Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Analysis: Newspapers Giants Combine For Greater Share Of Online Ad Revenue

Posted by Tom Foremski - February 18, 2008

Reuters reported that four of the largest US newspaper companies have formed quadrantOne, capable of reaching at least 50m unique visitors per month in 27 of 30 top regional markets, according to December 2007 data from Nielsen Online.

New York Times Co, USA Today publisher Gannett Co, Los Angeles Times publisher Tribune Co and San Francisco Chronicle publisher Hearst Corp have set up a stand-alone company called quadrantOne to oversee the aggregation of audiences.

Foremski's Take: Too little, too late. QuadrantOne is set up to primarily compete against Google's AdSense partner network, which generated $1.44 billion in the fourth quarter of 2007. QuadrantOne will provide better returns than Google or other online ad networks, but it will do little to improve the overall financial health of the newspaper publishers.

That's because online ads on newspaper sites are less effective than other forms of online advertising. An advert placed next to a column of news doesn't convert well.

You can sell shampoo next to a search engine box far better than next to a news story about beheadings in Iraq. While this is an extreme example, it illustrates the simple fact that journalism is not very good at selling goods and services compared with a search engine.

This can be seen in Google's revenues. At the time of Google's IPO, its revenues were about 50/50 from its own sites and those from of its partner sites, such as the New York Times, and other large media companies.

In its most recent quarter about two-thirds of Google advertising revenues came from its own sites compared with partner sites.

Online advertisers will continue to shift away from journalism towards search engine marketing and other forms of online advertising because it is a more effective means of acquiring customers.

So what will pay for journalism? The New York Times last week announced it will cut 100 newsroom jobs. Its coverage of Iraq costs $3m a year. As its print business declines, how much of its $200m annual newsroom budget will quadrantOne be able to support?

Without a business model to support quality journalism we will have inferior journalism. We will have inferior information on which to base important decisions about massive issues such as going to war, global warming, dealing with pandemics, the economy, and plenty more.

We are heading into a period where misinformation will be rife, and can be easily generated by special interest groups for profit at the expense of society in general, imho.


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