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Newspapers: Wanted: local news, national ads

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Despite sagging circulation, companies are pumping more of their advertising dollars into daily news-papers than they have at any time since the go-go '80s, and the quantum percentage increases seen then will resurface in 1998. Lower newsprint prices over the past two years have allowed publishers to maintain rates that appeal to marketers. A generally healthy economy has also helped bring in the money, if not the readership.
The Newspaper Association of America (NAA) reported that 1997 first-quarter advertising revenue jumped 8.9 percent to $8.9 billion, the best single-quarter showing for newspapers in 10 years. Through the first six months of this year, total ad revenue was $19.2 billion, a 9.5 percent gain and $1.7 billion more than the first half of 1996. Total ad spending is expected to increase by $1.3 billion in 1998.
Retail, traditionally the best-performing advertising segment for daily newspapers, had the smallest percentage increase of all the categories for the first half of 1997. Total retail was $9 billion, up only 7 percent from last year. The rash of department store mergers and closings of smaller shops have forced newspapers to rethink their retail strategies.
A rebound, however, is expected as entertainment companies, supermarkets and computer electronics superstores begin to fill the void. "In most markets, you'll find that papers have suffered through some cycles of ma-and-pa shops giving in to megastores," says Dennis Grant, vice president, advertising sales and marketing for The Chicago Tribune. "They'll have a better time in the future because they've learned to live with the megastores by now."
The recent uptick in national advertising is partly due to an earlier need for retail alternatives. National ad revenue totaled $2.6 billion in the first half of 1997, up 13.6 percent over the same period in 1996. Strong healthcare clients and new product introductions sped the category along. "We've urged the industry to pay more attention to growth opportunities in national," says Nicholas Cannistraro Jr., president of the Newspaper National Network. "National is more likely to need what newspapers offer," he adds, referring to the fact that daily papers reach 60 percent of the U.S. adult population. "They just weren't approached because of the reliance on retail."
A recent proposal by the Food and Drug Administration to soften regulations on pharmaceutical TV advertising, though, could threaten the potential growth of national ads next year. The proposed legislation would make TV a viable outlet for marketing pharmaceuticals, a category that print has dominated because of the necessity to include fine-print warnings.
Another staple of newspaper revenue--classifieds--has grown at a steady clip and should continue to thrive as computer capabilities improve. In the first six months of 1997, classified ads contributed $7.6 billion to the industry's revenue stream, up 11.4 percent from last year. "Online is really the only place in the classified arena to get the latest possible listings," says Grant. In 1998, classifieds should benefit the most from new online technologies. Knight-Ridder New Media, for example, has begun allowing people not only to read classifieds online, but--for a fee--to place them directly in cyberspace via a browser.
Computer-based commerce should also become a standard time-saver, making the medium even more attractive to advertisers. Newspaper planner MediaPassage recently launched a service which offers quickly accessible profiles on newspapers that advertisers can use to make their placements. MediaPassage also provides the software to send ad copy through the Net. "The ad agencies and ad reps love it because there are no errors," says Grant.
Though the industry is getting its managerial house in order, newspaper executives are taking a hard look at continuing circulation dips and trying to assess what readers want. In many cases, they are coming up with the same answer: local news. The increasing success of suburban weekly chains has driven dailies to beef up their own local coverage to stay competitive.


'98 SPENDING FORECAST:
VERONIS +7.0%
ZENITH +3.5%
'97 SPENDING a/o 6/30: $19.2 bil*
'96 SPENDING: $38.2 bil*
*Source: Newspaper Association of America