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

Power of Online in Affecting Consumer Behavior

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

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

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

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

53 5242 41

37

20 22

38

8 510

14

2923

35 31

1320 23 24

0

20

40

60

80

100

Where I prefer to find outabout new products

Where I prefer to receiveinformation about

companies

Have advertising that isrich in information

Have advertising thathelps me decide what to

buy

Internet TV Radio Magazines Newspapers

Total At Work Media User's Attitudes toward Advertising

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

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

In P

erce

nts

Internet: The Preferred Source for Local Merchant

and Store Search

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

70%

62%

70%

73%

75%

60%

Newspapers

Yellowpages

Internet

Feb-05 Oct-03

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 20042. Borrel Associates, “What Local Web Sites Earn,” May 20043. @plan 2004

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

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

Paid Content:What have we learned?

• Calendarlive.com 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

The Results

• Calendarlive.com 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).

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.

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

A Fictional Example• Daily Newspaper

– 300 editorial staff ($20 million)

– 300,000 daily circulation

– $300 million revenue

– $225 million expenses

– $75 million profit

•Dailynewspaper.com–30 dot-com staff ($2.4 million)–$13 million revenue–$7 million expenses–$6 million profit

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.