With the slow decline in print ad revenues, in the US and Europe mostly, newspapers face a challenge: how can they create sufficient revenue from their digital operations, which are typically low-yield?

The underlying question, which doesn’t seem to be asked anymore as most newspapers view their future as heavily (if not solely) dependent on digital operations, is: will these digital operations ever fully compensate for the high-yield print revenues newspapers enjoyed during their golden years? As of now, no.

Although “for most of the world, online advertising is growing at a steep rate, 30 to 50% annually,” “mobile phone penetration and Internet usage have begun to plateau,” says the SFN report. Even with a spectacular growth rate – and considering (in the US) “top research firms all predict a significant slowdown in online advertising revenue growth in the coming years” – publishers and editors might as well get used to the fact that the glorious years of the print newspaper are bygone.

That’s one false hope that can be put aside. That is, unless the newspaper industry as a whole is upholstered by a major innovation or transformation in its business model – a plausible possibility in the digital age.

Nonetheless, newspapers (print or online) have plenty more robust years ahead of them, and the potential digital revenue pool is still by and large untapped, and vast. Thus papers must turn to, and build upon, their digital venues, including mobile (a near 3 billion people in the world are predicted to be mobile subscribers by 2010) and video (three out of four American Internet users watched an average of 158 minutes of online video in May – comScore study).

In fact, some forward-thinking newspapers, which understood the transition to digital early on, are perfectly apt to sustain quality content and profitability. This is the case of Norway’s Schibsted (owner of VG.no), which tabs on online operations making up for 40% of revenues and 50% of profit in 2007. Digital operations for The Wall Street Journal and WashingtonPost.com in the US, as well as Fairfax in Australia, should all exceed 10% of the parent companies’ total revenues this year.


At the Dallas Morning News (US), “pre-roll” video advertising will generate $250,000 just for 2007, its inaugural year. In Sweden, Aftonbladet.se video will generate €600,000 this year. WebTV traffic alone is expected to increase Aftonbladet’s total market penetration from 2.7 to 3.2 million users (nearly 20% increase). Even a smaller player, such as the Naples Daily News regional paper in the US, made $400,000 in online video ad revenue in 2006.

On the other hand, “online video advertising is more like a trigger for the interests in the product or services, rather than the direct purchase catalyst for the consumers,” says the SFN report. According to an Online Publishers Association survey, 56% of video ad viewers never reacted in response to a video ad, while 31% checked out a web site. Only 14% of viewers went to the store, and another 14% requested more information about a product. Less than 10% of viewers actually sign up for a product or trial.

Newspapers are still seeking how to reap revenues from mobile ventures, but the same forward-thinking publications have made money on mobile too. The DallasNews.com expects to make $500,000 in mobile sponsorship packages online and on mobile. Aftonbladet made €600,000 from mobile revenues. In Japan, the Asahi Shimbun sold more than one million mobile subscriptions for news and sports content – and another 21,000 newspaper subscriptions were sold via its mobile service between 2002 and 2006.

Mobile Internet users are usually heavy consumers of news-oriented content, both on mobile phones and online. Another interesting piece of information: mobile news consumption is correlated with income (the higher their revenue bracket, the more likely were they to expect an increase in their mobile news consumption). But there remains a significant divide between mobile Internet penetration and actual mobile Internet usage (71% and 41% in the US respectively, 81% and 40% in Germany).

The sixty-four thousand dollar question remains unanswered. Newspapers do have a profitable way out if they embrace the transition to digital businesses, as some publications have. As readers increasingly rely on mobiles for news and get further accustomed to viewing online video, the newspaper industry can certainly profit from the booming share of advertising revenues linked to mobile and online video. But it will take more than mere implementation, and managers and shareholders will have to let go of the newspapers’ traditional high profit margins.

For more details and insight, please consult World Digital Media Trends 2007, part of a series of SFN reports exclusive to members of the World Association of Newspapers.