No one expected publishing companies’ digital revenue to catch up to print overnight, but what does it say when that revenue stream at The New York Times Co., Tribune Co. and Time Inc. is already declining?
All said so in their most recent financial filings—this, despite efforts like the Times’ to reinvent the banner ad and Time Inc.’s introduction of native ad products. And it speaks to the struggle all traditional publishers are having to get their share of digital advertising as buying goes automated.
EMarketer predicts the U.S. digital ad market will grow 15 percent this year, with magazines’ digital ad revenue up 13 percent and newspapers just 5.6 percent. It gets bleaker. From 2012-17, digital is projected to grow at a compound annual growth rate of 10.8 percent, with magazines up 6.3 percent and newspapers up only 3.6 percent.
The struggles speak to publishing’s dependence on a premium sales model when advertisers are embracing programmatic buying, with its low cost and targeting ability.
Eighty-five percent of advertisers are buying ads this way. But even though publishers are coming around to setting up their own private exchanges, only 72 percent are selling this way, according to an IAB/Winterberry Group survey. Magna Global predicts that by 2017, 83 percent of digital display advertising will be programmatic.
Clark Fredricksen, vp, eMarketer, said it’s getting harder for publishers to compete by selling premium ads when advertisers can reach their target audience cheaper and more efficiently through online giants like Google, AOL and their ilk. Publishers are setting up their own exchanges, but “the pricing mix is so compelling on a network like AOL that a lot of advertisers would rather do that,” he said.
At the same time, consumers’ shift to mobile devices poses its own set of challenges for publishers. By 2017, more than half of digital revenue is expected to be spent on mobile devices. But publishers haven’t been able to monetize that audience growth well because of limitations of the small screen size and comparatively low ad rates. Time Inc. is trying to counter with responsive mobile sites for properties like Time and Sports Illustrated that take into account the fact that not all clients are set up to buy mobile. “We will have fully responsive sites by the end of the year, which helps with the mobile ad ecosystem and a multiplatform sell,” said John Cantarella, digital president for news and sports.
Publishers also are trying to catch up by investing in online video and custom ad formats. Gannett, for one, has moved deeper into digital marketing services and high-impact ad units that it can adjust in real time.
As for newspapers, consumer revenue is beginning to help offset ad revenue where digital growth has stalled. About one-third of dailies are enacting paywalls, so far with minimal impact on digital audience and ad revenue.