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Newspapers have been let down by online advertising in the past few years. While many have grown the size of their readership online, income online has not eclipsed — or even matched — the loss of revenue in print products. The outlook is getting so bad that many newspapers have discussed banning together to charge for content. But they might not want to abandon their advertising model just yet.
According to PricewaterhouseCoopers, newspapers will see online advertising growth in the coming years. While the numbers are modest (1.8% growth by 2011 and 7.8% in 2012), they are a sliver of sunlight in an otherwise depressing forecast.
PriceWaterhouse expects print advertising to fall over $12 billion, from $36.7 billion in 2008 to $24.3 billion in 2013.
The decline of print advertising has been expected for the coming years, but drops in online ad revenues have been more unexpected, even with current economic conditions. A year ago, analysts were still predicting that advertising revenue online would grow in 2009 as print rates fell. But in the first quarter of this year, total online advertising revenues dropped to $5.48 billion, down 10% from the previous quarter and down 5% from the same time in 2008.
With unpredictable advertising revenue causing even the most established newspapers to question their business models, many new ideas are being thrown out to save the industry. Last month, some of the big names got together to discuss collectively charging for content. And groups like Journalism Online are creating venues for newspapers to charge readers for full access to Web sites, single articles or packages of related content.
But if newspapers forgo advertising in favor of a subscription model, they may lose more than just audience share.
According to the PriceWaterhouse report:
“We expect that an expanding economy will translate into growing online spending and project a return to double-digit growth in 2013.”
Unsurprisingly, PriceWaterhouse is predicting huge declines in traditional strongholds for print. During a five year period ending in 2013, recruitment classified advertising revenue will have lost 62.5%, real estate, 53.1% and automotive 49.2%.
And while online ad growth will only grow modestly in 2011 and 2012, in 2013 PriceWaterhouse expects online advertising to grow 12%. Which means that from 2008 to 2013, newspapers' digital ad revenue will grow at a compound annual rate of 2.3%.
The flailing economy has made consumers more open to paying for content online, but predictions of growing advertising revenues online remind that newspapers shouldn't be too hasty about putting all of their content behind a pay wall.
According to PriceWaterhouse:
"The challenge is to identify ad models that are able to withstand the downward pressure on ad rates in the digital environment and on subscription models that capture the consumers’ preferences for premium content."