by Rick Edmonds Published July 5, 2011 8:01 am Updated July 6, 2011 8:24 am

Through most of 2010, newspaper companies talked of “sequential improvement” in their revenues. That was a euphemism for advertising losses, which continued but were getting gradually less severe.

Then in the first months of 2011, the losses began accelerating again. Advertising, down 4.7 percent year-to-year in the fourth quarter of 2010, fell 7 percent in the first quarter of 2011, according to the Newspaper Association of America.

Results for the second quarter are still being computed, but they are bad enough to prompt mass layoffs at Gannett two weeks ago and a move last week that consolidated editing of all MediaNews papers in the San Francisco Bay Area.

Here are three angles for viewing yet another backward step for an industry struggling with the perception of rapid decline: the stock market’s verdict; the details of further advertising erosion; and the continuing search for new revenue gold.

First, the stock market’s verdict. If industry executives were disappointed by the first half results, so equally were investors. With the exception of the small Journal Communications company in Milwaukee, all publicly traded newspaper stocks declined from the beginning of the year. The losses ranged from about 5 percent to more than 60 percent (see table below).

Midyear Newspaper Stock Prices, 2011
Company name	6/30/11 Price per share	12/31/10 Price per share	Percent Change
A.H. Belo	$7.44	$8.70	-14.5%
Gannett	$14.32	$15.09	-5.1%
Journal Communications	$5.17	$5.05	+2.4%
Lee Enterprises	$.89	$2.46	-63.8%
McClatchy	$2.81	$4.67	-39.8%
Media General	$3.82	$5.78	-51.3%
New York Times	$8.72	$9.80	-11.0%
E.W. Scripps	$9.67	$10.15	-4.7%
Washington Post	$418.95	$439.50	-4.7%
Source:  Yahoo Finance

The three companies showing steep share price decline — Lee Enterprises, McClatchy and Media General — all carry heavy debt burdens. Lee and Media General must try to refinance some of their borrowings at higher rates by early 2012.  Wall Street is not exactly betting that they will go bankrupt, but many institutional investors bail out if that possibility even remotely looms.

More typically, stocks like Gannett, E.W. Scripps, New York Times Co. and Washington Post are off by just 5 to 10 percent from their close at the end of 2010.

Next, the advertising erosion. While the deeper advertising losses were unexpected, they are not inexplicable.

One unpleasant surprise was that telecom advertising suddenly dried up for most regional papers. I first heard about the reversal anecdotally from executives of Poynter’s St. Petersburg Times. But telecom troubles turn up in the small print of first quarter earnings reports of the public companies, too.

McClatchy, for instance, reported that national print advertising was down 29 percent year-to-year in the first quarter, a “broad-based [decline] but led by declines in advertising in the telecommunications industry.” A recent survey shows telecom ads in the top 12 markets up 7.5 percent so far this year (New York is especially strong). But the report found the number of ads down 27 percent in newspapers and telecom revenues for newspapers down 20 percent.

Also, preprinted inserts, a relative strength of newspapers in recent years, are slipping in 2011. Larry Maynard, a consultant and preprint booster, wrote earlier this year on the Inland Press Association site, that few, if any, every-Sunday insert advertisers, will stop — since coupon-loving bargain hunters make such heavy use of each week’s circular.

However, Maynard acknowledged that “retailers have worked hard to take out as much cost as possible by reducing page size, page count, paper quality and further refined target delivery (i.e reduced quantity).”

That makes sense to me. Preprint advertisers face the same pressure from rising newsprint costs (up 20 to 30 percent at most companies so far this year) as newspapers themselves. With so many marketing options available, they probably don’t want to pour 20 percent more into inserts. So they trim to keep the costs fixed.

More broadly, I suspect that newspaper ad budgets continue to get shaved in favor of a variety of digital marketing initiatives. For the year so far, local broadcast (factoring out 2010′s election windfall) and magazines are up. Keeping newspapers company in the doghouse are direct mail and yellow pages, also traditional standbys perceived to have decreasing clout.

And finally, how goes the search for new revenue streams? In a word, slowly.

Metered paywalls, while a seemingly sound strategy for big, expensive papers and small ones in uncompetitive markets, are not delivering difference-making revenues.  Mobile usage is huge, but news apps or a free-standing newspaper presence in mobile coupons is not big yet.

Results for tablets are mixed. Studies seem to indicate that tablet adapters often cut back or eliminate print news consumption — so staking out a position in the new medium makes sense. But the pricing of subscription apps and advertising is still in flux. And the Pew Research Center just reported that tablet sales may be slowing, outpaced by those of e-readers.

I do see two possible avenues of meaningful growth. One is liberating digital advertising from reliance on ineffective banners and remnant pricing. I have heard several consultants on the conference circuit suggest that newspapers should stop accepting tacky ad network advertising in the interest of a higher quality/higher price environment.

Another strategy is so-called “integrated sales” — in which newspaper reps put together for a client a complementary package of buys, many within the newspaper organization but some outside it. In effect, the newspaper sales force acts like a mini-agency sorting through choices.

I have also been hearing about some ingenious ways to re-introduce an element of scarcity into digital advertising. For instance, the Arizona Daily Star now offers “Green-Tag Tuesdays” — a weekly feature in the paper with Q-codes, scannable to mobile devices. Besides wedding two platforms that otherwise have little in common, the page layout has just 24 available slots. Once they are gone, they’re gone.

Though results varied by company, these new initiatives and others added up to a robust 10.4 percent increase in digital revenues in the first quarter of 2011 compared to the same period a year ago, according to the NAA.

A final industry hope is to protect and license content, collecting fees from aggregators. After three years of R & D, an Associated Press sponsored News Licensing Group is supposed to begin operations later this year.

This is a devilishly complex venture, both technically and legally, but newspaper execs will be clicking their heels if content creators can begin to collect royalties from aggregators.

Once again, a glimpse of the outlines of a new business model appears on the horizon. Meanwhile, the tide is running hard against newspapers. And recent history suggests that there is good reason to worry that the next big thing like Facebook or Groupon will appear before long to suck more legacy media ad dollars away.