ja_mageia

I love newspapers. I worked in the industry for decades, but before that, I grew up reading them. My grandfather and my father before me read the paper every day. My day still begins with newspapers and breakfast. And like nearly three-fourths of all adults in this country, I read my local community newspaper every week.

While newspapers have fallen on hard times over the past decade, the industry is finally showing signs of emerging from the deep trough it tumbled into, a pit largely dug by the newspapers themselves. In a few weeks we will revisit our forecast from 12 months ago that newspaper ad revenues would bounce back, showing an average annual increase of approximately 1.7% over the ensuing five years but perhaps never again reaching the $40 billion they achieved in 2008. I suspect we’ll adjust the forecast, but not by much. A mild bounce-back is inevitable.

Back in the early ’90s, before the Internet realigned everybody’s perceptions of media, newspapers were coming out of another earnings slump — albeit a far more shallow pit than the one they currently endure. The men who ran the big, multi-city metro chains decided that the best way to court Wall Street was with steadily climbing margins. They worked hard at the strategy, pulling newspaper company profit margins from an average of ten to 12 percent to beyond 20 percent by the end of the century. The process was tough. Newspapers were laying off people and ending careers all through the good times of the ’90s, long before their primary advertising franchises became in doubt.

By the late ’90′s newspaper classifieds started to erode. First, recruitment spending went to the Web, as employers discovered they could do for themselves what the liner ads in the back of the paper had always done before. Next, department store spending bled away, as the big chain stores hit cost and competition walls. Later on, real estate discovered the Web as well, and that long-held franchise began to drift away.

In reality, all of these major components of newspaper advertising had been eroding for years. But in a hot economy, loss of share may not be noticed as long as receipts continue to climb — especially if you don’t measure share, just year-over-year change in sales. The strategy of increasing price where sales were good, then meeting with major advertisers to mediate the increase had always worked for newspapers. Everybody thought it would work forever. However, the strategy could only work in a world where no new media competitors — especially competitors that could compete in the classified arena — existed. Once the Internet was monetized, the old ways no longer applied.

Now, as the newspaper industry pulls itself back to black ink, it finds itself in a new world. Here are some of the new rules:

• Content is still king (but not newswire content). Anybody with a computer or a smart phone can find 50 free sources for AP or Reuters content. They don’t need a newspaper (in any form) for that. On the other hand, Local news isn’t as commoditized. It tends to be scratched and suffered out of the community by actual reporters (or even by readers). It is the more valuable content for newspapers.
• Ads are content, too. More than one-third of the people who use their computers or read a paper are employing those media to help them look for items to buy, things to do, or places to go. On Sundays, nearly half of the people who buy the newspaper are doing so for the advertising content.
• Advertisers want measurement. They’re no longer satisfied being told that an ad will reach a lot of people – unless they can see the results in their places of business.

The last point is probably the most important. The marketing pendulum is swinging away from advertising, toward promotions. Unlike ads, promotions are very measurable, and they can be launched on an advertiser’s own website or Facebook page.

Can newspapers find a place in this new world, someplace between the pit and the pendulum? Some smaller papers, community and suburban offerings for the most part, continue to do well. It’s the big metro dailies that have been hit hardest and seem the slowest to recover. It is too soon to forecast how and in what form they will continue.