You may not realize this, but the newspaper industry has long been in the advertising business, deriving the majority of its revenue from the sale of ad space in print publications. In exchange, businesses purchasing these ads were assured a broad audience of readers. For many years, it was a win-win situation for both sides.
But the digital revolution has changed that. Between 2005 and 2015, newspaper publishing revenues fell at an average annual rate of 7.0%, largely due to advertising losses. In 2015, advertising services accounted for 55% of publishing revenues, down from 71% in 2005.
Underlying this structural shift was an erosion of print circulation as consumers flocked to the internet for an endless buffet of subscription-free news and other content. Many advertisers followed suit, abandoning print ads in favor of digital ones. While newspapers established online presences, with content supported by banner ads, this strategy was not enough to buoy the industry.
Through 2020, US newspaper publishing revenues are forecast to decline further, albeit at a more moderate annual pace of 0.6%. While publishers seek to offset losses in print circulation and advertising with digital strategies, they must contend with the growing influence of social media platforms – for better or worse – in both the news distribution and advertising realms.
The Good News: Social Media Drives Significant Traffic to Newspaper Websites
Social media has emerged as a prominent distribution channel for news information. In a 2016 Gallup poll, 6% of respondents cited platforms such as Facebook and Twitter as their preferred news source, up from 2% in 2013. This change was especially pronounced among 18-to-34-year-olds, with 15% relying on this medium for news, up from 3% in 2013.
Instead of employing journalists to write news content, social media sites allow users to share links to newspaper articles, and many also present curated news feeds to users. For example, Facebook’s Trending feature relies on a combination of algorithms and human curators to generate a short list of popular news stories. The influence on news publishers can be significant; by some estimates, Facebook generates as much as 20% of traffic to news websites.
Given this influence, newspaper publishers must take note of the methods by which social media platforms choose featured articles – and these methods have been, at times, marred by controversy. For example, in early 2016, allegations surfaced that human curators suppressed news stories from conservative sources on Facebook’s Trending feature. Following this controversy, the company made the selection process more automated. However, just a few days after this reconfiguration, the company was forced to issue an apology after a false and inflammatory piece about television anchor Megyn Kelly appeared among the top news items.
The Bad News: Social Media Platforms Are Advertising Behemoths
While social media helps newspaper publishers by driving web traffic, these platforms also represent formidable opponents in the ongoing competition for digital ad impressions and clicks. For example, Facebook’s revenue reached $17.9 billion in 2015 after growing 383% over 2011 levels, largely driven by its advertising services. Other social media platforms are hoping to leverage their broad consumer reach as well. In July 2016, Snapchat – a social network that claims 100 million daily users and the ability to reach 41% of 18-to-34-year-olds in the US – launched Snapchat Partners, an interface that connects advertisers with software and creative content developers and allows third parties to sell advertising space on Snapchat.
For more page-turning insights on the US newspaper publishing industry, read Newspaper Publishing: United States, a report recently published by the Freedonia Focus Reports division of The Freedonia Group. The report provides historical data on US newspaper publishing revenues by establishment, along with forecasts in US dollars to 2020. In addition, the report discusses revenue drivers and constraints and provides profiles of leading companies competing in the US industry.
To learn more about the US advertising industry, read Advertising Services: United States.
About the Author: Erica Keenan is a Market Research Analyst with Freedonia Focus Reports. She holds degrees in biomedical science and a certificate in data science, and her experience as an analyst spans multiple industries.