Margins on the developed sites can top 40 percent
By Heidi Dawley Nov 14, 2007
Nothing has quite whacked newspapers like the internet, sapping away both readers and advertisers. But at last papers are mastering this new, highly competitive medium. They're learning to make money from it, good money.
In the U.S., web revenue now accounts for 5.5 percent to 6 percent of newspaper revenue, on average, and that's expected to rise 10 percent by 2008 or 2009.
Further, while still a small share of total revenue, online advertising is highly profitable, with margins of 40 percent or higher for newspapers with developed sites, almost twice the profits earned from print worldwide.
Yet newspapers still face a huge problem, beginning with Google and Yahoo.
Papers may be mastering the web, but the so-called internet pure plays are stealing away an ever-greater share of the local advertising that newspapers for so long dominated against very little competition.
It's a big worry for the world's newspapers.
“The newspapers’ share is declining and the pure plays’ is gaining,” says Andrew Martin, a senior analyst at Borrell Associates, a research outfit that tracks local online media, and the author of a new report that looks at how newspapers are faring in the scramble for local online ad dollars.
The report is based on answers to the surveys that were sent out to many of the world’s newspapers.
It finds that while U.S. newspaper margins overall have fallen to about 23 percent in 2006 on average from 28 percent in 2000, papers have come to realize far higher profits from their online operations. They're feeling good about it, too.
“Some of the larger groups, the public companies, were actually saying, ‘We are now making very substantial profits on our operations,’” says Martin. “Some of these are now profitable businesses, and the level of profit is beginning to compensate for the loss of print advertising. It is not completely offsetting, but it is beginning to move in the right direction.”
If only Google and Yahoo and others of their ilk weren't pushing so hard to grab it away, and largely pulling it off.
In the U.S. and Canada, the pure plays have boosted their share of the local online market from 15.3 percent in 2004 to 37.9 percent in 2006, while newspapers' share fell from 44.1 percent to 35.8 percent.
“Your competitor in online is not the same as your competitor in print,” says Martin. “All these online marketplaces grab advertising away from the only medium that people used to have, which is the newspaper.”
Some of the share decline for papers is of their own doing, where they've partnered up with pure plays in such areas as job classifieds, which account for half of newspaper online classified revenues. Papers turn their classified over to a pure play in return for a share of the revenue and the national exposure. A steady stream of papers have partnered up on job classifieds, the latest being The New York Daily News, which this week signed a deal with Yahoo!’s Hot Jobs.
The big question facing newspapers is whether they're giving up more than they're getting, says Martin.
“The newspaper needs to be very careful that it isn’t making a pact with the devil and handing over the customers,” says Martin. “The risk there is that the newspaper is just progressively disintermediated in the relationship between the web site and the customer.”
But even these relationships do not account for the whole slip in the share of the newspapers in local online advertising. As Martin notes, the barriers to entry for print newspapers have always been high, but that's not so for online.
The effect is to open the way for all sorts of challengers, from the national pure plays to local TV stations, which all have web sites, to radio stations, to the online editions of the local alternative paper, to local magazines and the Yellow pages. They account for the remaining quarter of local online advertising.
It's a free for all, and while there will be shakeouts, newspapers face an unending challenge as they strive to hold onto local advertisers.
It’s those fat margins. Everyone wants a share, and papers are going to have to work hard for them.
Meanwhile, in online ratings for the week ended Oct. 28 (Nov. 4's ratings were delayed by Nielsen but will be posted when they arrive), according to Nielsen Online, Microsoft was the top parent company, followed by Google, Yahoo, Time Warner and News Corp. Online for the third straight week. The top five brands were Google, Yahoo and MSN/Windows Live, Microsoft and AOL Media Network.
NexTag was the No. 1 advertiser for the ninth straight week with 6.74 million impressions, followed closely by No. 2 Countrywide Financial Corporation at 6.71 million. Yahoo was the top advertising site, with 31.8 million ads served, again well ahead of No. 2 MySpace at 3.5 million.
Sessions per person per week remained even to last week at 17, as were domains visited per person at 41. PC time per person was up slightly versus the previous week, from 17 hours and 36 minutes to 17 hours and 38 minutes.
Top 25 parent companies Through October 28
#
Parent
Unique Audience (000)
Reach %
Time Spent per Person (hh:mm:ss)
1
Microsoft
84,125
62.5
0:40:22
2
Google
83,445
62.0
0:32:02
3
Yahoo!
75,982
56.4
1:06:32
4
Time Warner
68,483
50.9
1:18:32
5
News Corp. Online
42,052
31.2
0:47:47
6
eBay
32,346
24.0
0:57:49
7
InterActiveCorp
29,483
21.9
0:13:09
8
Wikimedia Foundation
22,615
16.8
0:08:53
9
Walt Disney Internet
Group
22,150
16.5
0:21:28
10
Apple Computer
22,104
16.4
0:31:07
11
Amazon
22,099
16.4
0:13:07
12
Landmark Communications
19,597
14.6
0:11:39
13
New York Times Company
19,508
14.5
0:11:10
14
RealNetworks, Inc.
16,159
12.0
0:18:08
15
AT&T Inc.
16,048
11.9
0:21:45
16
CBS Corporation
12,706
9.4
0:21:30
17
Bank of
America
12,567
9.3
0:20:12
18
Comcast Corp.
11,823
8.8
0:29:31
19
E.W. Scripps Company
11,720
8.7
0:05:34
20
Viacom Digital
11,021
8.2
0:28:03
21
CNET Networks
10,993
8.2
0:07:15
22
Verizon Communications
10,492
7.8
0:18:54
23
United Online
10,325
7.7
0:34:56
24
General Electric
10,238
7.6
0:08:21
25
Gannett
10,215
7.6
0:11:22
Source: Nielsen//NetRatings
Top 25 brands Through October 28
Parent
Unique Audience (000)
Reach %
Time spent per person (hh:mm:ss)
1
Google
77,590
57.6
0:23:18
2
Yahoo!
75,316
55.9
1:06:45
3
MSN/Windows Live
59,904
44.5
0:42:10
4
Microsoft
56,508
42.0
0:15:22
5
AOL Media Network
55,230
41.0
1:28:47
6
Fox Interactive Media
36,859
27.4
0:51:03
7
eBay
27,073
20.1
1:02:54
8
YouTube
25,632
19.0
0:25:19
9
Wikipedia
22,337
16.6
0:08:53
10
Apple
22,104
16.4
0:31:07
11
Amazon
17,403
12.9
0:13:06
12
Weather Channel
17,314
12.9
0:12:18
13
Ask Search Network
16,995
12.6
0:14:56
14
Real Network
16,159
12.0
0:18:08
15
CNN Digital Network
14,952
11.1
0:18:24
16
Blogger
14,403
10.7
0:09:25
17
About.com
12,789
9.5
0:02:55
18
AT&T
12,395
9.2
0:24:22
19
Bank of
America
12,303
9.1
0:19:58
20
ESPN
10,192
7.6
0:20:52
21
Facebook
9,761
7.3
0:30:11
22
Craigslist
9,514
7.1
0:31:53
23
Comcast
9,512
7.1
0:34:59
24
Gorilla Nation Media
9,014
6.7
0:06:39
25
Chase
8,856
6.6
0:15:02
Source: Nielsen//NetRatings
Top 25 advertisers (excludes house ads)
Through October 28
#
Company
Impressions (000)
1
NexTag, Inc.
6,739,862
2
Countrywide Financial Corporation
6,705,981
3
AT&T Corp.
2,928,146
4
InterActiveCorp
2,866,248
5
Experian Group Limited
2,840,729
6
HSBC Holdings plc
2,303,441
7
Low Rate Source
1,979,684
8
Netflix, Inc.
1,510,637
9
Alberto Culver
North America
955,201
10
Verizon Communications, Inc.
839,879
11
Wachovia Corporation
709,630
12
E*TRADE FINANCIAL Corp.
625,038
13
General Motors Corporation
593,506
14
Scottrade, Inc.
505,720
15
RMI Mortgage Licensing LLC
486,953
16
Apollo Group, Inc.
464,321
17
American Express Company
397,197
18
Fidelity Investments
381,316
19
TD Ameritrade Holding Corporation
378,745
20
United Online, Inc.
370,253
21
Monster Worldwide, Inc.
351,837
22
Privacy Matters
351,759
23
eBay, Inc.
341,990
24
Trade-Your-Car.com
340,991
25
Citigroup Inc.
332,234
Source: Nielsen//NetRatings AdRelevance
Note: Nielsen//NetRatings AdRelevance service estimated online advertising expenditures account for CPM-based image-based advertising. All reported estimated expenditures and impressions do not account for the following placement types: text only, paid fee services, performance-based campaigns, sponsorships, barters, in-stream ("pre-rolls") players, messenger applications, partnership advertising, promotions and email campaigns. AdRelevance currently does not report estimated spending for paid search advertising. Above data does not include any house advertising activity. Nielsen//NetRatings AdRelevance reporting data reflects advertising activity served on pages accessible via the World Wide Web and not within AOL's proprietary service.
Top 25 advertising sites (excludes house ads)
Through October 28
Company
Impressions (000)
1
Yahoo!
31,763,589
2
MySpace
3,457,373
3
MSN
1,396,575
4
eBay
1,239,428
5
AOL.com
1,121,791
6
FOXNEWS.COM
627,876
7
Juno
608,211
8
MSNBC
563,096
9
The Weather Channel
560,484
10
New York Times
458,521
11
CBS SportsLine
411,832
12
NetZero
390,972
13
ESPN.com
386,326
14
Comcast.net
326,346
15
IMDb
320,502
16
NeoPets
280,576
17
YouTube
270,624
18
Photobucket
220,171
19
Amazon
201,400
20
iWon
187,972
21
Excite
183,564
22
The Weather Underground
169,309
23
EarthLink
150,440
24
CNN Money
143,375
25
CNN
137,740
Source: Nielsen//NetRatings AdRelevance
Note: Nielsen//NetRatings AdRelevance service estimated online advertising expenditures account for CPM-based image-based advertising. All reported estimated expenditures and impressions do not account for the following placement types: text only, paid fee services, performance-based campaigns, sponsorships, barters, in-stream ("pre-rolls") players, messenger applications, partnership advertising, promotions and email campaigns. AdRelevance currently does not report estimated spending for paid search advertising. Above data does not include any house advertising activity. Nielsen//NetRatings AdRelevance reporting data reflects advertising activity served on pages accessible via the World Wide Web and not within AOL's proprietary service.
