How the Internet and Advertising Technology Destroyed Newspapers.

Newspaperdeathwatch.com” dedicates itself to “chronicling the decline of newspapers and the rebirth of journalism,” and tracks an ever-growing list of newspapers that have gone bankrupt since 2007 when the site began. Dozens of revered daily newspapers have closed their doors in the wake of one of the most pronounced cases ever of technology disruption of an industry. All newspapers, especially those that focus on local news, have faced shutdown or drastically downsized operations.

The reason for this decline has less to do with the fact that readers consume news on their computers, tablets, and phones as most people suspect. Readership numbers are not down; if anything, total reader numbers have surged since the internet has made content more accessible for local newspapers. Rather, the decline has occurred due to fundamental issues of supply and demand of “advertising inventory,” which represents total, sellable available advertising space. The internet, as well as advertising technology, has created infinite advertising inventory in a world that previously had a finite amount inventory, all of which sat with newspapers and magazines.

Newspaper Advertising Revenue
In 1994 if a brand wanted to reach a national audience that reads news, or on a specific day (rather than a weekly or monthly magazine), that brand could advertise on either The New York Times or The Wall Street Journal, and to an extent The Washington Post and USA Today. Advertising inventory to target newspaper readers was scarce, and limited to these newspapers with a broad reach. Newspapers contained a fixed amount of pages and square inches that could house advertisements, and with this limited supply came a high price for advertising space, and incredible power and influence for these newspapers. Rumors of the golden age for advertising salespeople include tales of newspaper ad salespeople being entertained, perversely, by brands that hoped to be moved up a “wait list” for advertising placements. Life was good for newspapers.

As the internet grew exponentially in the late 1990’s, so did the amount of advertising inventory. Any person with an internet connection and a blog was technically a “publisher,” and could procure content to a large audience similar to a newspaper. With more content came more advertising inventory, and suddenly major newspapers were no longer the sole purveyors of this finite source of advertising inventory. Advertising inventory could be found everywhere on the web. In 2003, Google opened the advertising floodgates by creating a network called “Adsense” that allowed publishers (even your roommate with a video game blog) to sell advertising space, and in a way that would be more “targeted” than newspapers. An advertiser that only wanted to advertise to video game buyers could do so a lot more efficiently by running on your roommate’s blog than he could on, say, the Wall Street Journal.

With these innovations, in an extremely simple “supply and demand” scenario, the supply of advertising inventory surged, so the price of advertising space dropped considerably. Much of this expanded inventory came at the hands of Google Adsense and a few other networks. Surprising to some, roughly 95% of Google’s revenue (which was $50 billion in 2012) comes from advertising. Google is, at its core, an advertising company.

Because the value of advertising units has plummeted, newspapers today simply drive less revenues, whether print or digital. And the unfortunate newspapers with operations that require higher prices for advertising sales than the market was paying, found themselves underwater and on possibly newspaperdeathwatch.com. Hit especially hard were the local, smaller newspapers that could not attract advertisers the way that larger, farther reaching newspapers could.

In the next article I will explore how advertising technology, despite bringing an industry to its knees, is now rewarding and leading a resurrection for premium newspapers that have a strong brand and broad reach.

Tripp Weber graduated Johns Hopkins in 2009 with an International Relations major and Entrepreneurship and Management Minor. He currently works as an Advertising Manager for the New York Times.

– Tripp Weber

6 thoughts on “How the Internet and Advertising Technology Destroyed Newspapers.

  1. — Newspaper’s super power

    Question: Why does Wired, the bible of all things digital, print a fat, glossy magazine?

    Picture a football stadium. It represents your market. The stadium is packed, but more people keep elbowing their way in.

    Clustered on the 50-yard-line are people who subscribe to your newspaper. Around the perimeter of this cluster are others who look through your paper from time to time. People in your market who read a newspaper are reading YOUR newspaper, because it’s about them.

    Thousands of shouts pour down upon these newspaper readers from the packed stands, Every person in the stands is hollering constantly. “Look at Me!” “Big Savings!” “Mine is Best!” Every arriving person adds to the din. “Act Now!” “Low Down Payment!” “Free Financing!”

    This throng in the stands represents the ever-growing multitude of media outlets that uses the airwaves, wires and cables to deliver interruptions.

    Look at the people on the field. Most look dazed as they search the stands for a message with meaning. Some have their hands over their ears and their eyes squeezed shut trying to block out the cacophony.

    Now, approaching the besieged group is a squad of people carrying sacks full of your newspapers. The people on the field have paid for these papers, and they eagerly anticipate receiving them every day or every week.

    “Here’s your paper, Mrs. Smith,” one of the delivery people says as he places a copy in her hand. Each person in the huddle reaches eagerly to accept his paper.

    Now, Mrs. Local Business Person, should you give your ad dollars to some of the thousands of people in the stands to cast your message into space (which ones?), or should you give them to the newspaper to have your message delivered into your customers’ eager hands?

    That’s why Wired prints a magazine.

    • Brilliantly put, Kent. Print is far from dead, and I personally think “rock bottom” has been reached for premium print publishers and better times are on the way, at least in the short run. Whether or not folks born after 2000 will find print to be an acceptable medium once they reach a spending age will dictate a lot, but print in the short run is due for a correction.

      There’s a reason that advertisers pay ~5x more for a print impression than a digital impression, and Kent’s post is the exact reason why. My article was meant to express the fundamental economic forces behind the collapse of many newspapers, not to predict the demise of print.

  2. Pingback: Newspaper Advertising | My Website

  3. My post was intended to reinforce your original entry. Too much discussion about the future of print focuses entirely on audience for and delivery of breaking news and ignores the other constituency of newspapers — local advertisers. A vibrant, professionally produced local newspaper that attracts a substantial chunk of local eyeballs will forever be a valuable partner to local business people. Newspaper advertising works great! If newspapers put as much time, money and effort into improving their newspapers instead of transitioning to “digital first,” they’d be doing themselves, their communities and the businesses in them a big favor.

  4. Pingback: Newspaper Advertising | Advertisingworld.co

  5. Pingback: Newspaper Advertising | Advertisingworld.co

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