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Nov. 13, 2008, 6:25 a.m.

Newspapers better hope Nick Denton’s wrong on advertising in ’09

Nick Denton, publisher of Gawker Media, has backed up his recent dire forecast of a potential 40-percent decline in advertising with a set of “doom-mongering” charts and graphs. His focus, naturally, is on Internet advertising — and he took his premonition to heart yesterday by consolidating two of his sites and putting a third up for sale. But if Denton is anywhere close to right, the most significant consequence will the be the death of many small newspapers in 2009.

An important caveat is that Denton’s 40-percent figure, no doubt intended to grab headlines, is based on a painful U.S. recession akin to Indonesia’s collapse in 1997. That’s unlikely, but even a milder recession — Denton points to Sweden between 1990 and 1993 — would lead to a 27-percent advertising decline under his model. (Actually, the model belongs to Mary Meeker, an analyst at Morgan Stanley, who hasn’t made such dramatic predictions and has recently been emphasizing the bright outlook for online advertising after the current recession lifts.)

So what does this all mean for small newspapers? Nothing good.

The tips that Denton offers for surviving the recession aren’t really applicable to most print publications, which can’t, for instance, “get out of categories such as politics to which advertisers are averse.” (That point is perhaps Denton’s most frustrating piece of realism; his entire business model is based on his ability to pick profitable niches in a way a print daily can’t. Denton sold his politics blog, Wonkette, in April.)

Newspapers, meanwhile, still suffer from what Scott Karp has called the “10% problem,” which is that just 10% of their readers but 90% of their revenue is in print. None of this is new, but the recession could make it fatal.

And what about those upsides highlighted by Meeker? Those are actually just further downsides for most newspapers, although I think there are some lessons in there, too. In a presentation earlier this month, Meeker laid out the “difficult near-term outlook” for Internet advertising but also pointed to three pieces of “good news.” Her most optimistic point was that search advertising continues to grow, both in CPM (how much advertisers pay per thousand impressions) and share of online advertising. These two slides she presented make the point well:

That’s not particularly helpful to newspapers that aren’t much in the search business, though it’s certainly a sign that they should be. It isn’t enough to offer searches of your own content. Local newspapers need to position themselves as the search engine of choice for their communities. Boston.com, the website of The Boston Globe, has had success with its local search function, which offers content from the Globe as well as other local news outlets and bloggers. (A search for the Nieman Foundation turns up our address, articles in the Globe and Harvard Crimson, posts by a local media blogger — and sponsored results.) It’s a good service that The New York Times Co. has rightfully touted as “forward thinking.” And it’s not like newspapers have much of a choice because look at whom Meeker expects search ads to continue taking revenue from:

POSTED     Nov. 13, 2008, 6:25 a.m.
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