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Online Publishing Focus On Newspapers
eMarketer, Sep 2005, Pages: 22
A Sample of the Content from the 'Online Publishing' Report:
Outlook:
Online publishers are posting consistently strong—indeed, extraordinary—financial results. Among the strongest are the online operations of traditional newspapers.
Part of this resurgence can be chalked up to cyclical factors. Advertising-supported media took a hit in the economic downturn earlier this decade. Now online publishers are reaping the benefit of pent-up demand following the extended decline. Similarly, the healthier economy has fueled strong gains in employment and real estate advertising. Many publishers seemed blindsided by the rapid rise of online classified sites, but now they appear to be putting up a stronger fight—classified ads make up the majority of online ad revenues at most companies.
But aside from cyclical factors, there are several key drivers behind publishers' online gains.
The first is usage. Internet users are increasing their consumption of online content, and in particular, online news. Data presented in this report clearly show that US consumers are flocking to online news sources, and in particular the online arms of offline publications. This growth is occurring despite the fact that growth in overall Internet usage is slowing down, or flat.
The second is broadband uptake. It may be counterintuitive that broadband consumers would increase their use of relatively 'light' content such as online news, but this is clearly the case.
The third is advertisers' belated shift to online channels. It has been evident for some time that advertising spending does not accurately reflect actual usage of different media. The percentage of time that people spend online dwarfs the percentage of advertising dollars devoted to the online channel. The biggest advertisers are cautiously shifting their budgets online. Online publishers, and again, newspapers in particular, provide a 'safer' environment for many advertisers, with trusted, known parent companies and predictable content.
A key question, of course, is how long current growth rates can be maintained. Common sense would argue that a 40% growth rate is simply not sustainable in the long term, and we would not argue otherwise. However, the revenue growth of the online newspaper industry outstripped gains in overall online ad spending last year and appears to be on target to do so again in 2005, reaching $1.4 billion.
Based on our online ad spending projections, online newspapers should see revenue growth of more than 20% in 2006, with increases falling below that level in 2007 and 2008.
Our market size and growth projections are in line with those of Borrell Associates. Borrell estimates higher growth for 2004, at about 47%, but a lower rate for 2005, at about 28%. Borrell's lower percentage growth projection for 2005 probably reflects the fact that the estimate was published in March, whereas our projection, coming five months later, has two quarters of actual performance to include in its analysis.
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