Trends show online ad revenue will overtake print this year

Technology Review | Poynter
Technology Review research editor Mike Orcutt combines data from four sources, including a report from the Interactive Advertising Bureau, that suggests online advertising revenue will cross print advertising revenue in 2012, if it hasn’t already.

In the first half of the year, U.S. Internet sites collected $17 billion in ad revenue, a 14 percent increase over the same period of 2011, according to a new report from the Interactive Advertising Bureau. In the second half of last year, websites had $16.8 billion in ad revenue. So even if growth were to slow in the second half, digital media this year could exceed the $35.8 billion that U.S. print magazines and newspapers garnered in ad revenue in 2011.

Chart by Mike Orcutt, reproduced here with permission from Technology Review

This development may provide little relief to newspaper publishers for two reasons. First, there’s no guarantee that surging online revenue will flow to them. Jeff Sonderman wrote in May about a presentation by venture capitalist Mary Meeker that showed, as Sonderman wrote, that print media “captures much more than its fair share of ad spending, while the Internet and especially mobile are lagging.”

A print optimist might read this as a sign that newspapers and magazines remain a more appealing medium to advertisers despite shrinking audiences. But Meeker argues it’s inevitable that ad dollars follow eyeballs, “it just takes time.”

Second, the convergence is more a function of print revenue’s dramatic tumble than any compensatory rise in online revenue. Rick Edmonds wrote last month about the meager gains online advertising was making against declining print: Newspapers receive just $1 in online revenue for every $25 they’ve lost from print.

In 2005, Edmonds used existing trend lines to predict that the lines would cross in 2018. Edmonds assumed 4 percent revenue growth for newspapers and online revenues growing by a third every year.

Here are the numbers in chart form.

One rather prescient paragraph Edmonds wrote then:

Of course, there isn’t any reason to believe any of these numbers will remain steady state over time. Most obviously Google, Yahoo, Craigslist and come-from-nowhere competitors we haven’t yet thought of can be expected to launch missiles into the media mix as soon as 2005 and 2006. It doesn’t look like the industry has a 14-year or even five-year window of calm weather to reinvent its business model.

Facebook, to name one of those yet-to-be competitors, launched in early 2004 and opened to anyone with an email address in 2006. Much of the online revenue that is surpassing print now goes to those “pure play” enterprises, not news organizations.

Gannett’s third quarter results were a rare ray of light through the dark clouds currently perched above publishers’ heads: The company announced a gain in circulation revenue, which it attributed in part to paywalls going up at most of its newspapers. Circulation growth, plus “an assortment of freestanding digital businesses as well,” Edmonds wrote, may mean “Gannett is moving gradually away from lopsided dependence on print advertising.” Will such gains come in time?

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