Six Pixels of Separation - The Blog
December 2, 2008 3:31 PM

Old Media Meet New Media - Good Times, Bad Times

If you thought things were ugly for the publishing industry before the economic meltdown, it's getting increasingly hard to turn your head and not hear the woes of traditional media. Some even argue that these traditional media companies are using the economic crisis as an excuse to cut staff and projections even more.

Advertising Age reported this news item today: Newspaper Ad Revenue Falls Nearly $2 Billion. That makes it a record 18.1% decline in the third quarter, based on news from the Newspaper Association of America. On top of this, newspaper's online ad revenue also dropped for the second quarter in a row.

"The historic drop resulted from a worsening economy that sharply exacerbated long-term challenges already confronting the newspaper industry, and it affected all kinds of newspaper ads. National ad sales fell 18.4%, classifieds sank 30.9%, and the biggest category, retail, slid 11.7%. Newspapers' online ad sales, where everyone is hoping some part of the future business model resides, accelerated their decline with a 3% drop. Online ad sales slipped 2.4% in the second quarter," according to the Advertising Age news item.

How bad is it?

Well, the hits just keep on coming. Also released today was a consumer research study by Experian Simmons the showed only 28% of the audience for an average news program, website or magazine gets "valuable information about products and services advertised there, making news venues less effective at conveying ad messages than all forms of media combined... [the study] also finds that consumers are less likely to purchase products and services they see advertised on news media, and are less apt to say products and services advertised on news media are high quality," according to the news item, News Media Less Effective at Conveying Ad Messages, in Marketing Charts.

You can almost hear the shrinking value and efficacy of your advertising dollars.

And on the same day that traditional media faces their Revelation, new media has their Genesis (that was a biblical reference):

The Huffington Post took $25 million in funding to set a $100 million valuation.

"The funding means Arianna Huffington's news blog is now considered more valuable by its backers than quite a few publicly traded newspaper companies, such as Lee Enterprises (LEE), owner of the St. Louis Post-Dispatch and 52 other papers (market cap: $36 million), A.H. Belo (AHC), owner of the Dallas Morning News and the Providence Journal (market cap: $35 million), and Media General (MEG), owner of the Tampa Tribune and Richmond Times-Dispatch (market cap: $34.6 million).  It puts Huffington Post in the same league as McClatchy Corp. (MNI), owner of the Sacramento Bee, Miami Herald and 28 other dailies (market cap: $150 million)," according to the Advertising Age article, Huffington Post More Valuable Than Some Newspaper Cos., published yesterday.

It seems like The Huffington Post is not even feeling the 3% decline in advertising that newspaper websites are feeling. So, what gives?

It's a question of culture.

The Huffington Post was digital from the get-go. It was driven like a Blog and the strategy lives on. But it's not all fun and games. There are many who say that The Huffington Post does not pay its Blogger (writers or Journalists). Some think this is an unfair practice, while some see their contribution to the Blog as a way to promote themselves and their content. Getting work by saying you write for The Huffington Post may be enough for some. Regardless of the editorial structure, the overall number and valuation is impressive, especially if you consider how the markets are doing today. Traditional media companies have "bolted on" their newspaper websites and ad sales team. They're trying to figure out why the online performance is not out-performing their traditional channels. They're failing to realize that it is a completely different business, with different results, different audiences and different metrics (for more on that, check out: Trading Analog Dollars For Digital Pennies).

How can traditional media companies compete, and do you think that The Huffington Post is worth $100 million? What's your take?

By Mitch Joel