 9.1% at Lee Enterprises, 12% at A.H. Belo, and 8% at E.W. Scripps. Meanwhile, online revenue growth slowed to a snail's pace for newspaper divisions at Gannett--up 3%--and the Washington Post Company, up 4%. Online growth was more robust at the New York Times Company, up 12.8%, and McClatchy, up 12.5%-- but still looked positively anemic next to the quarterly growth rates of pure-play Internet companies like Google, up 39% in the same period.

The slowdown in online revenue growth "is absolutely terrible news," Doctor said, removing the one source of good news in previous quarters. The slowdown could have been foreseen: "Newspapers got addicted to online upsells from the print classifieds," Doctor recalled, relying on combined print-online sales to sustain double-digit growth in online classified revenues for several years. Meanwhile, the volume of print classifieds was shrinking, a process accelerated by the economic slowdown. With fewer print classifieds being placed, there are fewer opportunities for online upsells.

Click on the headline to read the full report in Media Daily News.