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October 16, 2009

Can Newspapers Turn Sizable Online Audiences Into Profitable Ones?

By: Steve Dennen

Jay Leno included in one of his monologues recently a word of congratulation to the New York Times for being in business for 158 years. The punch line, however, was that he had read about the milestone on the Internet. Such is the state of the newspaper industry lately, as print editions struggle with eroding readership and advertising revenue, and online - while growing modestly - fails to fill the void on the more important metric of revenue. In an earlier post, I examined the growth in online newspaper site visitors relative to the decline in print readership audiences, and to what degree readers of the print edition are migrating to online newspaper sites for their news, either exclusively (i.e., they are becoming only online news readers) or as a complement to their print news reading.

Expanding on this news readership analysis, today I will examine three other dynamics facing newspaper organizations as they further evaluate their online strategies:

  • Losing News audiences to other sources of News and Information
  • Erosion of Classifieds audiences and revenues by Classifieds sites such as Craigslist
  • The threat posed by the emergence of local ESPN sites (e.g., ESPN Chicago)

Clearly, newspapers face much greater competition online for news and information than they did in an earlier time of three TV networks, local radio, and print newspapers. All of these legacy media are using the Internet as an alternative channel for distributing news; and the portals, as well as pure-play news sites, add to the competitive dynamic. The table below compares the year-over-year growth rate in unique visitors for a cross-section of News sites compared to the corresponding growth for the Newspaper category.

Visitation to News Sites and the Newspapers Category
August 2009 vs. August 2008
Total U.S. – Persons Age 2+
Source: comScore Media Metrix
  Total Unique Visitors (000)
Aug-08 Aug-09 % Change
Newspapers 76,872 80,200 4.3%
Yahoo! News 44,268 47,260 6.8%
CNN 32,223 33,410 3.7%
AOL News 28,367 27,220 -4.0%
TMZ 10,450 16,384 56.8%
FoxNews.com 9,621 8,737 -9.2%
HuffingtonPost.com 3,293 5,425 64.8%

The Newspaper category growth holds up well against other digital news sites, however the growth at more niche-targeted sites like TMZ and Huffington Post cannot be ignored. The size of their audiences now compares favorably with some of the more prominent newspaper sites.

Meanwhile, Newspapers can expect to continue to get more pressure on the Sports front as ESPN introduces more locally-targeted sites. ESPN Chicago was the first to launch this summer, with ESPN Boston launched this month, and others in Dallas and Los Angeles to follow. ESPN Chicago has already surpassed the Chicago Tribune Sports section in monthly Unique Visitors.

Chicago Sports Site Visitation
August 2009
Total U.S. – Persons Age 2+
Source: comScore Media Metrix
  Total Unique Visitors (000)
  Aug-09 % of Site Visitors Also Visiting Other Site
Chicago Tribune Sports 414 21%
ESPN Chicago 701 12%
Visited Both 86 N/A

Interestingly, there is relatively little overlap (considering the similarity of the content) between the audiences of these two sites. Given the fact that the number of visitors to Chicago Tribune Sports has remained fairly constant since the introduction of ESPN Chicago, this would suggest that ESPN Chicago Visitors are not switching away from the Tribune Sports site. And, since 95% of ESPN Chicago Visitors also visit other parts of ESPN, this supports the theory that ESPN is building its local site’s audience from those people who are already visitors to ESPN. And this, in turn, reflects the power of the ESPN brand.

From the perspective of revenue generated from their print editions, newspapers have taken the greatest hit in classified advertising revenue as a result of competition from online classifieds sites, predominantly Craigslist but also from sites such as eBay. While Craigslist’s annual revenue is pegged at a modest $100 million (its services are free in many cities), it is estimated that classifieds revenue for print newspapers has declined from a peak of $20 billion in 2000 to approximately $10 million this year*. The size and growth of the Craigslist audience is compared below to the size and growth of the Newspapers category.

Visitation to Newspapers and Classified Categories
August 2009 vs. August 2008
Total U.S. – Persons 2+
Source: comScore Media Metrix
  Total Unique Visitors (000)
Aug-08 Aug-09 % Change
Newspapers 76,872 80,200 4.3%
Classified 52,675 59,139 12.3%
Craigslist, Inc. 35,516 47,130 32.7%

The growth in visitors to the Classifieds category as a whole and Craigslist in particular outpaces the visitor growth for the Newspapers category. Additionally, over the last year Craigslist has become an even more formidable player in the Classifieds category. In August 2008, Craigslist accounted for 67% of category visitors, while by August 2009 Craigslist’s penetration of the category had increased to approximately 80 percent. What is most astounding, however, is the size of the Craigslist monthly audience as a percentage of the Newspapers category: by August 2009, Craigslist’s audience was 59% the size of the entire Newspapers category, and rivaled the audience of any individual Newspaper site.

Given the strong adoption of online Classifieds sites such as Craigslist, it is hard to imagine a scenario in which Classifieds revenue for newspapers returns to previous levels. Therefore, Newspapers sites must look for alternative ways to offset that revenue from other online sources. While it will be interesting to see how the recent discussions in the industry regarding the pay-for-content model unfold, Newspapers sites must also examine ways in which they can increase their display advertising revenue. While the size of the online audiences for many top newspaper sites are reasonable, engagement is lacking (the average visitor to a Newspaper site is only spending 24 minutes per month on the site), which limits these sites’ available inventory. Newspaper sites need to continue to look for ways to more deeply engage with the visitors they are attracting, while also measuring and promoting the unique value of their audiences so they can command higher premiums on the rates they charge advertisers for reaching their audiences.

* E-Commerce Times, "Craigslist on a Tear as Newspaper Classifieds Wither”, June 2009.

Tags: Newspapers, Rankings, Sports