Tribune Co., Lee Enterprises and E.W. Scripps all reported declines in web advertising during the most recent quarter, a worrying development in an industry that has been able to count on the uninterrupted growth of its websites during a period in which it has been able to count on little else.
"The decline in print has been so pervasive that it's taking the online stuff with it," said Benchmark Co. Media Analyst Ed Atorino, who has covered the sector for three decades. "This is the worst market we've seen."
But not every publisher is seeing declines online. Randy Bennett, senior VP-business development at the Newspaper Association of America, said the industry is "probably" on track for double-digit online-revenue growth this year, albeit at a slower pace than in recent years. Online newspaper revenue in 2007 grew about 19%, markedly less than its 31% rate of expansion in 2005 and 2006.
Keeping sales separate from print
Mr. Bennett said the papers that have found ways to wall off their websites from the print product have tended to do better, while publishers whose web fortunes depend on up-selling from print have fared worse. "We're in a transition period as an industry, and we're going to see some down quarters as papers deal with that," he said. "The ones who have done well are the ones who have most aggressively diversified."
One of the better performers, McClatchy Co., the No. 2 newspaper publisher, grew online revenue more than 12% during the quarter. CEO Gary Pruitt told Wall Street analysts that success was in part a result of the publisher's push to build an online ad base independent of its print edition.
As of late 2006, he said, 70% of the paper's online ads were the result of either up-sells from print or buys in tandem with print. Today, print advertisers account for 50% of McClatchy's web business, as the chain has been able to attract a growing number of online-only advertisers in nonclassifieds categories such as retail. "This is significant because it's establishing a separate, independent business from our print product," Mr. Pruitt told analysts.
Steep spending declines
But several major publishers have not been as successful on that front and are apparently paying for it now. At Lee -- which publishes a number of Midwestern titles including the St. Louis Post-Dispatch -- online ad revenue declined 9.1% during the quarter. A spokesman cited tough comparisons -- the chain's results were boosted by joining the HotJobs network last year -- but also steep spending declines in key classifieds categories that are afflicting its print and online results.
Tribune saw its online revenue decline about 4% during the second quarter. A Tribune spokesman declined to comment, citing an upcoming conference call in which the results would be discussed. But Tribune executives have said their papers -- which include the Los Angeles Times, the South Florida Sun-Sentinel and the Orlando Sentinel -- have been particularly affected by the pronounced economic woes in California and Florida, as well as by cutbacks in auto and real-estate advertising.
Online advertising in E.W. Scripps' papers, which include the Rocky Mountain News and Memphis Commercial-Appeal, fell 8% for the quarter. Mark Contreras, the company's top newspaper executive, also attributed the online declines to ads linked to print, which he said accounted for about 68% of the paper's online business. Online-only ads grew 26%, he said. "So clearly that source of online revenue that's tethered to print is going with the decline in print ad lineage," he told analysts recently. "We're focusing all of our efforts going forward on pure-play primarily."