Special Report: Publishing executives downplay ad downturn

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This year's web shakeout has left newspaper publishers whistling past the dot-com graveyard, insisting that the disappearing dots won't significantly hurt ad revenue. In one sense, they're correct. Dot-com advertising at dailies, perhaps because of its sudden and highly heralded arrival late last year, has loomed larger in the media's imagination than it ever contributed to the bottom line.

DOWNWARD TREND

Take the San Jose Mercury News. Its bailiwick encompasses Silicon Valley, and its dot-com take surpasses that of any other paper in the Knight Ridder chain. Yet in 1999, according to General Manager Mindi Keirnan, dot-com ads accounted for just $4 million in revenue. In '99, the Mercury News took in $262 million in ad revenue. So dot-com ads accounted for 1.5% of the paper's ad revenue last year. "We saw an explosion in the last half of the fourth quarter" of '99 that continued through the spring of 2000, says Ms. Keirnan. "But in April, right in line with the Nasdaq decline, we saw a fairly significant trend downward." Through March of this year, Ms. Keirnan says, the Mercury News saw year-over-year dot-com advertising gains of about 300%, but she expects the category to rise only 30% for the full year. "I think it would be an understatement to say the bloom has gone off the rose," says David Cole, publisher of newspaper trade publications NewsInc. and The Cole Papers. "What fueled all those [dot-com] ads in the fourth quarter of last year is money that's no longer there." But finding newspaper executives who will agree with Mr. Cole's point is as difficult as finding a standard definition of dot-coms. The Mercury News sticks to a strict dot-com definition, relegating the likes of Barnes & Noble's and Macy's online units to its retail category. "Our dot-coms are true dot-coms," says Ms. Keirnan.

GROWTH SLOWS

But Jyll Holzman, senior VP of The New York Times, says that the Gray Lady counts Barnes & Noble.com as a dot-com ad. "It's sort of a fuzzy category," agrees analyst Steve Barlow of Credit Suisse First Boston. The New York Times' dot-com story echoes that of the Mercury News. Through June, the newspaper's dot-com advertising revenue was up between 400% and 500%, says Ms. Holzman, but she cautions that the rest of the year's growth may not be so strong. Ms. Holzman would not comment on total dot-com ad spending, but says the category was about 2.5% of overall ad revenue for 1999 and is not among the Times' top 10 ad categories. In 1999, the Times took in $1.2 billion in ad revenue. Late last year, Ms. Holzman called dot-com's growth "explosive." "We're up against some very big numbers" for the last part of the year, she says. A slower rate of growth "is certainly possible."

'MANIA HAS ENDED'

USA Today Publisher Tom Curley concurs. "Obviously the mania has ended," says the publisher of Gannett Co.'s flagship newspaper. "But we still think" dot-com spending levels "will be firm. . . . We still expect new players, and we are expecting more from some of the surviving players." The Wall Street Journal, given its business news franchise, sees opportunity in emerging e-commerce trends. Consumer-oriented e-commerce advertising at the Dow Jones & Co. title might be "softer" going forward into the next year, says VP-Advertising Steve Howe, but business-to-business sites "are definitely taking their place." Back in Silicon Valley, the Mercury News' Ms. Keirnan is sanguine on the future. "Shakeout? Sure," she says. "But it's not such a large piece of revenue it stops a paper in its tracks."M1

Copyright August 2000, Crain Communications Inc.

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