The revamped Wall Street Journal is a harbinger of what's ahead for papers as advertisers shift more money online
Online editions of newspapers were once the unwanted stepchildren of print publications. They had to exist, if only to increase interest in the family franchise. But print companies didn't want to invest too much time or money in them.
Often, Web versions of printed papers were treated as little more than online archives, a place to dump the daily paper's contents and back issues in hopes of generating more print subscriptions and incremental revenue from the occasional banner ad. When a publication did hire staff to cover online-only stories, the writers and page designers were frequently separated from the more prestigious (and typically better paid) print journalists.
In some cases, the online staffers worked in entirely different buildings than their print counterparts. "Newspapers have unfortunately treated their online operations as distant cousins, not to be touched and admired," says Christine Tatum, assistant business editor at The Denver Post and national president of the Society of Professional Journalists. "A lot of these companies have invested very little in technology."
The once-ignored stepchild is getting a lot more attention lately, both from Internet-savvy audiences and deep-pocketed advertisers. Perhaps the biggest evidence of this change is the redesigned Wall Street Journal and WSJ.com (DJ), launched on Jan. 2. The narrower, more colorful print edition now concentrates on analysis stories, leaving the breaking news that once made up nearly half the newspaper for the online edition, which publishes throughout the day. "Business news, in particular, is very sensitive to the time cycle," says Bill Grueskin, managing editor of The Wall Street Journal Online, explaining the impetus for the redesign. "The value of a story that you break" diminishes as more publications publish their own online versions within minutes, he says.
Industry executives and analysts say the paper is going in the right direction and that other publications will have to follow suit or risk folding. The newspaper industry is expected to lose roughly $890 million annually in advertising revenue to the Internet through 2007, according to a March, 2006, report by Citigroup Investment Research (C). And much of the 1.4% growth in advertising overall this year is expected to come from a more than 15% gain in online revenue. Without the online increase, eMarketer reckons total ad spending will inch up just 0.6% this year.
David Hallerman, eMarketer's senior analyst, says the numbers are only going to get worse for the print newspaper industry, whose stocks largely declined as the Standard & Poor's 500-stock index rose 14% in 2006. He expects that more advertising dollars will move from print to online as papers continue to lose subscriptions due to increased competition for users' time, both from broadcast and online media outlets such as Yahoo! (YHOO). He also expects that classified advertisers will continue to favor online services like Monster Worldwide (MNST) and craigslist.com.
Classifieds' Tipping Point
Such online services won more classified advertising dollars than newspapers for the first time in 2006, generating $5.9 billion in help-wanted ads, vs. newspapers' $5.4 billion, according to a December study by Borrell Associates. "The losses are not going to taper off," says Hallerman. "For virtually every newspaper, their only growth area is online."
In 2006, many papers were reluctantly forced to accept the news that online media is not going to just bite off a tiny piece of the overall media advertising pie and leave newspapers with enough to continue to expand their print editions and ignore the online business, says Tatum. As a result, she says 2007 will be the year that newspapers start revamping their Web sites, filling them with exclusive content and multimedia coverage that can lure both readers and advertisers away from blogs and portals. "2007 will be the year when newspapers stare long and hard at their Web sites," says Tatum.
The Wall Street Journal is not the only newspaper stepping up the integration between print and online by differentiating content and adding more blogs and multimedia features. The Washington Post (WPO), The New York Times (NYT), and USA Today publisher Gannett (GCI) have all announced changes to their Web sites and increased cooperation between print and online staffs. The Washington Post, for example, told Reuters that print editors would play a bigger role in shaping Web coverage.
Glory Days Are Gone
But the Journal's efforts are among the most extensive. In the '90s, the online edition and the newspaper did not work that closely together, despite being in the same newsroom, says Grueskin. "The Online Journal was right next to Page One. So physically we were very close, but there wasn't much interaction," he said. Now, print reporters regularly will send scoops to online and Dow Jones Newswire reporters, who flesh out breaking news stories, Grueskin says. The print reporters then work on an analysis piece for the paper edition. He also says that more print journalists have become interested in creating online-only features such as blogs.
However, even a new online emphasis won't restore newspapers to their former glory. Hallerman says that newspapers' share of overall U.S. online advertising revenue—estimated at $16.4 billion in 2006 and expected to grow to $25.2 billion in 2010—will not account for losses in print advertising. He believes that newspapers will inevitably consolidate with one major paper per big city, except perhaps in New York. He also believes that many newspapers will go private to avoid Wall Street demands to keep pace with the growth of other media and the market as a whole. More publications will enter ad-sharing partnerships with Yahoo, Google (GOOG), and other portals that republish their articles, he says.
Tatum, while more optimistic about the possibilities for online journalism, also believes that newspapers will just have to deal with less. "There is an opportunity for a certain amount of growth if they can get it together," says Tatum. "But, by and large, we are still talking about a smaller portion of the pie."