The 1999 dot-com boom has done great things for a select group of newspapers--those that serve tech-heavy markets or are irresistible advertising vehicles for newly minted e-launches.
The category is still so fresh that, despite Prudential Securities estimating that newspapers will bring in $120 million in dot-com ads this year, the Newspaper Association of America has yet to start tracking the industry's dot-com take. That $120 million is still a small piece of the overall estimated $46 billion newspapers nationwide will take in from ad revenue this year.
"It's certainly become a significant revenue stream for newspapers in tech markets--L.A., San Francisco, San Jose, Seattle, New York, Washington--and as well for the national papers," says David Cole, editor and publisher of NewsInc, a trade publication covering the newspaper industry.
"Is it going to be a long-term piece of business? No, because the dot-coms are going to consolidate," Mr. Cole says.
Newspaper executives, however, don't necessarily agree with Mr. Cole's short-lived view of the boom.
"Explosive," says Jyll Holzman, senior VP-advertising at The New York Times, characterizing her paper's upsurge in dot-com ads.
Ms. Holzman says the category "started being a big factor" this spring and, while the company would not divulge data, ad revenue from new e-commerce companies is up 170% over '98.
At USA Today, Associate Publisher Carolyn Vesper Bivens says the category has gone from "barely discernible" last year to its fifth-largest this year, behind automotive, marketplace (classifieds), high-tech and retail.
At The Boston Globe, a spokesman says the paper's year-to-date take from dot-com ads has been in the "low seven figures," up substantially from '98. The boom for The Globe, he says, began in late June.
SAN JOSE NO. 1
In the Knight-Ridder newspaper chain, "San Jose gets the most and Philly gets the next most. After that, I'd say it falls off," says Polk Laffoon, VP-corporate relations for Knight-Ridder.
Dot-com ad projections for '99: About $6 million combined for Knight-Ridder's The Philadelphia Inquirer and The Philadelphia Daily News; less than $1 million for The Charlotte Observer; and about $250,000 for The Miami Herald. Steve Weaver, VP-advertising and circulation for the San Jose Mercury News, says that newspaper netted $1.7 million in dot-com ads during the third quarter alone and expects $4.5 million to $5 million for all of '99.
Consider the figures in the context of 1998's total ad revenue for the same Knight-Ridder papers: some $434 million for the Philadelphia dailies, $267 million in Miami, $246 million in San Jose and about $147 million in Charlotte, says Mr. Laffoon. Dot-com ads contribute but a fraction of the total.
"It's certainly not replacing any of the top 10 categories, but any new category in media does make a difference because it tightens supply," says Steve Barlow of Credit Suisse First Boston, noting that online retailing is but 1% of total retail sales.
A tighter ad supply may be needed given the fact that the revenue backbone of the newspaper industry--classifieds, specifically recruitment classifieds--is threatened by online competitors.
Forrester Research predicts newspapers will lose 18% of total revenue by 2004. Though most newspaper-side observers loudly decry such predictions, it's worth noting The Boston Globe's 5% drop in recruitment ad revenue through the third quarter. The Globe spokesman insists that near-full employment may be the cause rather than online competitors. At the same time, recruitment ads are rising in the fourth quarter.
AMBIVALENCE IN SMALLER MARKETS
Once you get past the top markets, meanwhile, not only do dot-com ad dollars grow scarce, in some cases they're viewed ambivalently.
"I want more dot-com business," says Shaun Higgins, director-marketing and sales for The(Spokane, Wash.) Spokesman-Review. "But I am not anxious for ads for retail sales that come from outside the market I'm set up to serve."
For local papers, the presence of such ads can anger the longtime advertisers with which they compete "and the out-of-town merchant will never spend as much to carve a little niche in our ad audience as the local merchant is spending," Mr. Higgins says.
E-commerce sites, he continues, cherry-pick the highest-demographic potential customers available to local advertisers. That local business may then be unable to advertise because people have bought elsewhere--"sowing the seeds of your own destruction," says Mr. Higgins.
Mr. Higgins' view is instructive for a local perspective since there are 1,500 daily newspapers in the U.S.
"At the end of the day, the word's commerce, not e-commerce," says Pete Petrusky, director of new media for PricewaterhouseCoopers, in rejecting apocalyptic notions of bricks-and-mortar business models collapsing.
And Mr. Weaver of the San Jose Mercury News remains bullish on newspaper power.
"The newspaper still sells things like nothing else around," he says. "When that stops, then we'll have a problem."
Copyright November 1999, Crain Communications Inc.