Tuesday, May 11th, 2010
6

Google Believes Online Ads Could Be Worth More Than Print Ads by 2012

When you look through the delightful PowerPoint presentation prepared at Google on the newspaper industry, a few things stand out.

OH DEAR
Now, this graph, while entertaining, isn't a useful comparison of anything. (You could compare construction employment, or Medicare spending, to GDP, and it would look meaningful, but I'm not sure it really would be!) All this means is "newspaper ad revenue isn't a component of GDP growth," which, well yes.

FACTS
This seemingly nothing little slide actually reveals huge truths about the newspaper industry. Which is that subscription numbers-while they're the backbone of what newspapers can sell against!-bring in basically negligible income. It also shows the number one mistake of newspapers. If editorial costs are a mere 14% of revenue, then the hugest mistake of the last 5 years has been the brutal hollowing out of editorial staff, which results in less content to sell and, indirectly, in less good content to sell against.

This presentation runs with a piece recapping long talks with Google by James Fallows.

The piece is increasingly vague as it goes, with an alarming lack of examples, but that's Google for you-their method is that they build stuff and see what works and what sticks, and that model totally works in the long term. But one thing that is clear is that everyone at Google seems to believe in massive growth in the role, frequency and even cost of display advertising online.

And then there's this startling sentence from Fallows, summing up what he heard from everyone at Google: "Sooner or later-maybe in two years, certainly in 10-display ads will, per eyeball, be worth more online than they were in print."

The immense gulf between the cost of print ads per eyeball and the value per user of ads online is usually viewed these days as something unresolvable; and so it follows that sites that are attached to newspapers believe they just can't support themselves even on huge traffic. That Google believes otherwise is striking.

6 Comments / Post A Comment

There was a moment a few years ago when that little "raw materials" entry became some papers' profit center–their pulp and paper hedges became lucrative trading desks, just as Sears became effectively a hedge fund. When folks talk about "financialization," that's what they mean.

HiredGoons (#603)

"while they're the backbone of what newspapers can sell against!-bring in basically negligible income."

This has always struck me as a funny condition of the newspaper, and magazine industry(ies?).

By funny, I mean, a little sad.

I mean, I get why it is thus; it just seems they have to work twice as hard for something people want (?) anyway.

spanish bombs (#562)

"…this graph…isn't a useful comparison of anything…All this means is 'newspaper ad revenue isn't a component of GDP growth…'"

Hmm? That graph has an obvious, meaningful point. Newspaper advertising is in a state of decline such that it falls even during periods of economic growth. Fine, maybe it's so obvious it's not worth mentioning, and the graph is probably a little too zoomed out, but it's not exactly an inane graph.

Bobby Womack (#4,074)

"It also shows the number one mistake of newspapers. If editorial costs are a mere 14% of revenue, then the hugest mistake of the last 5 years has been the brutal hollowing out of editorial staff…" How do you know that this was the case at every publication? Isn't it possible that publications, unable to reduce the costs of production and distribution and either unwilling or unable to cut promotion or administrative costs, had nowhere else to turn to except the editorial staff? I don't know about every paper and magazine out there, but I know that the NYT, Mother Jones, the Atlantic, and the New Yorker have all continued to publish high-quality articles, and have seen their revenues decline. Cutting staff /=/ loss of ad revenue, loss of ad revenue -> cutting staff.

Bobby Womack (#4,074)

Ugh, single paragraph.

Martin Langeveld (#4,908)

"newspaper ad revenue isn't a component of GDP growth,"

First of all, it IS a component of GDP. And second, the graph shows that somewhere around 1987 (which is when newspaper revenue peaked in real dollars), the fortunes of newspapers became unhinged from GDP. Before that, when GDP grew, newspaper revenue grew. After that, and especially after 1999, newspaper revenue generally fell, whether GDP grew or not.

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