Newspaper Ad Revenue Fell Off Quite A Cliff: Now On Par With 1950 Revenue

from the adjust-for-inflation... dept

Tue, Sep 18th 2012 3:58pm — Mike Masnick

It's no secret that the newspaper industry has been in quite a decline lately. But a graphic put together by econ professor Mark Perry really highlights the massive size of that decline. It shows newspaper advertising revenue adjusted for inflation from 1950 to 2012 (with 2012 being estimated), and also includes a second line adding in online newspaper ad revenue. The situation is pretty clear:

As Perry puts it:

It's another one of those huge Schumpeterian gales of creative destruction.

Jay Rosen helpfully points out that the peak was the same year that blogging software came on the scene. Though, I'm doubtful that's the "cause" here. You could probably make a stronger argument that the introduction of Craigslist, which really came on the scene in San Francisco in the late 90s before spreading elsewhere in 2000, contributed to this, as did tons of other online services.

But, here's the thing: for years we keep hearing about how the "decline" of the newspaper industry is supposedly happening because they put their papers online for free. But this chart certainly suggests a very different story. As we've said for a while, the real problem wasn't "free" but the newspapers failure to innovate. Going free online, if anything, should have increased ad revenue, not decreased it, since it would have increased inventory (though potentially decreased the prices).

We've pointed out for many years that the "real" business of newspapers was never "news," but collecting together a community and then selling their attention. The problem that newspapers came up against wasn't that they were suddenly giving out content online for free, but that there were very, very quickly millions of other "communities" that people could join online, such that the community of folks reading the newspaper started to go down, and with it, the attention went away. Thus, advertising in a newspaper became a lot less valuable. In fact, it became even more pronounced because, at best, newspaper advertising was targeted around (a) the general location where the newspaper was published and (b) perhaps the section of the newspaper in which the ad was placed. But, again, the internet changed the equation there, where you could start to target the attention of various communities based on a variety of other factors, some of which were seen to be much more lucrative than a crapshoot towards "all people in this city."

Making matters even worse, as various online communities focused on providing more "community" oriented features and content, newspapers seemed to go in the other direction. In part, this was because they kept insisting they were in the business of providing news, not in the business of aggregating a community's attention. So they took the somewhat elitist view that the community didn't matter much -- often to the point of acting in almost insulting ways towards the community. Things like paywalls, overly intrusive advertising, limited community functionality and the like just made newspapers less and less relevant. And when you're less and less relevant to a community, their attention goes elsewhere... and with it, advertising revenue.

And, in fact, it does not appear that the money that used to be spent on newspaper ads went away. While there are a number of different sources that seek to calculate total ad revenue over time, here's a chart showing overall US ad revenue from 1919 up to 2007, in which you see that it has a pretty consistent upward trend (admittedly, this is not corrected for inflation). That same chart also shows advertising as a percentage of GDP... and that has been pretty consistently stuck between 2.0% and 2.5% since the early 1980s. Various other metrics seem to show something similar. US advertising, as a whole, continued to generally expand over the past decade and a half while newspaper advertising collapsed. Looking over some more data, it looks like the big winners since 1998 were, of course, the internet, direct mail, cable TV and "out of home" advertising. Also "miscellaneous."

In other words, the newspapers suddenly faced a lot more competition for ad dollars, and they did nothing to convince the market to stick with them. So, the market went elsewhere.

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Filed Under: ad revenue, business models, creative destruction, journalism

41 Comments

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Anonymous Coward, 18 Sep 2012 @ 4:11pm

Yep they engineered their own decline particularly with pay walls cutting off even more ad revenue.
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Anonymous Coward, 18 Sep 2012 @ 4:18pm

Newspapers had the idea they were about news. Yet less and less real reporting has been done following massive layoffs to the industry. Today's news isn't so much news as it is propaganda led by whatever bias the owners hold.

People have learned they can get the news and it not be a day old when they get it on-line. No print costs for paper, ink, and delivery. So what is left for newspapers to put out cause paying to see ads aren't what I care about.
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BentFranklin (profile), 18 Sep 2012 @ 4:31pm

The newspapers dug their own grave by selling out and becoming irrelevant. They would never challenge the positions of their money masters. The only reason I buy one is anymore for the crossword puzzle.
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fogbugzd (profile), 18 Sep 2012 @ 4:31pm

I think local newspapers doomed themselves before they ever went online. I am talking about regional papers serving medium sized cities. A lot of them fired their expensive veteran reporters and started buying more content from syndicated sources. They stopped doing serious local reporting. Instead of quality reporting on local government they started just rewriting the meeting agendas and local government press releases. I remember the experience of reading the local paper and realizing that I had already readost of the "feature" stories online over the previous few days. The situation got even worse when local papers got bought out by syndicates.
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fogbugzd (profile), 18 Sep 2012 @ 4:37pm

I think local newspapers doomed themselves before they ever went online. I am talking about regional papers serving medium sized cities. A lot of them fired their expensive veteran reporters and started buying more content from syndicated sources. They stopped doing serious local reporting. Instead of quality reporting on local government they started just rewriting the meeting agendas and local government press releases. I remember the experience of reading the local paper and realizing that I had already readost of the "feature" stories online over the previous few days. The situation got even worse when local papers got bought out by syndicates.
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Anonymous Coward, 18 Sep 2012 @ 4:45pm

Hey Mike, ask your buddy Chris what happened at Wired. Same thing.

Print advertising dropped significantly in all media, not just newspapers. It isn't a newspaper specific thing. You just have to look at how many magazines have either shut down or been made skinny as a result of the print ads disappearing.

Also, does that "ad revenue" include classified? That is one areas newspapers have been pushed out by the online world, with plenty of sites willing to do for free what they were charging for. Most of those players outside of CL and a couple of others come and go, as it is a difficult business model to make work. But newspapers just don't have the classified business they once had.
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Anonymous Coward, 18 Sep 2012 @ 4:45pm

I miss them
The real benefit of online news for me has been the elimination of the stacks of old newspapers lying around that I had to deal with.
Although I have to admit they did have their uses...masking off an area before painting, wrapping stuff up, swatting flies, and the one I really miss, is whopping the kids and dogs a good one with a rolled up newspaper.
Now I had to buy plastic for my painting projects and a fly swatter. Then the kids moved out...though I can still hit the dogs with my ereader, it's just not the same.
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sehlat (profile), 18 Sep 2012 @ 4:45pm

Newspapers actually hit a wall.
Just like every other content provider, they hit, and bounced, from a fundamental limit: how much time and attention people have. If you're already getting your news in real time, and your "I'm looking for (x)" from eBay or Craigslist, the newspapers pretty much are toast.

One thing they've also done that damaged them is how poorly most of them handle commenting, which is the key to building a community. Everybody wants to get your email address/ID to sell. Not a bad idea, but when you visit eight or nine different news sites in a day, across maybe two or three states in different time zones and each one wants the same information typed in to comment, over and over, it gets old in a hurry. Poor implementations of OpenID aren't a big help with this, nor any other "capture the user" schemes.
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sehlat (profile), 18 Sep 2012 @ 4:46pm

Re: I miss them
Upgrades are possible.

I was visiting my son and daughter-in-law last night when I
asked if I could borrow a newspaper.

"This is the 21st century, old man," he said. "We don't
waste money on newspapers. Here, you can borrow my iPad."

I can tell you, that friggin' fly never knew what hit it ...
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SomethingHasToGive (profile), 18 Sep 2012 @ 5:08pm

Re:
Why do you think that talking about other print media that also failed to adapt sensibly and is also sinking, in some way makes his point less valid?

Why do you think he mentioned craigslist.?
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Akagi, 18 Sep 2012 @ 5:12pm

Ignoring the fact that too many newspapers are owned by too few, it always rolls my head that very few, if any, local papers have a writing section: annual short fiction student/amateur writing contests; it isn't as if they need the ad space these days.

Newspapers always claim that they are in the news business, but most forget that they are also in the writing and publishing business. What aspiring student/amateur writer would not want to see their work published in the local paper?

If 99% of the local paper is devoted to talking to the community, then devoting 5% to listening to the community isn't, I don't think, a lot to ask of your local paper.

This would give me a reason to buy the daily paper, April through October, and vote in November my mailing in my tear-out ballot.

Seriously, I can't justify, nor afford, spending a dollar everyday for a crossword puzzle or a Cryptoquote.
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Anonymous Coward, 18 Sep 2012 @ 5:14pm

While newspapers did wrongfully benefit from socially detrimental anti-competitive laws (in the form of copy protection laws that last way way way too long) what we really need to do is abolish govt. established cableco monopolies and the FCC, or at least (abolish the former and) make the FCC act in the public interest. For the government to grant monopoly privileges on both distribution (through cableco and broadcasting monopolies) and content (through IP laws) to commercial entities for purely commercial purposes (with no regard to the public interest) is unacceptable.

The media has really gotten away with a lot of lies and nonsense over the years thanks to an unconstitutional govt. established media monopoly (it effectively restricts free speech) and, thanks to insanely long copy protection lengths, it's hard for us to document their past lies and distribute it for future generations to see and learn from. The only reason the media isn't so bad anymore is because of the Internets influence on it.
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Anonymous Coward, 18 Sep 2012 @ 6:29pm

Re: Re:
Actually, it's a pretty damning situation all around, for all of print media - and should be considered a big warning for the online world.

Print media still gets plenty of eyeballs. It gets plenty of visiblity, and gets plenty of attention. Yet, ad rates keep dropping, the number of advertisers keeps going down... there is something wrong there!

Well, most people would say "it went online". They would be right, but not exactly as you think. It didn't go to great websites or anything like that, it's gone to one big sink hole: Google.

2011 Q1 Google netted around 2.5 billion, on sales just short of 10 billion - or net 10 billion for the year running rate, or about 40 billion of ad sales. Go look at the graph Mike put up, and there is about (shockingly) 40 billion of ad sales missing.

DING!

It's not perfect, clearly other online properties get ad dollars, and Google get small businesses that might never had used a newspaper ad. But the end result is there. The real shame of it all, the real problem is that Google is a company that is stockpiling money and not putting it back in the market. Newspapers use to take in 60 billion, and probably pay out 58 billion. Google holds 25% or more of the results as pure profit. That is money that is effectively pulled out of the economy.

So beyond what has happened to newspapers, you could also say that Google has been pretty bad for the economy overall. Sort of like what Wal-mart tends to do in the short run at least to local businesses.
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Anonymous Coward, 18 Sep 2012 @ 6:44pm

Re: Re: Re:
So you think profit is money that is "pulled out of the economy"? What do you think happens to it? Are they stuffing it under a gargantuan mattress somewhere?
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Anonymous Coward, 18 Sep 2012 @ 7:27pm

Re: Re: Re: Re:
As of April, "The software giant now has nearly $50 billion in cash on hand".

So yeah, a REALLY big mattress.
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Anonymous Coward, 18 Sep 2012 @ 8:00pm

All the News that's Fit to Print
I like how "real" journalists scoff at blogs and the internet, always trotting out some line about watchdog and/or investigative journalism. Trouble is, the last time they did any real journalism was when two people, Bob Woodward and Carl Bernstein, did some investigative journalism in the '70s. "Real" journalists have been riding the coattails of their work ever since while parroting whatever they're given, without any critical thinking, and claiming it's being "objective". What a bunch of tools.
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TtfnJohn (profile), 18 Sep 2012 @ 9:00pm

Re: All the News that's Fit to Print
It's even less than that.

Once you get by concentration of ownership, if you can, you'll find that most investigative reporting tends to avoid challenging the power structure which is what Woodward and Bernstein did. Though, to be honest, print still covers more deeply than TV does. And more than most blogs do.

As others have mentioned newpapers have been in cost cutting mode long before craigslist or blogs appeared so that their ownership could pay off the debts established building huge chains of papers. And the easiest way to do that? Lay off your most seasoned and experienced staff and hire people on the cheap. Pay AP not your own staff. Hire stringers. Specialize in "he said, she said" stories and pretend that's objective and penetrating journalism. And if there's no blood for the "if it bleeds, it leads" truism, find a way to create some.

And as you said, reprint, almost verbatim, corporate and government press releases without investigation or even a hint of rewrite to them.

As for craigslist or Kijji, the most recent response to that around these parts has been to put the classifieds behind a paywall!
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Anonymous Coward, 18 Sep 2012 @ 10:20pm

Re: Re: All the News that's Fit to Print
Yes, I'd agree that paper is better than TV and blogs. I just wish it wasn't a matter of a few mere degrees of being better. As you said though, they decided to cut costs by cutting quality. They did it to themselves. I wish them a quick and fiery exit for all the lack of good they've done, especially for claiming to have done the public a good deed anytime in the past few decades; that's just reprehensible.
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Anonymous Coward, 18 Sep 2012 @ 11:22pm

Re: Re: Re: Re: Re:
And Apple is sitting on more than twice that much. Why single out Google unless maybe you have an axe to grind? It's not like there's literally a big pile of money in some vault deep beneath Google headquarters. It's invested in securities and deposited in banks, from whence it circulates in the economy.
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TtfnJohn (profile), 18 Sep 2012 @ 11:31pm

Re: Re: Re: All the News that's Fit to Print
You have to admit that fighting craigslist and kijji by putting a paywall around THEIR classifieds is something only a madman would think of!! :-)
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Anonymous Coward, 19 Sep 2012 @ 3:06am

Re: Re: Re: Re: Re: Re:
I single out Google because they are in the advertising business, which is the topic at hand here.

Can you remind me of the Apple ad network again?
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Ninja (profile), 19 Sep 2012 @ 3:35am

Re: Re: Re: Re: Re: Re: Re:
And that only proves what Mike said. Google simply knew how to draw the attention with its services. But with a healthy community you'll always generate revenue. Doubt it? Ask Mike, he lives on that.
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Ninja (profile), 19 Sep 2012 @ 3:58am

A few newspapers will reinvent themselves. It's very interesting, I just read a very similar article yesterday talking about the Brazilian reality. Newspapers here are thinking they are impervious to the Internet but as the author wisely notes, we still have very little Internet access for the population in general compared to the US for instance so their fate is inevitable. Unless they open their eyes for the mess ongoing in the US editorials and actually evolve. Time will tell.

For those interested here's the article (in Portuguese):
http://terramagazine.terra.com.br/silviomeira/blog/2012/09/17/schumpeter-a-destruio-cr iativa-e-o-fim-dos-jornais/
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indieThing, 19 Sep 2012 @ 4:17am

Re: Re: Re: Re: All the News that's Fit to Print
Yes, sure:
http://advertising.apple.com
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Anonymous Coward, 19 Sep 2012 @ 5:55am

Given that newspapers were in the business of forming communities, I wonder if that's where the division of the media into different segments (left/right wing etc.) started forming, being able to sell a demography to advertisers consistently.
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The Groove Tiger (profile), 19 Sep 2012 @ 7:05am

Re: I miss them
I still buy newspapers.

Nobody reads them. They're there for my dog's poop.

I don't even wait till they're a day old.
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Chuck Norris' Enemy (deceased) (profile), 19 Sep 2012 @ 7:14am

Re:
Save your money and buy a book full of 'em without ads.
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DannyB (profile), 19 Sep 2012 @ 7:25am

Re:
So to summarize what you said, would it be accurate to say: newspapers went with the print equivalent of clear-channel?
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Anonymous Coward, 19 Sep 2012 @ 7:49am

Re: Re: Re: Re: Re: Re: Re: Re:
Google doesn't do community. They are so poor at it, that every community project they do either fails or has to be propped up.

Outside of search, Google doesn't do as well as they should considering their large audience. They make most of their money off of small to medium sites running their ads.

As for Mike, he lives as Howard Stern does. Half the people visit because they think he is god, the other half come because they think he's a clown.
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DannyB (profile), 19 Sep 2012 @ 7:56am

Re: Re: Re:
> Well, most people would say "it went online".
> They would be right, but not exactly as you think.
> It didn't go to great websites or anything like that,
> it's gone to one big sink hole: Google.

That is because Google came up with the greatest advertising platform ever. Advertisers love it. Especially small businesses. People looking for, or interested in your special brand of footwear see the ads for your product. Google doesn't waste your ad budget or other people's time by showing other people ads for your product if they are not interested in it.

Small businesses can set their advertising budget, and Google won't exceed it.

> The real shame of it all, the real problem is that
> Google is a company that is stockpiling money and
> not putting it back in the market.

Yes what a crying shame it is that Google came up with the most innovative and effective advertising platform ever and businesses are using it. Someone needs to pass a law that requires the world go back to less efficient, less effective and more annoying advertising.

Oh, boo hoo hoo, waaaaaaaaaaah! (wipes tear) It's all just so sad!

> So beyond what has happened to newspapers,
> you could also say that Google has been pretty
> bad for the economy overall.

So beyond what has happened to the horse and buggy industry,
you could also say that Automobiles have been pretty
bad for the economy overall.

(pony express --> telegraph)
(telegraph --> telephone)
(land line telephone --> cell phone)
(railroads --> trucking)
(radio, home recordable cassette tapes, VCRs, mp3 players, streaming, eBooks, the internet . . .)

Waaaaaaaaah!
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DannyB (profile), 19 Sep 2012 @ 8:02am

Re: Re: I miss them
That is funny, but probably true. Newspapers may be an easily accessible way to buy cheap, absorbent "newsprint" paper for its various uses -- such as dog poop and bird cage liner.
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DannyB (profile), 19 Sep 2012 @ 8:07am

Re: Re: Re: Re: Re: Re: Re:
> Can you remind me of the Apple ad network again?

http://advertising.apple.com
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jupiterkansas (profile), 19 Sep 2012 @ 8:20am

My local newspaper has one of the most unnavigable websites imaginable. They run multiple articles together because that's how they do it in print, hey refuse to put active hyperlinks in articles, and they take all their articles offline to put in an archive without even a placeholder to tell you where to find it.

In other words, they're doing as little as possible to have an online presence.

Then they try to sucker you into buying their "digital edition", which is nothing more than an exact reproduction of their print version.

I'm amazed they've stayed in business this long.

The only good thing I can say about the local newspaper is that the local TV station websites are worse.
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Anonymous Coward, 19 Sep 2012 @ 12:19pm

This is a good thing. Less trees will die to print ads no one pays attention to anyway.
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btrussell (profile), 19 Sep 2012 @ 7:16pm

Re: Re:
Newspapers, if you can find one without too many ads, are good for in the out-house and for lighting the fire.
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Anonymous Coward, 19 Sep 2012 @ 9:27pm

Re: Re: Re: Re: Re: Re: Re: Re:
Yeah, and exactly how much of Apple's income comes from it? Not much.
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Michael Rivero, 26 Sep 2012 @ 11:06am

Nobody likes a liar!
The reason newspapers are losing revenue has nothing to do with being online. A recent poll shows that 60% of Americans have lost all trust in the corporate-owned media to tell them the truth about what is going on in the world. Nobody likes a liar. And the public, seeking the truth, has abandoned the traditional media in favor of the alternative media. The corporate media doomed itself when it stood shoulder to shoulder with the US Government about Saddam's nuclear weapons, never questioned the official story of 9-11, and so forth.

They did it to themselves and I have no sympathy for them.
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CAT, 26 Sep 2012 @ 11:27am

Every Liar is a Theif
TOO MANY LIES
Remember these saying
EVERY LIAR IS ALSO A THEIF!!!!!!
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Anonymous Coward, 26 Sep 2012 @ 11:30am

Re:
News papers is traditionally recycled NEWSPRINT paper!!
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Gordon Wagner (profile), 27 Sep 2012 @ 3:44am

Newspapers tend to be ultra-conservative and once the web rolled around you realized how sluggish newspapers are in covering any story -- something you'll read on the web will appear as filler in the local paper days later.

The tendency to parrot whatever the government lie du jour is hasn't helped matters. Especially after 9/11/01, which still stinks to high Heaven. Try telling the unvarnished truth once in a while and possibly even taking a slightly progressive or at least humanistic point of view. It's not all about money and the 1%.

When newspapers lie perpetually, people figure out they're being lied to. Mass media exists to shape public opinion. Mass media ought to provide information and allow people to make up their own minds.
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robertsgt40, 27 Sep 2012 @ 7:08am

Why The Decline
The real reason for the decline of print is pure and simple. People are tired of the lies. No one likes a liar!
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