Martin Langeveld points out something interesting in Scripps’s fourth-quarter earnings: Those already-dismal online advertising numbers you’ve seen for newspapers? They’re badly inflated.
If you want to get even more depressed about the state of newspapers, consider that a very large percentage of their online ads come from people who advertise in the print edition and are given online ads as a sweetener or “upsell,” as we and others have pointed out before.
What’s interesting, though, is the specific data Langeveld pulls from this Scripps earnings release (emphasis mine):
The decline in online revenue…is attributable to the weakness in print classified advertising, to which roughly half the online advertising is tied.
How much of that online advertising goes away if the print advertiser does? That’s a critical but difficult-to-answer question. Critical because, of course, print advertisers have been going away at a near-catastrophic clip, but also because it directly affects how we attempt to answer the paywall question.
The way online ads are counted on the books now artificially tilts the calculus of paid content toward the anti crowd.
At Scripps, online ads were down 5 percent in the fourth quarter from a year earlier. But when you take out the upsells tied to print, online ads soared 21 percent. Since overall sales were negative, we can deduce that the decline in upsells had to be even greater—either in percentage or in volume—than the increase in online-only ads.
As Langeveld says:
The rise in online-only is positive, but it’s worth pondering whether the “roughly half” that’s “tied” to print ads should actually be considered online revenue at all. Essentially, it’s revenue from “upselling” or “value added” programs for print advertisers; it disappears when the print ad disappears; and those print ads could probably be sold for the same price without the incentive of the online upsell. In other words, half of the company’s online revenue results from journal entries that move print revenue to the online column, not actual selling of online inventory as such. This is not unique to Scripps, and is worth looking at more closely across the industry.
Indeed.
Take away half the online ads and you have a much stronger case for charging readers online since you have much less (existing, at least) ad revenue to lose online than newspapers are leading people to think.
We need more reporting on this accounting trick. It’s admirable that Scripps disclosed the upsell figure. But what about everyone else? I noted a few months ago here that Alan Mutter has said two-thirds of industry online revenues are from upsells. If I were an investor in a newspaper company I’d want to know that right away.
The reason newspapers are failing is because they have been caught lying repeatedly. They are supposed to be the publics watchdog, not the govts lapdog. They sold us out.
#1 Posted by robertsgt40, CJR on Wed 3 Mar 2010 at 04:00 PM
Mainstream media has become a commodity. Certain stories are simply not covered, or are covered in the same way, with the same lies. It does not matter which mainstream media outlet one reads, listens to , or watches.
A commodity means the supplier does not matter; it's the same stuff.
Anyone remember what happens in a commodity market?
Thin margins, low profits!
Contrast the MSM with talk radio. Some people hate it, but enough love it that it is not a commodity. Sean Hannity cannot do Rush Limbaugh's show. He can do his OWN show, which is the reason both make money! If Ron Paul went into talk radio, Rush listeners might hate him, but so what? He would attract enough of his own listeners to make money. The MSM's fatal conceit: they are professionals. Like doctors and lawyers. Wrong. Those professions can send their unlicensed
competitors to prison. Columbia J school grads cannot.
#2 Posted by Richard2718, CJR on Wed 3 Mar 2010 at 04:46 PM
but seriously, on-topic: "up-selling" isn't limited to on-line ads. You also have the phenomenon of existing newprint publications spinning off other, similar newsprint and/or glossy things for perceived niche markets. Any content therein is most often provided by existing editorial and production staff, and any and all ad-selling is accomplished by existing sales staff. voila! "new revenue."
#3 Posted by edward ericson, CJR on Wed 3 Mar 2010 at 04:57 PM
Most of the items they advertise have no purpose for me. I got all over Google last year when they put car ads with LOUD voices on when it was 1 am in the morning. I told them I didn't drive and didn't need someone yelling at me after midnight. Either they were to be gone permanently or I would sent a notice to BBB. It worked. How well they work otherwise I don't care since I don't buy from anyone there. If you want some gone, stop buying. But most people will go and get "taken" by bad items, overpricing or extra high shipping costs. Until someone polices the Internet for bad ads, they will continue.
#4 Posted by Patricia Wilson, CJR on Wed 3 Mar 2010 at 06:36 PM
I am one of a hand full of newspaper classified industry experts. And yes, what the Scripps report says is true, however, and it is not some dirty secret nor any accounting trick.
This is all part of the transition of print to web. When newspaper classifieds first started online, it was hard to convince any advertiser of the value of the internet. It was too new and many advertisers just did not understand it.
So at first, in order to get print advertisers interested in online, we offered the "upsell" sometimes free, sometimes for a minimal price or sometimes it was included in a package price. This slowly got print advertisers use to the online products. Now it is starting to reverse whereby we are selling online with a "print" upsell.
As long as there are print subscribers, the combined package is ace for the advertiser as they get the best of both worlds and a whole lot more eyeballs seeing their message. However, in almost every scenario I have worked with, customers can request just one or the other, but rarely do.
Behind the scenes "accounting" for this revenue is merely a reflection of the classified front end systems ability, or sometimes inability, to parse out the ads to different online and print products and then to the accounting interface. The more sophisticated the front end system, the easier it is to parse out the revenue into the correct buckets.
I have been tracking newspaper online and internet revenue, as well as classified competitive products for over 10 years.
If Scripps is just now discovering that classified print and internet revenue are tied together, I would wonder what else they don't know that everyone else in the industry does.
Sincerely, Janet DeGeorge, President, Classified Executive Training & Consulting
#5 Posted by Janet DeGeorge, CJR on Thu 4 Mar 2010 at 02:53 AM
Why is this story news?
I posted this four years ago in 2006:
Current online “profitability” is a smoke-and-mirrors illusion. Most online revenue comes from upsells of print classifieds. And most sites do not subtract the actual cost of all the “free” news content they get from print. Subtract these dollars and our sites begin to look like vanity projects.
Here's a link to the complete story:
http://www.brasstacksdesign.com/newrulesfornewspapers.htm
#6 Posted by Alan Jacobson, CJR on Fri 5 Mar 2010 at 06:33 PM