Smartphone shopping perils publishers

The smartphone has emerged as the hottest shopping accessory since the brown paper sack, the latter of which, as a matter of law, now costs a dime if you don’t bring your own environmentally sustainable tote into the supermarket in my part of California. 

With nearly one out of five consumers now consulting their mobile gizmos when making a purchasing decision, smartphone shopping represents a profound threat to newspapers, because it strikes at the heart of the historic value of the medium to the merchants who buy the preponderance of newspaper advertising.

The stakes hardly could be higher: Based on the newspaper industry’s actual performance for the first nine months of last year, I estimate that national and retail advertising likely generated three-quarters of the approximately $19.3 million in print advertising sold by publishers in 2012. 

Here's why smartphone shopping matters: While local media in the un-wired age were the primary conduit for connecting sellers with potential buyers, the efficiency and immediacy of smartphone-assisted shopping has created an unprecedented opportunity for both on- and off-line retailers to build powerful, personalized and direct relationships with consumers. The stronger and more efficient those ties become, the less merchants will need to buy ads from such traditional intermediaries as newspapers, radio and television. 

This is not some threat in the distant future.  The popularity of smartphone shopping rocketed last year during the holiday shopping season.   

On Cyber Monday (the first day after the national Thanksgiving-weekend shopping orgy), more than 18% of consumers used mobile devices to visit a retailer's site, according to an analysis complied by IBM Corp.  The number of smartphone shoppers was 70% greater than in the prior year.  

And the mobile-ized shoppers weren’t just browsing.  IBM said smartphone-powered sales nearly doubled between 2011 and 2012, reaching “close to 13%” of digital volume for Cyber Monday, which historically is the busiest day of the year for online merchants.  Based on ComScore data that pegged Cyber Monday turnover at a tad under $1.5 billion, smartphone shoppers bought some $200 million of goods in a single day.   

Beyond their obvious convenience as point-of-sale devices, smartphones are used by one out of five consumers to share pictures of products they are considering; to consult with friends, social networks or product-review sites about a prospective purchase, and to scan barcodes in search of product information or better prices, according to a report by Business Insider.  

With more than half of Americans now wielding smartphones as they prowl the aisles, merchants are moving quickly to respond to both the challenges and opportunities the phenomenon represents. 

According to a survey last year by CrossView, a mobile marketing consultant to the retail industry, merchants are equipping stores with wifi, producing branded mobile apps and, to a great degree, matching in-store and online pricing to avoid angering bricks-and-mortar customers who check the web to ensure they are getting the lowest-possible price.  During the Christmas shopping season, Best Buy even promised to match the prices offered by Amazon and the other leading online discounters. 

Smartphone shopping is popular among all ages and genders, said CrossView. “The local retailer who makes inventory positions available to the mobile shopper has a significant competitive advantage,” added the firm. “Clearly, top retailers understand this – and it’s why 80% of those we surveyed allow customers to use their mobile devices to see if products are in stock at a particular store.”

Though the transparency is bound to please customers, merchants aren’t doing this sort of thing to be nice.  The real reason retailers are embracing mobile commerce is to develop far more targeted and actionable relationships with consumers than was possible in the un-wired era. 

The more shoppers use their phones to compare products, to research purchases and to scout for deals, the more digital breadcrumbs they leave for merchants to analyze, including: who they are, where they are, what they have purchased and what they might buy next.  The more data that merchants capture about individual consumers, the more data they can crunch to predict the types of products or services an individual might buy, thus tailoring offers in terms of time, place, features and even pricing. 

Unless newspapers want to get shut out of their lucrative and long-standing partnership with the retail industry, the shift to smartphone shopping merits their full attention. 

Unfortunately, publishers are so technologically out of touch that, according to the Newspaper Association of America, only 110 (8%) of the nation’s 1,382 dailies have gotten around to launching apps for the tablet, which happens to be the fastest-growing electronics product since electricity was discovered.

To play in the new order of things, publishers need to (a) talk with astute merchants to discover their needs, (b) partner with savvy technologists to meet said needs and (c) get serious about investing in modern mobile platforms.  

© 2012 Editor & Publisher

Auto recovery leaves newspapers behind

Although the sales of new vehicles hit a five-year peak in 2012, automotive advertising at newspapers was on track at year’s end to decline for the ninth straight year – and likely headed to the lowest level since 1979.  

The continuing slump in auto advertising at newspapers, which has persisted in spite of a healthy rebound that powered new vehicle sales to 14.5 million units  in 2012, is perhaps one of the best examples of how technology irrevocably has changed the behaviors of both buyers and sellers in what once was one of the most significant and reliable categories for publishers.  

As we will see in a moment, the new dynamics of the marketplace make it highly unlikely that auto advertising, which once reliably tracked the ups and downs in the economy, will return to its former prominence for newspapers.  First, the numbers: 

In the third quarter of this year, auto classified slipped by 0.9% to $255.5 million, according to the Newspaper Association of America, an industry-funded trade group.  In the same period, vehicle advertising by auto makers across all national media – print, broadcast, Internet and outdoor – surged 26% to $2.7 billion, according to the Nielsen marketing-information service.  Beyond the advertising bought by the factories, Nielsen said local dealers boosted their spending by 22% to $1 billion.  Thus, newspapers captured less than 7% of auto advertising in the three-month period.   

The feeble newspaper auto sales in the third quarter of last year contrast with the $1.1 billion of vehicle advertising sold in the same period in 2005, the last year before publishing revenues began a catastrophic tumble  that has cut the industry's aggregate ad revenues by more than half.   Thus, as illustrated in the chart below, publishers have lost three-quarters of their ad volume in this key vertical in just seven years. 

The once-powerful partnership between auto dealers and publishers has collapsed because consumers for the better part of the last decade have moved to shopping for cars on highly optimized digital sites, rather than in print. 

Well aware of the ability of consumers to compare models, read ratings, peruse inventories and negotiate terms while still in their pajamas, both dealers and manufacturers are shifting ever-greater portions of their marketing budgets to the digital media in the interests of intercepting potential customers early in the decision-making process. 

The exodus of auto advertising from newspapers began well before the onset of the Great Recession in late 2007.  After peaking at an all-time high of $5.2 billion in 2003, auto advertising began falling in 2004 – a good four years ahead of the recession – and has continued to slide ever since.    

The trend in the first nine months of this year suggests newspapers collectively will sell approximately $1 billion in vehicle advertising for all of 2012 – or less than 20% of the volume achieved in 2003. Assuming the projection is accurate, this will bring the industry’s auto sales to the lowest level since 1979, according to records maintained by the NAA.  

Back in 2003, auto advertising delivered a significant 11.6% of industry revenues for publishers. This year, my projections show vehicle advertising will generate no better than 5% of total print sales. (The NAA does not detail the sources of online revenues in its reports, but Jim Conaghan, the trade group’s research chief, noted in an interview that 15% of the industry’s total revenues come from digital advertising.) 

The secular shift in the way consumers buy cars is detailed in a comprehensive new report from AIM Group, a research and consulting firm formerly known as Classified Intelligence. The report, which is available here, costs $795.     

The reason auto sellers are forsaking newspapers is that “most buyers made vehicle and dealer decisions before stepping foot in any showroom,” said AIM in the report. “Then, 40% went straight to their chosen dealership and bought.” 

In addition to visiting such pure-play sites as Auto Trader, Kelley Blue Book, Edmunds, eBay and Cars.Com, AIM said consumers also shop and share information on eBay, Facebook and Craig’s List.   Cars.Com is owned by A. H. Belo, Gannett, McClatchy, Tribune Co. and Washington Post Co., a quintet of newspaper publishers who were wise enough to hedge their bets by investing in what has become one of the top pure-play sites. 

Instead of kicking tires at car dealers on Saturday morning, consumers today “talk pre-sale with dealers by email, live chat, text and social media,” said AIM.  Noting that 15% of consumers are shopping for cars on mobile devices and many shoppers also are comparing models among themselves on the social media, Jim Townsend, the editor of the AIM report, said “social-mobile” services will further transform the way buyers and sellers interact.  

“If you think about what your customers already are doing with their phones and tablets, you really can’t afford to ignore the trend of social-mobile,” said Townsend.  “Incorporating social-media tools like Facebook, user reviews and social sharing of information into auto advertising is the direction every publisher needs to go.”  

Why investors embraced newspapers in 2012

Part two of two parts.  The first part is here. 

While more than half of newspaper advertising has vaporized since peaking at $49.4 billion in 2o05, the share prices of five out of the nine publicly held publishers impressively outpaced the broader stock market in 2012. 

Yesterday, we looked at the winners and losers among the publishing sector in a year when the average share price of newspaper issues rose 20.8% at the same time the Standard and Poor’s index of 500 shares gained 13.4%.  The industry’s performance on Wall Street last year contrasts sharply with the loss, on average, of a third of the value of publishing shares in 2011.  

Today, we’ll look into the reasons for the remarkable turnaround – and why newspaper shares fared so well on Wall Street in spite the relentless decline over more than half a decade of the industry’s primary revenue stream.  

Before proceeding, it should be noted that even the best-performing newspaper stocks last year closed at a fraction of the prices they commanded six or eight years earlier. For example: Although Lee Enterprises rocketed 61.7% to become the biggest gainer in 2012, its shares closed the year at $1.14, or 98% less than the $49 they fetched in mid-2004. 

In a nutshell, the newspaper stock boomlet of 2012 was fueled by the belief among a certain number of investors that publishers have the motive, means and opportunity to transition their businesses out of the faltering print model and into prosperity in the digital era. 

The investors evidently were persuaded by the persistent and consistent effort of publishers throughout 2012 to change the perception of their industry. As discussed below, publishers at almost every turn emphasized their commitment to introducing a growing array of digital products on the web, on mobile platforms and through the social media.  Further, the executives of most publicly held publishing companies jazzed up their financials by lowering their debt and/or improving their profitability. 

In other words, publishers were telling investors exactly the sorts of things they love to hear.  As long as publishers can deliver – and there is scant reason to doubt they will make every effort to do so – then newspaper stocks may continue to enjoy high regard on Wall Street.  If publishers prove to be longer on rhetoric than they are on execution, their shares – and perhaps individual executives – will suffer. 

Here’s a look at the several factors that fueled fresh confidence in newspapers in 2012: 

Warren Buffett's buying blitz 

America’s favorite billionaire, who already held a stake in the Washington Post and owned the Buffalo (NY) News, got into newspapering in an even bigger way in late 2011 when he  paid $200 million  for his hometown paper, the Omaha World Herald – and then kept buying papers throughout 2012. Saying he believed newspapers to be strong and unique franchises in each of the communities they serve, Buffett quickly acquired most of the Media General papers and, by all accounts, remains in an acquisitive mood.  Buffett’s prominence as an investment guru, combined with his demonstrated conviction, played no small part in fanning investor interest in newspapers. 

Print-to-pixel pivot potential

The publishers whose shares advanced the most in 2012 were also the best at articulating their plans to transform their companies from their print legacies to multiproduct, multiplatform, multimedia digital franchises.  In a presentation to investment analysts in New York last month, the top officers of Gannett used the word “digital” 63 times and the word “print” just 10, according to the transcript of the event.   The story is the same elsewhere.  “It's noteworthy that a growing percentage of our advertising revenues are now coming from sources outside of our traditional newspapers,” said McClatchy chief executive Pat Talmantes in his third-quarter earnings report. “Digital advertising and direct marketing together now make up over 36% of our advertising revenues.” 

Premium payment prospects

After years of charging modest prices for print papers and almost always giving away their digital content for free, many publishers have moved aggressively to force readers to contribute a fatter slice of the revenue pie.  To a large degree, the New York Times paved the way to charging for digital content when it added a pay system to its website in early 2011.  By the end of 2011, the Times generated 42% of its revenue from print and digital subscriber fees, as compared with 27% of its revenues from print-only circulation in 2006.  One of the reasons the subscriber-fee percentage rose is that advertising sales fell; thus, the company saw its revenues plunge to $2.3 billion in 2011 from $3.2 billion in 2006.  Apart from that detail, the seeming success of the Times in getting subscribers to pay for content has motivated literally hundreds of publishers – at least a quarter of the nation’s nearly 1,400 dailies – to either install or get ready to install tollgates on their digital products.  

Pumped-up profitability 

At the same time publishers are working to boost revenues, the ones getting some of the strongest interest from investors in 2012 were those doing the best to cut expenses to generate higher profits in the face of listless advertising sales. In the first nine months of the year, McClatchy’s net income rose 140% even though its sales fell by nearly 5%.  In its investor presentation last month, Gannett, said it hopes to increase operating margins by 15% to 19% between 2011 and 2015, even though sales are projected to rise by only 2% to 4% in the same period. The mid-year decision by Advance Publications to cut print publication of the New Orleans Times-Picayune and other titles to three days a week may have been taken as a sign by investors that virtually every tactic is on the table when it comes to powering newspaper profitability.    

Burnished balanced sheets

While several publishers entered the Great Recession carrying the heavy and costly debt they acquired to finance what proved to be ill-timed acquisitions, they have been paying down and/or restructuring their obligations to repair their dangerously over-leveraged balance sheets. Among them are the New York Times, McClatchy and Lee, the latter of whom even went though a brief, prepackaged bankruptcy to get the job done.

Power of a positive press 

The resurgence in newspaper stocks attracted a number of positive articles last year, which not only proved the enduring power of the press but also seemingly inspired investor interest. “Warren Buffett Likes Newspaper Stocks,” said Forbes in June.  “Newspaper Paywalls Proving Successful,” said the Wall Street Journal in October. And even Jim Cramer, the CNBC wild man who in 2008 called newspapers “one of the worst neighborhoods in the stock universe,” last month recommended purchasing Gannett shares, gushing: “The company is executing a phenomenal turnaround plan!” 

Though Cramer may be among the most mercurial market commentators of our age, his mood swings are not uncharacteristic of the market itself.  Cramer, like the market, can be high on a stock one day and down the next.  And when Cramer, like the market, is displeased – as demonstrated in this classic video – the vengeance can be fierce.   

Many newspaper stocks beat market in 2012

Part one of two.  Second part is here. 

After getting shellacked in 2011, a number of newspaper stocks rebounded sharply last year, with five out of nine publicly held publishers handily outpacing the broader market. 

On average, newspaper stocks rose 20.8% in 2012, as compared with a 13.4% increase in the Standard and Poor’s index of 500 shares. But the average doesn’t properly reflect the wide disparity in the industry’s performance on Wall Street.

The biggest percentage gainer last year was Lee Enterprises, which surged 61.7% after averting default on some $900 million in high-interest debt in a quickie bankruptcy. Notwithstanding Lee’s performance in 2012, its yearend closing price of $1.14 a share was nearly 98% lower than the $49 level at which it peaked in mid-2004.   

The biggest percentage loser in 2012 was GateHouse Media, whose stock fell 9.1% to close the year at six cents per share (yes, six cents), thus leaving the company's market capitalization at a paltry $3.5 million, with an M.  When GateHouse began trading as a public stock in 2006, the company was valued at $1.25 billion, with a B. This represents more than a 99% plunge in shareholder value. 

In addition to Gatehouse, two other stocks lost ground in the last 12 months. The Washington Post Co., which is battling operating losses at the flagship paper and weakness at the Kaplan educational division that actually represents a far bigger part of the business than the newspaper, tumbled 3.1%. After producing desultory sales and operating profits  in the first nine months of the year, the shares of A.H. Belo slipped 2.1%.   

The shares of every other publisher advanced in 2012.  In addition to Lee, the other stocks beating the broad market were Gannett, Journal Communications, McClatchy and E.W. Scripps. While the shares of the New York Times Co. rose in 2012, they failed to match the increase in the S&P 500. Here are the details: 

To put last year’s robust percentage gains in perspective, it should be noted that every newspaper stock exited 2012 at a fraction of the price it commanded at the end of 2006, the first year of a relentless slide that has more than halved the industry’s collective advertising revenue since topping at $49.4 billion in 2005.  

In the last six years, publishing shares on average have shed 72% of their value. Following are the percentage declines experienced by the newspaper companies that essentially include the same assets today as they did at the end of 2006. Belo and Scripps were eliminated from chart because they underwent corporate restructuring in the intervening years that makes it impossible to do an apples-to-apples comparison of the value of their shares. 

Two publicly traded companies that previously were included in the annual survey of newspaper stocks were eliminated in this year’s market analysis for the following reasons:

∷ Although News Corp.’s shares soared by 44.3% in 2012, most of the gain came after Rupert Murdoch confirmed in the summer that he would spin his newspaper holdings into a standalone venture, isolating his fast-growing and highly profitable entertainment assets in a company to be called Fox Group. With all due respect to the Wall Street Journal, New York Post and London Sun, the jump in the pre-spinoff stock seems to be attributable to investor cheer that Fox is getting out of the newspaper business. Next year, the free-standing print incarnation of News. Corp. – which reported a pro forma loss of $2 billion  in fiscal 2012 – will be included in this analysis. 

∷ Media General was removed from the annual survey because it sold most of its papers last year to Berkshire Hathaway for $142 million and certain other consideration. With $424 billion in assets, it is unlikely that the performance of Berkshire’s shares will be materially influenced by its newspaper holdings.  Accordingly, Berkshire will not replace Media General in future annual surveys. 

The boomlet in newspaper shares in 2012 occurred in spite of the fact that advertising – the primary revenue stream for newspapers – continued to contract throughout the year.  At the end of 2012, industry ad revenues were less than half of the all-time high of $49.4 billion achieved in 2005.  While final numbers remain to be compiled for the fourth quarter, a projection based on actual performance in the first nine months of the year suggests that the industry’s aggregate print and digital ad revenues will come in at about $22.5 billion for 2012. 

Although print advertising slipped throughout 2012, digital advertising, which most publishers proclaim to be the future of the industry, rose 3.6% in the third quarter of the year.  Unfortunately, as reported here, this growth rate is substantially lower than the 18% increase in the same period in over-all digital advertising in the United States.

The performance of newspaper shares last year contrasts with the battering the industry took in 2011, when publishing stocks, on average, lost nearly a third of their value at the same time the S&P 500 closed at exactly the same level it opened 12 months earlier. 

Given that the stock market is largely driven by expectations of future performance, Wall Street’s far more positive disposition toward newspapers in 2012 appears to reflect a growing confidence among at least some investors that publishers have a plan to successfully pivot their businesses away from print and into the digital realm.    

If publishers execute well on their promises, the market potentially could reward news executives and their shareholders with still higher valuations in 2013 and beyond.  If publishers falter or fail, the market’s judgment is likely to be swift and harsh.  

Next:  Behind the news-stock boomlet

Digital ad share dives sharply at newspapers

Reflecting the apparent acceleration of a troubling and long-running trend, the share of digital advertising earned by the nation’s newspapers plunged precipitously in the third quarter, according to an analysis of new data released this week. 

While total U.S. digital advertising expenditures surged 18% in the third quarter of this year to a record $9.3 billion, online advertising at newspapers rose a comparatively modest 3.6% to $759 million.  Thus, the 1,300-plus dailies in the land collectively captured a mere 8% of the digital advertising dollars spent in the most recent three-month period – a sharp drop from the 10% of the market they held in 2011. 

As reported previously here, newspapers collected 15% of digital ad dollars as recently as 2007. But their share of the burgeoning market has tumbled ever since, owing to a lack of such popular products as targeted and search advertising.   

The Internet Advertising Bureau, a trade association, reported that digital sales in the third quarter were fully $600 million greater than the all-time record set in the second quarter of this year.  The newspaper data is tabulated by the Newspaper Association of America, an industry-funded trade group.   

As illustrated below (click to enlarge), the growth of digital advertising at newspapers was reasonably competitive with the broader digital marketplace until the economy slipped into recession in late 2007.  Ad expenditures contracted for both newspaper and native digital publishers during the downturn, and the year-to-year percentage gain in newspaper advertising actually matched that of the Net natives in the second quarter of 2010. Since then, however, the growth rate of advertising sold by the pure-play digital competitors has rocketed ahead of publishers.  

One reason for the sluggish digital recovery at newspapers is the collapse of advertising for employment, real estate and autos since the economy contracted.  Prior to the downturn, publishers relied heavily on “upselling” web classified listings to print advertisers.  While recruitment and real estate advertising remain weak, publishers still have not seen an increase in auto advertising even though vehicle sales are at a 4.5-year high.  

Another reason publishers are trailing the digital natives is that they generally sell run-of-site banner advertising that cannot be targeted to the demographics or interests of specific individuals.  Unlike the ads appearing next to Google search results, which are explicitly targeted by the keywords selected by marketers, newspaper ads are sold in packages of 1,000 impressions at a crack. Unlike ads at LinkedIn or Facebook, which can be targeted with the enormous amount of personal information voluntarily contributed by each user, newspapers can provide little information to advertisers about the individuals visiting their sites. 

While some experts believe that the density of keyword ads at Google produces ad yields as high as $95 per thousand impressions, the commoditized nature of newspaper banners typically keeps their rates at $12 to $15 per thousand impressions.  Because publishers often are unable to sell substantial portions of their inventories, they are forced to fill the space with remainder ads that typically deliver only $1 to $2 per 1,000 impressions.  

The final reason newspapers are trailing the over-all digital market is that most of them have what charitably could be called rudimentary mobile and video ad offerings. Because publishers have not invested in harvesting information from their users or modernizing the technology on their web and mobile sites, the only thing they have to sell are static and untargeted ad formats. 

Given all of the above, the most logical explanation for the steady and continuing erosion of the newspaper industry’s share of the digital market is that a growing number of sophisticated local and national marketers aren't very interested in dollar-a-holler web and mobile advertising. 

It’s none too soon for publishers to resolve to do better in the new year. Happy holidays.  

5 tips for developing new digital products

When the iPad debuted in 2010, I began urging newspaper publishers to defend and extend their franchises by developing innovative products to attract new audiences and new revenues on this transformational platform. But I always got the same question:  Who else is doing it? 

For a year, I didn’t have a good answer, because publishers either ignored the most rapidly adopted electronics product in history – now owned by roughly a quarter of the population, according to the Pew Research Center – or slapped together retro renditions of their websites or print products for this state-of-the-art environment.  

A miracle occurred in the spring of 2011, when the Orange County Register introduced a spritely, purpose-built app called The Peel that, exercising the full multimedia and interactive capabilities of the iPad, was explicitly designed to be as un-newspapery as possible.

The miracle was short-lived. A little more than a year after it was launched, The Peel was killed when the newspaper changed hands and the new owners throttled back most of their digital initiatives to double down on print. 

It’s too soon to assess the wisdom of the bold, if counter-intuitive, print-first strategy at a time when the digital media vigorously are siphoning readers and revenues away from newspapers.  While we wait to see how that plays out, the tale of The Peel offers an excellent case study of the good, bad and ugly aspects of innovative product development in the legacy newspaper environment – a skill that every publishing company needs but few have mastered.

The perfect man to tell the Peel story is Douglas Bennett, who until September was the top digital officer at Freedom Communications, the parent of the Register.  Bennett, who exited the company when the strategy shifted from pixels to print, has five important tips for editors and publishers hoping to develop inovative products. We’ll get to them in a moment.  First, here’s the background: 

“The Peel was proposed in July, 2010, as a lean-back, media-rich experience, to be delivered at 6 p.m. each day to the sort of 24- to 44-year-old individuals who typically don’t read newspapers,” said Bennett in an interview.  “Our research showed that the younger readers we wanted – but didn’t have – were not necessarily interested in conventional newspaper content, but, rather, were interested in the weather, personalities or what to do on the weekend. So, we went heavy with video and graphical stories and left out most of the stuff that normally appears in the newspaper.”

Although the app intentionally was designed to be nothing like the newspaper, it initially carried the Register’s name and was marketed primarily through the print and web editions of the paper.  This led to two big problems, which immediately came to light in focus groups. First, the app, which largely had been downloaded by the over-50 folks who make up half of newspaper readers, hadn’t attracted the desired audience.  Second, the early-adopters were angry that the app lacked the traditional newspaper content they were expecting to see. 

“We knew immediately that we blew it,” said Bennett.  ““So, we launched a contest to find a new name and moved our marketing to such channels as Pandora, Twitter and the social media.”

Renamed The Peel within three months of launch, the product generated a few hundred thousand dollars of revenues in the first year but it wasn't making money, said Bennett, who is prohibited by his severance agreement from discussing financial details.  Although Bennett said the losses were in line with those anticipated in the two-year launch plan adopted at the outset of the project, The Peel was scrapped when the company switched its focus back to print. 

Reflecting on the venture, Bennett identified the following tips for developing a new and novel product:

∷ Do your homework. “Make sure there is a market there,” said Bennett. “Be able to prove it’s there for the people in finance and sales – and the CEO.” 

∷ Get the CEO’s backing. “Have a plan that the CEO buys into, supports and guarantees,” said Bennett, so he or she can “run interference” with finance, the newsroom, the ad sales department or anyone else who wants to kill the project if it is losing money in the early days – as almost all new ventures do.

∷ Field the right team.  “For iPad development, you need people who understand HTML5, video and design on a screen environment,” he said “You don’t have those people in today’s newsroom.”

∷ Recruit a sales champion. “Newspaper sales people already have too many things to sell,” said Bennett.  “You need a leader who buys into your project.”

∷ Build on your failures.  “The plan you put on paper never happens the way you thought it would,” said Bennett. “Recognize that you are going to make mistakes. When you do, make changes fast.”

© 2012 Editor & Publisher

What’s next for press? They don’t know, either.

For those in blissful oblivion or simple denial, the Columbia Journalism School has issued a valuable essay describing how digital technology and empowered consumers are eroding the commercial institutions that historically supported journalism.  

As a backwards look at how the contraction of the legacy media business has affected – and will continue to impact – journalism, the essay makes for worthy reading.  But it comes up short in terms of providing actionable recommendations for those of us who are worried about what will happen to our democracy in the absence of news organizations that adhere to the generally accepted professional standards of rigorous reporting and fair-minded presentation*.  

C.W. Anderson, Emily Bell and Clay Shirky, who authored the essay called  “Post-Industrial Journalism:  Adapting to the Present,” can be excused for not solving the problem of who will pay for journalism when we don’t have newspapers or the other legacy news media to kick around any longer. With journalism turned into a free-for-all where anyone with a video camera or an iPhone can hijack the news, we are facing, if not always bravely, a new world that is utterly uncharted.  

Inasmuch as we can learn a lot from history, the most valuable part of the essay (free, here) is its exploration of why nearly all of the immensely powerful and stunningly profitable legacy media companies failed to appreciate and respond to the changes in the media landscape wrought by the Internet and the myriad publishing platforms and formats it has spawned.  

In a word, the reason the traditional media institutions are faltering – and they are faltering and will continue to falter – is inertia. The companies now sagging under the digital onslaught were organized in the eras when their printing presses and broadcast licenses gave them highly defensible and superbly profitable advantages over any would-be competitors. These companies were – and, understandably, continue to be – focused on extracting the greatest possible profits from those advantages. 

The legacy companies had every reason to disdain – and no incentive to embrace – the power that digital publishing has conferred on every wired consumer to get and give news in the time, place and fashion she wants.  Rather than adapt, the legacy institutions doubled down on the business models that leveraged their monopoly and near-monopoly status to charge premium prices for advertising to the largest audiences they could assemble.   This unfortunately puts the legacy media distinctly at odds with modern marketers, who want to spend the least money possible on putting the right message in front of the right consumer at precisely the right place and time.  

The legacy media are not failing to adapt for want of money, say the Columbia trio in the essay published last week. “The presence of [institutional] process is a bigger obstacle to change than the absence of money,” they concluded. “This conundrum isn’t surprising…. [T]he entire purpose of institutional arrangements is actually to ingrain and rationalize standardized patterns of behavior – in other words, to make change hard.”

The challenge of change is underscored by the essay’s lack of big ideas about how to transition journalism to a solid footing as the legacy institutions implode.  After several hundred words describing the enormity of the challenges facing the legacy media, the essay provides rather modest recommendations for editors and publishers, such as improving transparency in news-gathering; upgrading content-management systems, and publishing data and other raw source materials  – not that there’s anything wrong with any of that.   

The authors make a strong, repeated and welcome case that legacy media should partner with individual citizen journalists and next-generation journalistic enterprises to provide fuller and more inclusive reporting.  “Give up on trying to keep brand imprimatur while hollowing out product,” the authors wisely advise.  

As luck would have it, Jan Schaffer of the J-Lab at American University in Maryland, published immediately after the release of the Columbia report an excellent, must-read study (free, here) of the successes and failures of nine projects where legacy media companies attempted to partner with various nascent journalistic ventures in their markets.  Funded three years ago with $500,000 from the Knight Foundation, the J-Lab effort produced “five wins, two hits and two losses,” said Schaffer, who ran the program. 

The successful projects, which include a local news network put together by the Seattle Times, are inspiring.  By far, the most creative idea was Pipeline, a collaboration orchestrated by the Pittsburgh Post-Gazette to pull together community sources information relating to the hydraulic-fracturing oil boom in the region.  One of the fails was a local network attempted by the Asheville (NC) Citizen-Times, which faltered, said Schaffer,  “amid considerable upheaval in this Gannett newsroom."  (See also the previous discussion on institutional dysfunction.) 

Commenting on the fluid nature of even the successful networks, Schaffer observed that “partners come and they go,” adding: ”Some divorce the network, some die in an emerging news ecosystem that is still quite fragile. Indeed, only two of the projects still have the identical partners they launched with.”

The path forward for journalism, she concluded constructively, is “iterative.” But the Columbia team was a bit more blunt: “There is no solution to the present crisis…. [T]here is no stable state coming to the practice of news any time soon.” 

Looks like we have more work to do. 

* Yes, I know there are many who feel that the media are as corrupt as any other institution, but all the journalists I know take their missions and responsibilities seriously, acting ethically in the public interest to comfort the afflicted and afflict the comfortable.

For all the flaws of traditional journalism over the years – and there are plenty, ranging from racism and sexism to the Jayson Blair scandal and the WMD fiasco – the republic never has gone without a press powerful enough to pry into official misconduct or peer into the problems of society. Absent a financially strong and independent press, I fear the conversation will be taken over by crackpots, commercial interests and political partisans.  

Those rooting for the demise of the professional media ought to be careful what they wish for. It won’t be pretty.  

Online sales are flat-lining at newspapers

With total ad sales sliding 5.1% in the third quarter of this year, newspapers have set what must be some sort of record in the annals of American business by having their primary revenue stream fall for 25 quarters in a row. 

In 75 months of unremitting declines, the industry’s consolidated advertising sales have plunged from an all-time high of $49.4 billion in 2005 to what I estimate will be no better than $22.5 billion in 2012. The year-end revenue projection is based on historic trends. 

It is a testimony to the legendarily high operating margins of the industry and the considerable cost-slashing skills of contemporary publishers that nearly all the newspapers in business in mid-2006, when the trouble began, are still plugging along today.   

But no industry ever cut its way to success. And the question, as newspapers mark six-plus  straight years of contracting revenues, is what, if anything, they are going to do to turn things around.  The nearly universal answer we have heard from editors and publishers is that they are going to transition from print to digital publishing.  

That is the right answer.  But the objective record shows that, to date, they have manifestly blown the opportunity.  Let’s look at the numbers: 

On the eve of the Thanksgiving weekend, the Newspaper Association of America quietly updated its website on Wednesday to report that print advertising revenues in the third quarter fell by 6.4% from the prior year to $4.5 billion, the lowest level for the period since 1982. To put the decline in perspective, $4.5 billion in 1982 dollars would be worth more than $10.3 billion today.   

On the plus side, the NAA, a publisher-funded trade organization, reported that digital revenues advanced by 3.6% in the third quarter to a bit under $759 million.  But the $23.5 million year-to-year gain in digital sales was too small to offset the $311 million year-to-year drop in print revenues. Thus, newspapers in the quarter lost more than $13 in print revenue for every $1 they gained in digital sales.  

Unfortunately, as illustrated in the chart below, the pivot from print to pixels has been far too feeble for the last six years for digital sales to come anywhere close to replacing print revenue. Here is the long-term trend:

After peaking at an all-time high in 2005, print ad sales at newspapers began what would prove to be a six-year dive in the middle of the next year, falling by 2.6% in to $11.2 billion in the third quarter of 2006. That means print sales in the third quarter of this year were $6.6 billion lower than they were in the comparable period in 2006, reflecting a 59.5% decline.  

In the same six-year time frame, digital sales at newspapers rose 19% from $638 million to $759 million.  With the $6.6 billion drop in print revenue dwarfing the $121 million increase in digital sales, newspapers between 2006 and today lost a staggering $55 in print revenue in the third quarter for every $1 in new digital dollars. 

But, wait, it gets worse: 

As illustrated in the green line along the bottom of the chart below, digital advertising growth at newspapers has been all but flat in the last six years at the same time the over-all market for digital advertising (orange line) has grown explosively. 

While the Internet Advertising Bureau has not yet reported digital sales for the third quarter of this year, I have projected from historic trends published by the trade association that the figure will come in at approximately $9 billion in the period.  

Assuming my projection is correct, then the over-all market for digital advertising between Q3-06 and Q3-12 grew by 114% while digital sales at newspapers increased by only 19% in the same period.   

One of the reasons newspapers are underperforming the market is that they have built their interactive businesses on the two weakest digital advertising categories: banner and classified advertising.     

As reported on page 21 of this IAB presentation, the percentage of digital ad dollars spent on banner advertising in the first half of the year has dropped annually for the last three years.   The percentage of dollars spent on online classified advertising has tumbled by more than half since 2006.  

The single most significant digital ad category is search, which consistently has accounted for nearly half of all expenditures since 2008, according to IAB. Notwithstanding the growing desire of advertisers of all stripes to target specifically identifiable customers, transactional search is a format where newspapers never invested and never have been able to compete. By their inaction, publishers have been shut out of nearly half the digital market. 

Now, the same thing appears to be happening again. While the IAB reports that mobile advertising has doubled in each of the last three years, most newspapers have only rudimentary capabilities in this rapidly developing area. Publishers also are weak contenders in video, the next-biggest area of growth after mobile.  

The challenges will keep coming.  Not the least of them will be the innovative, target-marketing capabilities bound to be developed by Facebook, Twitter and dozens of other social media to capitalize on their expanding audiences.  And who knows what lies beyond?  

While publishers are preoccupied with managing the epic decline in print, they are losing sight of the future. 

Web election audience overtakes newspapers

In 2008, the Internet and newspapers were tied in the number of people who turned to each them for news about the presidential election.  This year, the Internet absolutely buried newspapers as the preferred source for campaign news.

The dramatic shift in the relevance, authority and influence of newspapers on this most consequential of news stories was revealed in a comprehensive post-election survey released last week by the Pew Research Center. 

The study adds to the accumulating evidence – as discussed here and here  – of the profound cultural and commercial challenges facing local publishers. 

Nowhere are the challenges more evident than in the strikingly different ways Americans consumed election news in 2012 than they did a mere four years earlier. 

While newspapers and the Net each were cited in 2008 by approximately a third of Americans as their go-to outlets for political news, Pew found that the number of people in this year’s contest relying on newspapers plunged to 27% while those using the web soared to 47%.  As illustrated in the chart below, television remained the top source for campaign news, sustaining the dominance it has enjoyed since Pew began asking the question in 1992. 

The sharp contraction of the newspaper audience in the last decade underscores the need for publishers and editors to seriously re-examine the coverage they offer in both print and digital media. 

It is not going to be easy, because print cannot match the in-the-moment immediacy of television and the web.  And the digital offerings of most publishers, which tend to emulate print in substance and sensibility, generally lack the intimacy and interactivity of  Twitter, Facebook, YouTube, blogs and host of other user-generated media. 

While most newspapers bannered the outcome of the presidential election on the morning after President Obama won his second term – and I frankly can't imagine what else they could have done – the big news was old news to almost everyone in the land. 

The reason the news looked so old is that anyone who cared about the election had been monitoring the results in real time on the previous evening.  

In its post-election census of voters, which also discovered a widespread distaste for the tenor and tone of the presidential campaign, Pew found that 78% of respondents followed the results of the voting on election night.  Of those monitoring the ballot count, 92% tuned watched television and 34% used the web.   

In a significant new development in this election, Pew found that a substantial portion of individuals consumed the news simultaneously on multiple screens. Fully 39% of voters between the ages of 18 and 39 – and 28% of those between the ages of 40 and 64 – watched the returns on television and online at the same time. Multi-screen use was only 9% among those over the age of 65.  

Pew did not ask whether people passively consumed political news on the digital platforms or whether they actively commented on it.  But the anecdotal evidence suggests a number of people were having quite a conversation among themselves.

As but one measure, Twitter reported  that it handled 31 million “election-related” tweets on Nov. 6, which represents a 17-fold increase over the 1.8 million messages on election day in 2008.  

To be sure, the election generated historically high traffic at newspaper websites, too.  Traffic at the New York Times website was 75% higher on election day this year than it was in 2008, according a source at the paper quoted by the Nieman Journalism Lab.  

But the ancient “it's-not-news-until-we-say-so” mentality was alive and well at NYTimes.Com, which took until 12:03 a.m. (all times EST) on Nov. 7 to confirm the Obama victory that NBC called at 11:12 p.m. on the prior day. The peak Twitter traffic commenting on the outcome occurred at 11:20 p.m. 

While the Times merits respect for the values and traditions that caused it to be far more cautious in calling the race than most TV news organizations and websites, the unfortunate perception is that the newspaper was sluggish and out of touch in comparison to the growing array of video and digital competitors vying for audience and advertising dollars.

If newspapers don’t find a way to reassert their relevance in a world of real-time media, they will become increasingly marginalized.  

Newspaper endorsements: Out of step?

Supporters of President Obama gasped prior to the election when four of the major newspapers in Iowa backed Mitt Romney for president in that crucial state. As it turns out, they needn’t have worried, with the President breezing to victory with 52% of the Hawkeye vote.

But the endorsements penned by the Des Moines Register, Cedar Rapids Gazette, Quad-City Times and Sioux City Journal were far from the only ones in the country this election cycle that were out of step with voters in their states. 

The disconnect was similar in a number of pivotal states, suggesting the waning power of newspaper endorsements – at least in this particular election – to sway the electorate in an age when readers have access to multiple digital and cable-news sources to shape their political views. 

In a rundown of swing-state endorsements, Poynter.Org found publisher-reader disconnects all over the place.  

Though final returns from Florida were pending at this writing, Romney evidently was narrowly defeated in spite of being endorsed by seven of the state’s dailies.  He failed in Nevada, even though he was backed by two of the three biggest newspapers in the state.  And he lost Ohio in spite of being pushed by the Cincinnati Enquirer and Columbus Dispatch, which serve two of the biggest blue counties in the must-win state.

The disconnect was bipartisan.  Romney captured North Carolina, even though Obama was favored by five dailies in the state, including such biggies as the Charlotte Observer, the Raleigh News & Observer and the Winston-Salem Journal. 

At the same time the recommendations of many newspapers diverged from the sentiments of the majority of voters in their states, a number of publishers skipped endorsing a presidential candidate altogether.  Among the major publications declining to back a candidate this year were the Milwaukee Journal-Sentinel, the Virginia Pilot and the Palm Beach Post. 

Given the number of publishers whose endorsements failed to help their chosen candidate carry their states, is the decision not to endorse a presidential candidate the better part of valor?    

Maybe.  But maybe not.  

A non-endorsement policy might be good for a newspaper’s credibility, because it eliminates one of the potential arguments that its coverage is biased. And a gelded editorial page might be good for business, because an endorsement-free publication minimizes the chances of offending readers and advertisers.

But a newspaper lacking the gumption to endorse a presidential candidate looks pretty lame in a day when opinions are a dime a dozen on the Internet and the airwaves.  

The only thing worse than a newspaper recusing itself in an election is a publication that finds itself zigging when its readers are zagging. 

The fact that so many newspapers were not on the same page as the majority of voters in several swing states in this election suggests they may be dangerously out of tune with the communities they serve.    

And the reason for this may be that newspapers tend to be published by and for older white people, an increasingly shrinking portion of the population and the electorate.  Without new products and services to appeal to next-generation voters, the relevance and influence of newspapers will continue to diminish, too.   

And that cannot possibly be good for business.

Newspapers failing to diversify digital audience

Though newspapers have been pretty good over the years at growing traffic on their websites, they are shockingly bad at capitalizing on the social power of the digital media to broaden their audiences.

Audience diversification is important, because the typical newspaper website is read, more or less, by the same senior citizens who take the print paper. Here’s how serious the demographic challenge is: 

Using data from the Census Bureau and the Pew Research Center for People and the Press, I calculated a couple of years ago that at least half the audience at the typical newspaper is no less than 50 years old, because publishers are not attracting younger readers. 

Today, “the average print reader is a female nearing 60, when the average age of the national population is 43,” says Greg Harmon of Borrell Associates, who has been tracking readership trends for more than a decade. “The user of a newspaper website is a little less female than the print subscriber and just over 50 years old. Our research shows that print and web readers are basically the same people – and that the average age of the online newspaper audience keeps getting one year older every year.” 

As the core newspaper audience ages to perfection (and beyond), a proliferation of faster, better and cheaper digital devices is cutting into the appetite for print among consumers of all ages. 

In a poll released earlier this year, the Pew Research Center for People and the Press found that only 20% of Americans look to their local newspapers for campaign news vs. 40% as recently as 2000.  In a separate survey a year ago, Pew found that the early adopters of tablet computers were not twenty-something hipsters who abhor print, but, rather, the same sort of mature, highly educated and high-income individuals who traditionally read newspapers. 

Given the profound demographic and cultural forces challenging newspapers, how are publishers doing at diversifying their audiences via the social power of the digital media to build audience and community?  Just awful. 

Here’s how we know:

In a study completed in September, professor Rich Gordon of Northwestern University crawled the 300 largest news-oriented sites in the Chicago area to determine who linked to whom.  

Analyzing the results, he found that 81.7% of the links generating traffic for sites associated with the Chicago Tribune came from within the newspaper’s family of sites and that 80.4% of the link-driven traffic at the Sun-Times Media Group came from its corporate cousins. To be fair, newspapers were not the only large sites gaining the bulk of their link-driven traffic by steering existing readers from place to place on their own sites. As but one example, 91.7% of the link-driven traffic at Patch sites came from other Patch sites. 

Turning to the question of how well the Chicago news sites used the social media to build traffic, Gordon found that small websites – which cannot hope to benefit from the legacy readership enjoyed by the large sites – are much better than the big guys at leveraging Facebook to build and diversify their traffic.  

Whereas the smallest news sites in the survey drew 48.1% of their traffic from links on Facebook, the newspapers and other big sites got only 14.5% of their in-bound traffic from Facebook.  On the other hand, the big properties benefitted slightly more than the small ones from Twitter links to their sites. Gordon found that Twitter was responsible for 4.2% of big-site links and 3.6% of small-site links.

While there’s nothing wrong with using internal links to illuminate readers and expand advertising inventory, the heavy reliance on self-referential readership means that newspapers are not expanding beyond their core audience to capture younger readers. As print inexorably wanes, the lack of differentiation in the digital audience will be an obvious impediment to publishers seeking to sustain their relevance, readership and revenues in the digital age. 

One way for newspapers to broaden their base is to be far more avid about aggregating and linking to third-party content than they have been to date. While these practices seem to be anathema to many journalists and publishers, they not only enrich a website’s content offerings but also have the side benefit of encouraging third parties to link more generously to publishers. 

We know publishers can do this. The Chicago Tribune created ChicagoNow.Com to aggregate content from dozens of local bloggers covering everything from politics to pancakes.  But ChicagoNow lives on its own pages and merits only a modest link on the flagship website. This isolation not only keeps bunches of interesting stuff off the main Tribune site but also cuts the odds that the followers of the third-party content will see – and engage with – the Tribune’s valuable, staff-produced content.  

A tentative approach to social publishing won’t work. If publishers don’t go all in, there’s great danger they will be left out.

© Editor & Publisher

Newspapers lost 31.5% of ad share in 4 years

Newspapers have lost nearly a third of their share of the advertising market in the last four years, with the dollars – no surprise here – shifting to the online and mobile media, according to a new study from eMarketer, an independent research company. 

The decline in newspaper ad share – which is far deeper than drops in the other legacy media in the same period – appears to be a direct response by marketers to an even sharper decline in the amount of time that consumers spend with print newspapers.  

The eMarketer study, which was released last week, clearly demonstrates the economic impact of the shifting preference among consumers for the individualized experience and instant gratification delivered by the digital media.  

The findings align with other industry research that has found, among other things, that:  

:: The percentage of Americans who read a print newspaper has fallen to 23% today from 41% in 2002, according to the Pew Research Center. 

:: Newspapers have been particularly unsuccessful at attracting readers under the age of 55.  As reported previously here,  a survey by the New York Times Co. found that 22% of 18- to 34-year-olds read print newspapers and 34% of those aged 35-54 favored print.  By contrast, 53% of the over-55 cohort still used newspapers.   

The eMarketer study adds another dimension to the discussion, showing the way ad dollars are following audiences.  

In surveying media consumption annually since 2009, eMarketer found that consumers this year are spending 3.1% of their media time with print papers, as compared with 5.1% in 2009 – a drop of 40.4% in engagement in four years.  The survey includes multiple media use when people multitask; thus, eMarketer counts the time that people spend perusing a newspaper while also listening to the radio or watching TV.  

As illustrated in the first chart below, the newspaper audience has contracted faster than those of magazines, radio and television.  The TV audience remained the most stable among the legacy media, falling 4.8% in four years, while radio slid 14.8% and print magazines dived 34.3%. At the same time engagement with the traditional media has contracted, the use of online media advanced nearly 7.8% and the use of mobile media soared (from a low starting point) by 234%. The time spent on mobile media, by the way, does not include telephone calls.  

Not surprisingly, ad dollars are following consumers. At the same time newspaper ad spending fell by 31.5% in the four-year period, online ad expenditures grew 37.5% and mobile ad outlays rocketed 433% (again, from a low base).  Among the legacy media, TV ad spending grew 6.6% since 2009, while radio fell 4.1% and print magazines slid 12.4%.

The good news for newspapers in the above data is that they have clung to far more advertising share than their share of audience would seem to warrant.  While newspapers today have only 3.1% of the media audience, they are getting 11.5% of the ad revenues.  

The bad news for publishers is that markets tend to be rational, correcting such imbalances in the fullness of time. The plunge in newspaper ad sales from $49 billion in 2005 to $24 billion in 2011 – a decline that has continued unabated all of this year – indicates the market is behaving as anticipated.

With the objective evidence suggesting that the newspaper business is living on borrowed time, publishers should be using their residual economic power, brand power and marketing power to develop new digital products to protect and sustain their valuable franchises.  Or else.   

The incredible shrinking newspaper audience

Once the definitive mass medium, newspapers – in both their print and digital incarnations – have shrunk to being niche players in the typical market, according to a number of must-read research reports released in the last few weeks.

With approximately a third of adults in the average community saying they use either a print or digital edition of their local paper to stay informed, newspapers today remain “super niches,” a term I heard for the first time a few years ago from Ron Mulder, who now works at Scarborough Research.  But a distinct lack of interest in newspapers among those under the age of 50 suggests it is only a matter of time before the niche turns from “super”  to “sliver.”

As detailed in a moment, a steadily accumulating body of research shows that consumers are using computers, mobile devices and even Facebook to shop actively for news and information. While the research shows that newspapers have slightly more market clout in small and isolated communities than in cities and suburbs, the trends all point in the same direction. Although publishers in small and medium markets have slightly more time to adapt to the digital revolution than their metro colleagues, the challenges causing the New Orleans Times-Picayune to abandon seven-day print publication will affect all but a few outlier markets in the fullness of time.

Here’s what we know from the wealth of research that has come our way:

∷ The number of people who used a print newspaper in the last week to get local news ranged from 36% in metro areas to 42% in small cities, according to a study released in late September by the Pew Research Center.  The survey found that newspaper website consumption was weaker than print, with use running from 31% in metro areas to 20% in smaller markets.  By contrast, the reliance on local television broadcasts was 65% in metro areas and 72% in small cities and rural markets. The use of TV websites ranged from 27% in big cities to 21% in small ones. 

∷ In a second study released this month, Pew found that 44% of Americans own smart phones and 22% own tablets, the latter of which, incidentally, represents a doubling of tablet penetration in just one year. After accounting for people who had both types of devices, Pew reported that fully half of the population has some sort of mobile device – and that two-thirds of this group uses their wireless devices to surf for news.  Pew reported that news consumption was the second most popular mobile activity after email. 

∷ In its September study, Pew found that, notwithstanding some variances based on market size, roughly two-thirds of consumers go to three or more sources for local news each week.  “Urban and suburban residents also use a wider variety of local news sources on a regular basis,” said Pew. “Close to half of urban (45%) and suburban (51%) residents use a combination of traditional, online and mobile local news media to get their local news, compared with 38% of those living in small cities and 27% of rural residents.” So, audience fragmentation is well under way.  

∷ The sharp generational divide in newspaper readership is illustrated in a national study  released earlier this month by a research unit at the New York Times.  While 53% of the Boomer generation (those 55 and older) said they read print newspapers, only 22% of Millenials (ages 18-34) and 32% of Generation Xers (ages 35-54) used the medium.  As illustrated below (click to enlarge), online news consumption is reasonably consistent across all ages, but smart phone use is far higher in the younger cohorts than among Boomers.

:: Another dimension of the generational divide is illustrated in a study produced in April by Burst Media, an ad-targeting service.  The company found that Facebook ranked second only to news sites as the place where sub-Boomers consumed political news.  While 44% of Millenials used news sites for political information, 22% of the cohort used Facebook and 17% used YouTube to learn about politics.  At the other end of the spectrum, 53% of Boomers relied on news sites and only 8% used Facebook and 7% used YouTube.  The usage pattern for GenXers was 49% for news sites, 12% for Facebook and 6% for YouTube.      

Assuming young’uns don’t suddenly ditch their Droids in favor of print, publishers hoping to maintain the value of their franchises must invest aggressively in broadening their audiences and revenue opportunities beyond the narrow confines of their existing, monolithic, and increasingly fragile businesses.

While this admittedly is easier said than done, the alternative to a profound commitment to strategic audience development is to let readership and revenue shrivel to the point that the costs outweigh the benefits of being in the local news and advertising business. 

Based on the 6.6% drop in newspaper advertising revenues in the first half of this year, industry-wide sales likely will be no better than $22.5 billion in 2012 – or less than half of the industry’s peak production of $49.4 billion in 2005.  While Borrell Associates (which, like most of us, is not always perfectly prescient) bravely has predicted 0.5% growth in newspaper advertising next year and further gains in the low single digits in the out-years, publishers should not be beguiled by any bounce occasioned by an improving economy.   

Unless newspaper companies find ways to connect to younger audiences, there is a clear and present danger that they will be marginalized to the point of irrelevance.