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By Ron Shuttleworth

http://seekingalpha.com/article/126776-is-the-newspapers-shift-in-focus-to-the-web-too-late

There has been a spate of recent announcements regarding the disappearance of traditional print newspapers and here is the latest from Hearst. The market is not surprised, and there is little sentimentality towards the demise of the industry.

According to the Newspaper Association of America [NAA], print advertising revenue has been in decline since 2005. The category has been in free fall since the end of 2007 with Market Research reporting a 16.4% decline in revenues for 2008. Since peaking at $47.4B during 2005, U.S. newspaper advertising expenditures have declined by 67% over a three year period to $28.4B.

The outlook for 2009 may be even more bleak with JP Morgan predicting a 20% decline in advertising revenues to approximately $23.7B. This prediction infers a 50% decline in revenue for the industry in only 4 years. Put into historical perspective, the last time that the newspaper industry generated less than $24B in revenue was when Ronald Reagan was finishing his first term...1984.

The major media companies are obviously suffering. It was reported on March 9 that McClatchy (MNI) cut 1600 jobs as it struggles to service $2 billion of debt. Gannett (GCI), Hearst and New York Times Co (NYT) are also attempting to sell assets and shed jobs in order to cope with the cratering of the ad business. Some, like Tribune Co., have already declared bankruptcy.

Management at these operations have not been completely blindsided by the sudden emergence of the big bad Internet. Although there has been a lot of hand-wringing, spurious plans, ego-coddling, and various other forms of executional doddling, newspapers have been shifting focus onto the web for the past few years. However, this shift may have come too late to effectively compensate for eye-popping declines in print advertising sales.

As late as 2007, online advertising still only represented 7.5% of total revenues according to the NAA, and the industry organization didn't even start calculating online revenue until 2003, a full decade after the commercialization of the Internet. Instead of viewing online publishing as a complementary source of revenue streams, most newspapers initially viewed the Internet as a threat, or worse, a fad. This lack of initial recognition is the root of the damage being wrought on the industry now.

This industry has missed so much opportunity to transform. Here is the laundry list of already missed billion dollar opportunities: search, RSS, ad networks, video, blogsphere, social networking, social broadcasting...uh...the point is made. To be fair to the much maligned buggy whip manufacturers, they only failed to recognize the threat / opportunity of one new innovation.

Just as newspaper publishers have begun to really press forward on the potential of monetizing the Internet, a significant recession has impaired the migration online. The only area of growth remaining appears to be paid search advertising, a category dominated by Google (GOOG). Online display advertising is expected to show a decline in revenues by up to 5% during H1 2009 before recovering. Newspapers were hiding, and now they have nowhere to hide.

They must forge ahead...but with what?

A really valuable data asset that newspapers retain via editorial systems is... context. One could even extend this value to historical narrative. Unlike social networks where history is a mere 3 years at best, and content portals where history is at most 10 years, newspapers have the potential ability to seamlessly link today's breaking events to literally millions of local and historical events, opinions, and commentary that are decades deep.

Newspapers could be the gateway to context for online users, however they interact with information, or each other. And the technology is there. Nstein [EIN.V; NNLFF.PK] has some advanced web content management solutions that can help newspapers create context on the fly. It has the ability to extract and index meaning from any article, advertisement, or caption. The system can then connect the meaning of multiple articles to deliver narrative and insight on-the-fly. This is pretty powerful stuff, and could represent some value-add that only a newspaper editorial system could deliver. Hearst became one of Nstein's biggest clients last year as it got serious about re-inventing itself.

In order to be relevant and make money, already leveraged media companies will need to find ways to continue to invest in the federation of proprietary data sources. Clearly, there is a lot of ongoing investment required in infrastructure, storage, middleware, and at the application layer. Besides Nstein, which is a micro-cap with limited liquidity, Open Text (OTEX) should still be considered a good bet to benefit from the continued need for advanced content management solutions.

For newspapers, the geographic monopoly is long gone. the primacy of context, the "why" things happen has been deeply eroded. The print production and distribution techniques that were once barriers to empires are largely irrelevant. It took the leadership at once seemingly invincible newspaper empires a decade too long to recognize and then act upon the threats and opportunities posed by digital media. It may have been Mark Twain who said that history does not repeat itself, but it sure does rhyme. Newspaper = buggy whip.

Those media enterprises that are reacting now are investing as aggressively as possible into enabling technologies. Not all of the ideas will work, not all of the transforming media companies will succeed, however the technology companies that provide content management, storage, and data solutions should continue to benefit from this mad scramble for the next 4 to 6 quarters

Comments

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Interesting content.

Just wanted to share some information that I came across in a few articles discussing about recession and how we can adopt a different marketing strategy to promote our business. It’s quite eminent that most of the advertisers and businesses are taking to online advertising medium since the Internet has now become a necessity to reach global audience. However, even today there is still a huge chunk of people who do not access Internet and to reach this segment of the society; we can rely on the print media. This in fact would be a great choice for anyone whether they are looking out for global, national or local exposure.

Since the economies are now at the bring of recession, it’s a good idea to consider print media as well in the marketing mix so that you can extend your reach further to get additional traffic to your website or business. You can try a blend of online and print advertising through a reputed ad agency that can help you professionally.