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Newspaper Advertising: Paper Dollars vs. Digital Dimes?

February 3rd, 2010 by Dana Scherer - Senior Policy Analyst, Media Bureau

In Entertainment Industry Economics, Hal Vogel estimates that about 80% of newspaper revenues have traditionally come from advertising, with the remaining 20% coming from subscription and newsstand sales. [Hal Vogel, “Publishing,” Entertainment Industry Economics (Seventh Edition) at 342.]

Standard and Poor’s has a similar estimate in its August 2008 Publishing Survey.  [James Peters, Industry Surveys: Publishing (includes Advertising), Standard and Poor's, Aug. 21, 2008, at 26.]

As newspaper readership migrates online, however, this ratio may change. Ken Auletta states in his latest book, Googled that:

The rule of thumb is that an online ad brings in at most about one-tenth the revenue as the same as the same ad in a newspaper. There are two reasons for this: readers spend less time reading a paper online than they do a newspaper, and because ad space is not scarce on the Web, advertisers pay lower rates.” [Ken Auletta,”Chasing the Fox,” Googled, 2009, at 165.]

Do you think that these estimates are valid? Do you think these estimates will persist? If so, could the paper dollars vs. digital dimes ratio apply to subscription revenues as well?

 

 

One Response to “Newspaper Advertising: Paper Dollars vs. Digital Dimes?”

  1. Paul Camp says:

    The argument that ad space is scarce on paper and not scarce on the Web is spurious. Newspapers routinely ad pages when they have more advertising to justify it.

    The argument that readers spend less time reading a paper online than on paper is demonstrably true. However, there are many reasons for this. The often younger online viewer certainly may have less patience for lengthy reports. But online viewers also have fewer opportunities to "bump" into a story that catches their eye that they did not know enough about to type in a search field. For example, in today's Wall Street Journal there was a fascinating little article about how Logan airport manages to keep open in snow storms using 68-foot snow and slush eating monsters. http://online.wsj.com/article/SB10001424052748704140104575057550843956426.html

    There is no way most mere mortals would search for such an article, but even the most casual print newspaper reader might bump into this piece and find themselves sucked in and engrossed. That is the unsung beauty of paging through a print product that has yet to be fully valued by advertisers (or consumers) and cannot be easily reproduced online.

    In other words there is a difference, at least at present, in the way news and information works between print and online. And I would argue that there will continue to be a different value placed on ads that reach people consuming news in each medium, not because of scarcity, but because of the perceived value of the consumer and the value of the intensity of their relationship with the medium. Devices like the iPad or technology we have not yet envisioned may change how we interact with information in print and online, but for now there is a qualitative difference that explains the dollars to dimes ratio.

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