Nieman Foundation at Harvard
HOME
          
LATEST STORY
The New York Times’ new Slack 2016 election bot sends readers’ questions straight to the newsroom
ABOUT                    SUBSCRIBE
June 12, 2014, 4:15 p.m.
Business Models
LINK: www.aeaweb.org  ➚   |   Posted by: Caroline O'Donovan   |   June 12, 2014

A paper by the University of Chicago’s Matthew Gentzkow, published last month in the American Economic Review, is making headlines. “Trading Dollars for Dollars: The Price of Attention Online and Offline” looks at advertising spending based on time spent engaging with news content. In it, Gentzkow contends that the conventionally held belief that the dawn of the Internet destroyed the business model for print newspapers is false.

Contrary to most popular accounts, the growth of the Internet has not obviously caused a large decline in newspaper readership. Readership has fallen steadily since the Internet was introduced in the mid-1990s, but it had been falling at almost the same rate since 1980, and the small acceleration of this trend accounts for a drop in readership of only about 10 percent. This is consistent with more systematic evidence in Gentzkow (2007) and Liebowitz and Zentner (2012), suggesting that online-offline substitution is relatively limited, as well as survey evidence showing that the Internet currently accounts for less than 10 percent of total time spent consuming news (Edmonds 2013).

In addition, he says print news lost more revenue when it lost its classifieds to sites like Craigslist than it ever did to online news.

For data, Gentzkow relied on comScore for online news traffic and the Video Consumer Mapping Study for print. Obviously, it’s much harder to measure minutes spent reading print than spent reading online, however, Gentzkow writes in an email:

…they actually had observers follow participants around and record what they do minute by minute. They find that the average person who reads a newspaper on a given day reads for 41 minutes.

Now these aren’t exactly comparable — one person could make multiple visits to a website on a given day, and subscribers probably read more than the average reader. But I think it’s clear as a ballpark estimate that the print number is an order of magnitude bigger than the online number.

Based on these numbers, Gentzkow calculates that, although more money is spent on print advertising, when you look at spending per hour of attention, the rates for online are much higher.

Screen shot 2014-06-12 at 2.42.40 PM

Gentzkow offers a a few rationales for why online advertising might be valued more highly in the market.

Each newspaper has physical space for exactly one advertisement. All readers of the newspaper must see the same ad. The marginal cost of printing ads is zero. Each website also has physical space for exactly one advertisement, but these ads are targeted, so the website can show different ads to different consumers. Consumer types are observable to websites.

In other words, whatever online news lacks in eyeballs, it makes up for in delivering the intended viewer.

Show tags Show comments / Leave a comment
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
The New York Times’ new Slack 2016 election bot sends readers’ questions straight to the newsroom
“Instead of asking you to come to us and be part of this massive room of people shouting over each other, you can bring us to you, and have us be, essentially, one more person in your conversation.”
The Conversation expands across the U.S., freshly funded by universities and foundations
The news site that uses academics as reporters and journalists as editors now boasts 19 paying member universities and is opening up posts in Atlanta (and maybe in the Bay Area).
A Boston public radio station is redesigning its site to make audio “a first-class citizen online”
But: “I’ve tried to be really disciplined about not calling this process just a redesign,” WBUR’s executive editor for digital Tiffany Campbell said. “We’ve built a brand new platform.”
What to read next
0
tweets
Newsonomics: Setting the news table for 2016
The news business hopes it won’t end up one sandwich short of a picnic as the new year’s big trends unfold.
0The sun never sets on The Times: How and why the British paper built its new weekly international app
“We’re pursuing the idea of editions everywhere. An edition is something that can be finished. When you’ve read it, you feel up-to-date; you’ve been told what you need to know for the day or the week.”
0Hot Pod: Is the next front in podcast innovation hardware?
Plus, 21st Century Fox invests in a new podcast network, and some thoughts on the second season of Serial.
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Fuego is our heat-seeking Twitter bot, tracking the links the future-of-journalism crowd is talking about most on Twitter.
Here are a few of the top links Fuego’s currently watching.   Get the full Fuego ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
The Dish
ReadWrite
International Consortium of Investigative Journalists
Medium
Iowa Center for Public Affairs Journalism
Tampa Bay Times
Mashable
Suck.com
Tumblr
Kaiser Health News
National Journal
Conde Nast