As if the news for the US newspaper industry couldn't get much worse, it now appears that online advertising is vanishing.
According to the Newspaper Association of America, digital advertising revenue in the first quarter at newspapers rose just 1% from a year ago. That's the fifth consecutive quarter that growth has declined.
This troubling trend comes against a background of US newspapers fleeing print to go online and the imposition of paywalls by many publishers.
Publishing executives and analysts believe that a flood of excess advertising space, the rise of electronic advertising exchanges that sell ads at cut-rate prices and the weak US economy are all contributing to the slowdown.
It is now believed that the double-digit online growth rates that many newspapers used to enjoy - and on which their hopes for a prosperous future rest - could be a thing of the past.
At the New York Times Company, digital ad revenue at its news sites fell 2.3% to $48.5m in the first quarter compared to a year earlier. At the Washington Post Company, the decline was even worse, with revenue dropping 7% to $24.2m.
"The online share that newspapers are getting is smaller even though it's the greatest goldmine of advertising growth we've seen in a generation," said analyst Ken Doctor.
The news follows last week's report by ratings agency Moody's in which it referred to the US newspaper industry's outlook as "negative" because of the "relentless" declines in overall revenue.
"At this point, there is no evidence digital strategies are returning most daily newspapers to positive growth," wrote Moody's senior credit officer John Puchalla. "It is merely a way to moderate revenue declines."
Scott Heekin-Canedy, president and general manager of the New York Times Company, said digital advertising is becoming just as sensitive to economic swings as print.
"We actually saw a dip associated with uncertainties," he said. "We heard it from advertisers and saw it in the spending patterns."
The company gets 10% of its revenue from digital ad sales and 35% from print ads. Print and digital subscriptions generate 48% of revenue, while miscellaneous sources account for the rest.
Sources: Reuters/MediaDailyNews
