Ben Smith, Bob Clark: Newspapers Ditching Traditional Advertising Models

Historically, newspapers have relied on print advertising and paid circulation as main sources of revenue. Since the birth of the internet in the 90’s, the industry has been faced with a challenging future. The internet quickly deflated the value of print and created little reason for people to pay for newspaper subscriptions. While demand for news has remained constant, readership patterns have changed over time. When polled, just 23% say they read a print newspaper yesterday, down only slightly since 2010 (26%), but off by about half since 2000 (47%). Online and digital news consumption, meanwhile, continues to increase, with many more people now getting news on cell phones, tablets and websites. A recent study by PEW Research Center found that nearly half of all Americans are getting news digitally, topping newspapers, radio.

According to Forbes, U.S. spending on online advertising will exceed spending on print advertising for the first time in 2012, and the trend will continue as advertisers find more value online. Online advertising in 2012 is predicted to reach $39.5 billion, as marketers realize and invest in online advertising’s ability to build long-term value for brands. By 2016, the projection is $62 billion for online vs. $32.3 billion for print. The web and now mobile has opened up a world of non-traditional advertising solutions and it’s time for the news industry to latch onto these new technologies.

While some analysts have all but pronounced the death of newspapers, many are optimistic about the industry’s future. In order remain in existence and thrive, newspapers must focus on diversification in revenue streams and adopt change. This will involve creating some distance between the newspapers and traditional advertising. Many newspapers are already doing this effectively, but the industry as a whole has a long way to go.

Here’s a look at some revenue streams the news industry can and should utilize to the fullest.

Non-Traditional Revenue Streams for Newspapers

●  eCommerce/mCommerce – More than 33.3 million U.S. consumers already engage in shopping-related activities on their mobile phones, and online shoppers in the United States are expected to spend $327 billion in 2016, up 45% from $226 billion this year. The future of the news industry will rely heavily on electronic and mobile commerce for revenue. In the U.S. alone, 50% of cell phone users have smartphones and 62% of shoppers search for deals digitally for at least half of their shopping trips. News outlets have taken notice and begun to develop relationships with online commerce sites like Groupon and Living Social as an alternative revenue source. 88.1% of U.S. internet users ages 14+ will browse or research products online in 2012. The idea here is to come up with a digital equivalent of a Sunday paper insert.

●  Video – Video advertising is yet another medium where newspapers can see significant revenue growth in the years ahead. Video advertising enables advertisers to connect their message to a massive, engaged audience. In 2012, 53.5% of the population and 70.8% of internet users (up 7.1% from 2011) will watch online videos. Online video ads outperform other types of online ads, increase brand awareness, brand favorability, and purchasing intent. Over 80% of U.S. brands and agencies are currently leveraging videos for their content marketing programs due to its ‘dynamic, visual content format’. While growth in the space is slow, advertisers are finding their audiences respond better to digital video advertising, with consumers showing a higher engagement rate with online video.

●  Social Media – Perhaps the most dramatic change in the news environment has been the rise of social networking sites. Over 62% of adults worldwide are now using social media on a regular basis. Social networking is the most popular online activity, with 22% of time online spent on channels like Facebook, Twitter and Pinterest. It’s clear that social media is a traffic builder and the potential as a revenue builder looks promising. Social media advertising is expected to grow from $3 billion in 2011 to $3.6 billion in 2012, $4.4 billion in 2013 and $5 billion by 2014. Social media sites are competing with major search engines as premier organic traffic drivers. Last month Pinterest surpassed Yahoo in driving more organic traffic and Facebook just announced they reached one billion global users. This is great for newspapers, since they now have access to the largest audience in news history.

More and more people are going online to find news and information. On average, U.S. internet users spend 32 hours online every month. Think about how much time you spend online for work, research, news and social media, compared to the amount of time you spend on print media like newspapers and magazines.

While the future of the news industry is faced with challenges, there are a variety of things that can be adjusted or improved to better position it for success. Currently, 55% of regular New York Times readers say they read the paper mostly on a computer or mobile device. Publishers need to invest in non-traditional advertising, as the effectiveness of print continues to decline and more value is being found in targeted digital marketing. The good news is that many news outlets are moving in that direction aggressively, and seeing positive results. Let’s hope this trend continues to grow and spread throughout the industry.

(Ben T. Smith IV is Chief Executive Officer of Wanderful Media. Bob Clark is Vice President of Technology at Wanderful Media. They are focused on reinventing the local shopping experience through mobile, web and tablets. Ben Smith can also be found on twitter @bentsmithfour and Bob Clark can be found on twitter @justbobchico.

 

About Ben T. Smith, IV

Founder of, investor in and advisor to technology and media companies
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