Why Online Is Not The New York Times Rolling Stone Solution
NEWSPAPERS – the dead tree press- are in the mush. Seeking Alpha looks at how the New York Times is facing up to the challenge, via Adrian Monck:
Despite the highest readership of any newspaper in the United States, the New York Times only generated $330 million in online advertising in 2007. Total operating costs for that same year totaled $2.9 billion.
It is widely reported that total newspaper operating costs would be reduced by 35% if newspapers eliminated their print product [is that assumption really right?]. Using the NYT example … costs could be reduced to $1.9 billion.
Read on:
Online advertising in general is growing approximately 12% year over year. The New York Times is following this trend.
NYT online advertising revenue is projected to be ~$350 million or $29 million per month.
The NYTimes.com reaches an average 15.6 million people per month (quantcast) and newspaper websites in aggregate reached 69.8 million people (naa).
65.4% of NYTimes.com readers come from the USA.
NYTimes.com is reaching approx. 3.3% of the US population (15.6 million x 65.4%) =10 million/(305 million)
Revenue per person:
- $29 million month/15.6 million unique monthly visitors = $1.87 per unique per month.
Each unique reader is worth $22.40 annually in online advertising revenue (a far cry from the 1 subscriber = $1,000 which is what it was before the arrival of the internet).
The gap to break-even is still a whopping $1.55 billion.
If advertising rates stay the same, The New York Times needs to raise its unique audience 5.4 times in order to break even. Here is how it breaks down:
- 5.4 x 15.6 million uniques per month =
- 84 million uniques per month x $1.86 per unique =
- $158.6 million per month x 12 months =
- $1.9 billion annual online advertising revenues = Break Even NOT YET PROFITABLE
Questions for further examination or the “Stalin Problem” (reality):
- Is it unrealistic for NYTimes.com to grow their national audience reach much more than 3.3% considering their print audience reach is ~1million or roughly 0.3%?
- Generating 84 million uniques per month would make NYTimes.com the number 5 website in the entire world, ahead of Wikipedia.org
Preliminary conclusions:
- Pursuing online audience growth strategies to grow revenue may not be the best way to grow revenue
- Absent online advertising innovations, newspapers must seek alternative revenue streams to achieve economic sustainability.
Rolling Stone just laid off several more staff, including Online Editor Kyle Anderson, a tipster informs us.
Invest in Anorak…
Posted: 9th, December 2008 | In: Reviews Comment | TrackBack | Permalink
