Dip In Ad Spending Threatens Papers

By Dan Sewell - September 23, 2005 - Associated Press

Federated Department Stores Inc.'s takeover of May Department Stores looks like bad news for the newspaper industry, which already has been hurt by years of reduced department store advertising.

Though this article predicts the continuing decline of the local newspaper's advertising base, it still seems oblivious to the real damage that is being done to the newspaper revenue stream overall.

The Internet has several growth areas that are damaging newspapers, even if you exclude the damage that bloggers have done to the credibility of newspapers and their propensity to deliver a liberal slanted view of the world. These areas are; job advertisements, auto ads, store coupon ads and business ads. Department store ads, the focus of this article is simply one of the business ad areas that are moving advertising out of newspapers.

As ads disappear, a large reason for buying newspapers disappears, damaging further the already eroding base of newspaper circulation.

The intelligent search capability of ads on the Internet make them more desirable from the standpoint of the person looking for something. The significantly lower cost of distribution makes the ad more attractive from the standpoint of the person placing an ad. Both are driving the huge growth of Internet advertisement at the expense of other advertising media. Newspapers are bearing a large share of the loss in revenue to the Internet. Google, Yahoo and MSN are the major ad revenue competitors of local newspapers today.

Another article called "Old-style media on the defensive" explains why some of this is happening.

As advertising on online giants such as Google, Yahoo! and msn becomes increasingly sophisticated, advertisers are diverting hundreds of millions of marketing dollars away from newspapers, radio and television to the nation's most popular websites.

It does not appear that newspapers have yet figured out what to do about this trend, nor do they seem realistically inclined to recognize the certainty that it will continue and even accelerate. What is certain is that a great number of newspapers will be shut down in the coming years. The loss of revenue assures it. The only questions, which ones and how soon.