Newspaper Ad Pricing Faces Strong Test in 2007
Important Details: With both print circulation and advertising volume down, the newspaper industry is largely moving forward with standard price increases going into 2007. Major publishers report three to six percent increases in ad rates in the major categories of national, retail and classified.
Such increases, which will vary across markets, test the must-have selling power of the medium. Already, according to the Newspaper Association of America, overall print ad spending was down three per cent in the third quarter of 2006 compared to a year earlier. In addition, this year has seen a deepening and lengthening of print circulation decline, delivering fewer readers to advertisers. With the last report of a 2.8% on decline daily and 3.2% on Sunday, ad pricing increases point to a greater crossing of lines between circulation and advertising pricing.
In Outsell’s Opinion: Outsell believes the first quarter of 2007 will be a major test of whether the industry can get this pricing to stick. The industry has long been able to increase ad pricing against declining circulation numbers, since that decline began 50+ years ago. It may well be able to get some of those price increases to stick into 2007, but Outsell expects that there will be much more packaging, discounting off rate cards and unusually greater negotiation overall. Advertisers have much more choice in advertising — niching through various pay-for-performance models and in targeted print and online products — and increasingly they favor more measurable media than print and broadcast TV. Already key advertising categories are under all kinds of pressure as publishers project the year ahead:
- National advertising has been hardest hit in 2006, registering declines as the nation’s largest advertisers lead in embracing newer ad models;
- Real estate advertising is challenged by both the softness of the market — the hesitancy of buyers and sellers to transact at an uncertain time — and by the increase in online lead generation advertising, at upstart sites like Oodle, Zillow (check out its brand new “Make Me Move” feature), a newly expanded Edgeio, Trulia and the familiar craigslist, while newspaper companies’ own online plays recoup only a part of the online shift.
- Recruitment advertising, though still doing well, is increasingly subject to competition — 40,000 online job sites of every description — plus renewed competition as Yahoo! HotJobs is being revived by its recent deal with seven newspaper companies and CareerBuilder’s direction is put at question by the potential impending sale of major partner Tribune Co.
- Auto advertising is projected to grow just 1.6% next year, reinforcing this year’s car-related ad woes.
- Preprint advertising, a staple of retail, may hold as we approach 2007, but numerous advertisers are assessing alternatives to mass distribution, printed circulars, with more movement expected toward the end of next year and into 2008.
So while increased pricing itself may be hard to hold, multiplying that pricing against declining ad volumes shows the deep dilemma the industry faces. It must find ways to grow — or first stay even — as it transitions the business as quickly as possible from print to digital. As we move into 2007, there are good signs that the industry is moving out of its comfort zones and better embracing the major GYM (Google, Yahoo, Microsoft) distribution channels of the day, witness the recent Google/newspaper ad network and Yahoo! HotJobs+ agreements. Such moves as these, plus smaller-scale efforts to give smaller, very local advertisers self-services tools, like MediaNews’ experiment with AdStar in Texas and New Mexico, point in a necessary direction. Within a new dizzying arena of ad products and revenue shares, it all comes down to the arithmetic of total revenue. That number in print is still severely challenged, with the rate of online revenue growth now slowing. There’s one other number that under girds the larger problem for an industry reliant for 90%+ of its revenues still on print. Newsprint use by U.S. dailies is down 7.8% year over year, one of the best indications of the print product decline for news and advertising.
Implications: