How Much is Enough?
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How Much is Enough? International Symposium on Online Journalism April 8, 2005. Online Advertising: The Good News. Is increasingly relevant to advertisers of all types and categories Travel Business Education Finance Retail Provides recognized value in branding, reach, cost-efficiency.

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How Much is Enough?

International Symposium on Online Journalism

April 8, 2005

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Online Advertising:The Good News

  • Is increasingly relevant to advertisers of all types and categories

    • Travel

    • Business

    • Education

    • Finance

    • Retail

  • Provides recognized value in branding, reach, cost-efficiency

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Power of Online in Affecting Consumer Behavior

  • Last year consumers spent $130 billion at stores on Internet-influenced purchasesAmerican Interactive Consumer Study, “The Dieringer Research Group, Sept. 2003

  • For every $1 spent online, consumers are influenced by the web to spend another $6 offlineJupiter Research, 2004

  • For the full year, total online consumer spending rose by 26%, from $93.2 billion to $117.4 billion in 2004emarketer, Inc., 2005

  • 69% of consumers use online information to help them select a specific store and productJupiter Survey, November 19, 2002

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At Work Users believe Internet advertising has unique values …intrinsic branding attributes

Total At Work Media User's Attitudes toward Advertising

In Percents

Source: Online Publishers Association/MBIQ Media Consumption Study, May 2003

Q. 12: Please give your impressions of advertising you see on each of the following media. For each statement, please select all the different types of media which you think apply. (Includes Duplication) Base: At Work (1053)

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Internet: The Preferred Source for Local Merchant and Store Search

Source: The Kelsey Group and Constat, Inc., March 2005; MediaPost, March 2005

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Newspaper Web Site users are Your Ideal Consumers

  • Newspaper Web pages reach more local online users than other local media sites in 22 of the top 25 U.S. markets.1

  • Local advertisers spent $811 million to promote their products on newspapers' sites in 2003.2

  • Newspaper Web site users spend almost twice as much time online than other Internet users are more likely to have high-speed connections. 3

  • Newspaper Web site readers are younger, better educated and more ethnically diverse compared with online audiences in general.3

  • As a medium, Internet advertising is as likely as television to influence purchases made by Internet users. 3

1. The Media Audit, April 2004

2. Borrel Associates, “What Local Web Sites Earn,” May 2004

3. @plan 2004

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Registration: What Have We Learned?

  • Targeting ability has become the norm, not a premium

    • ZIP, age, gender, income

  • Trade-offs between “permanent” registration and “lite” registration

  • Still missing key attributes

    • Children in the household, interests, education level

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Changes in Advertising

  • Larger ad units

  • More video ads

  • Targeting is the norm

  • Text ads

  • Pay for performance models

  • Downward pressure on pricing

  • Online evaluated by many in terms of direct response

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Paid Content: What have we learned?

  • re-launched as paid site on August 4, 2003.

    • $4.95/month or $39.95/year; free to 7-day newspaper subscribers

    • Included discounts coupons/card for entertainment venues and events around Southern California.

  • Goals:

    • Test the market for premium content

    • Provide additional value to subscribers

    • Better monetize our entertainment site

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The Results

  • not well-known enough to establish value.

  • Marketing message to print subscribers was too long for most sales channels.

  • Online users generally not enthusiastic about paying for this type of content.

  • BUT… did generate more revenue (between subscriptions and advertising) than before (just advertising).

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Online Revenue

  • Interactive revenue up 40%+ YOY

  • But still a very small % of total company revenue

  • Does not contribute to newsroom costs

  • Does pay allocation for overhead, but benefits from the company economies of scale.

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Where are we now?

  • Newspaper circulation still declining

  • Newsprint costs increasing

  • Employee costs increasing

  • Classifieds business moving online

  • Display advertising under fire

    • Department store consolidation

    • Big stores that don’t advertise in newspapers (Wal-Mart, Kohls, Costco)

    • Advertisers looking for “sub-zip” delivery to make their ads less expensive, more efficient

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A Fictional Example


    • 30 dot-com staff ($2.4 million)

    • $13 million revenue

    • $7 million expenses

    • $6 million profit

  • Daily Newspaper

    • 300 editorial staff ($20 million)

    • 300,000 daily circulation

    • $300 million revenue

    • $225 million expenses

    • $75 million profit

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How much is enough?

  • Online sites are the future for newspaper companies, and for better or worse carry the burden of the revenue growth for the foreseeable future.