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Friday, October 17, 2014

The Economic Devastation of Newspapers

Overall the economic devastation would be difficult to exaggerate. One statistic conveys its dimensions: the advertising revenue of all America's newspapers fell from $63.5 billion in 2000 to about $23 billion in 2013, and is still falling. Traditional news organizations' financial well-being depended on the willingness of advertisers to pay to reach the mass audiences they attracted. Advertisers were happy to pay because no other advertising medium was as effective. But in the digital era, which has made it relatively simple to target advertising in very specific ways, a big metropolitan or national newspaper has much less appeal. Internet companies like Google and Facebook are able to sort audiences by the most specific criteria, and thus to offer advertisers the possibility of spending their money only on ads they know will reach only people interested in what they are selling. So Google, the master of targeted advertising, can provide a retailer selling sheets and towels an audience existing exclusively of people who have gone online in the last month to shop for sheets and towels. This explains why even as newspaper revenues have plummeted, the ad revenue of Google has leapt upward year after year—from $70 million in 2001 to an astonishing $50.6 billion in 2013. That is more than two times the combined advertising revenue of every newspaper in America last year.
The other online innovation that has devastated newspapers is Craigslist, the free provider of what the newspapers call “classified advertising,” the small items in small print used by individuals and businesses for generations to buy and sell real estate and merchandise, and to hire workers. Twenty years ago classifieds provided more than a third of the revenue of The Washington Post. Craigslist has destroyed that business for the Post and every major paper in the country.